Structured products can offer unique investment opportunities and customization but also come with risks and complexities. It is vital to thoroughly understand the product’s structure, risks, and potential returns before investing. In this episode, we delve into the value of structured products and recap a past episode about the philosophy of money before continuing our focus on reading and finance by diving into the book, Just Keep Buying by Nick Maggiulli. Nick is a highly regarded author known for his insightful and engaging works on finance and investing. With a passion for demystifying complex financial concepts, Nick has earned a reputation for his ability to present information in a clear and accessible manner. His ability to blend storytelling with data-driven insights made his articles immensely popular among readers of all backgrounds. We discuss the pros and cons of financial products, why investors prefer them, the dark side of structured products, and what investors need to avoid. We recap a past episode with Barry Ritholtz about the philosophy of money and the main takeaways from our conversation with him. Then, we delve into Just Keep Buying and the invaluable lessons and uncover hidden gems it offers readers before speaking to Nick about savings and investing. We discuss the best strategies for investing, how to spend your money comfortably, why you should never wait for the markets to dip, and much more. To learn everything about structured products and valuable insights about saving and investing, tune in now.
Timestamps:
0:00 Intro
3:19 Main Topic: Structured Products
6:07 Background
9:11 Biases
14:12 Complexity
17:57 Empirical Evidence
22:03 Persistence Despite Poor Performance
29:06 Episode 57: 60 Seconds
32:05 Book Review: Just Keep Buying: Proven Ways to Save Money and Build Your Wealth
35:51 Special Guest Nick Maggiulli
58:29 Aftershow
Participate in our Community Discussion about this Episode:
Book From Today’s Episode:
Just Keep Buying: Proven ways to save money and build your wealth —
Links From Today’s Episode:
Rational Reminder on iTunes —
Rational Reminder Website —
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Nick Maggiulli on Instagram —
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Cameron on Twitter —
Nick Maggiulli on Twitter —
Nick Maggiulli —
‘The dark side of financial innovation: A case study of the pricing of a retail financial product’ —
‘Engineering lemons’ —
‘Ex Post Structured-Product Returns: Index Methodology and Analysis’ —
‘Catering to Investors Through Security Design’ — …(read more)
HOW TO: Hedge Against Inflation
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Structured Products (Plus Just Keep Buying with Nick Maggiulli) | Rational Reminder 255
In the world of investing, structured products have gained popularity as a way to provide customized investment solutions to suit specific needs. These products offer a combination of various financial instruments, such as derivatives, bonds, and equities, to generate potentially higher returns or provide downside protection. On episode 255 of the Rational Reminder podcast, Benjamin Felix and Cameron Passmore delved into the topic of structured products, along with their guest Nick Maggiulli from Ritholtz Wealth Management.
Structured products are designed to address the needs of investors who seek specific outcomes based on their risk tolerance and investment goals. They can be tailored to provide capital protection, generate income, or deliver leveraged returns. These products are typically created by financial institutions and offered to retail or institutional investors. They can be complex in nature, as they involve intricate combinations of different underlying assets.
One benefit of structured products is their ability to offer capital protection, which appeals to conservative investors. For example, a structured product may guarantee the return of the investor’s initial capital amount if held until maturity, regardless of market performance. This feature provides reassurance to risk-averse individuals who want to preserve their capital but still seek some upside potential.
Another advantage of structured products is their ability to generate income. Some structured products offer regular interest payments or dividends, providing investors with a steady stream of cash flow. This can be particularly appealing for those who rely on investment income to meet their financial obligations, such as retirees.
Structured products can also be designed to provide leveraged returns by incorporating derivatives or other leveraged instruments. Leveraged structured products can amplify the potential gains (or losses) above what would be achieved through a direct investment in the underlying assets. However, this increased potential for returns comes with increased risk, as losses can also be magnified.
During the podcast episode, Maggiulli emphasized the importance of understanding the complexity and potential risks associated with structured products. Due to their intricate nature, it is essential for investors to carefully review the terms and conditions, as well as the associated costs and fees. Investors should consider the reputation and credibility of the issuer, as well as any counterparty risks involved.
Moreover, structured products may not be suitable for all investors, especially those who prioritize simplicity and transparency. For investors seeking broad market exposure or low-cost passive investing strategies, structured products may not align with their investment philosophy.
As with any investment, it is crucial for individuals to thoroughly research and seek expert advice before considering structured products. Understanding the underlying assets, associated risks, and the potential returns is essential to make informed investment decisions.
In conclusion, structured products can be an attractive investment option for those looking for customized solutions tailored to their specific investment objectives. These products offer capital protection, generate income, or provide leveraged returns, depending on the investor’s requirements. However, their complexity and potential risks require careful evaluation and due diligence. Structured products may not be suitable for all investors, and it is crucial to consider one’s investment philosophy and seek professional advice before diving into this investment avenue.
We're moving closer to a Ben Felix appearance on The Compound & Friends.
It's really nice to hear you talk.The guy on the left always makes me want to speak out my opnion lol I dont know why. Structured product as a composed product of securities is a very interesting topics to me. I have never heard this before this video but the some of the interesting parts I got from the video are the phrases that describes people's mindset and behavioural on the market. And I also pretty much agreed on listening on parents' opinion as a second thought lol. As a person who never experiences the serious market breakdown it's hard to imagine what will look like when experience the harsh economic downturn, it's new for me to listen to someone has more knowledge and expertise talking about that.
You should interview one of these dudes who have come up with 100 different variations of the profitability factor using Deep Learning. Should be interesting.
Hi Ben, where is the thread of “total cost of ownership” on rational reminder? I cannot find it. Thanks
I love the podcast, but this is the first time I openly disagree with a guest perspective.
Yes, "Personal Finance" is more personal than finance, but I fundamentally disagree with "the problem of having too much money" when you die or the "Die with Zero" mentality. To me, the purpose of having a large nest egg in retirement is so you can pass money down to your love ones and have peace of mind that you won't need money when you're in your 90s and have serious health issues.
Living off your investments by living off dividends or just living off the capital appreciation provides a peace of mind which cannot be replicated by selling down your principle or worrying about whether a market crash will affect your retirement. I want a retirement plan where I can literally say "a market crash will not hurt my retirement lifestyle at all."
Simply put, if I begin retirement with 2 million dollars, I'd rather die with 5 million dollars than die at 0 or close to it.
Premium T-shirt is a great idea.
47:00 good point but really needs a disclaimer. There are millions of Americans spending themselves out of retirement (or even basic financial security). The median American makes more than enough for a comfortable, average life and retirement. The median American also has a car payment approaching $1000/month and zero emergency savings. These people don't have an income problem, they have a spending problem
Do you plan to talk about managed futures and strategies involving them? Their return characteristics look interesting but I am sure there is a catch somewhere that I am missing
47:00 very good point. i used to cut on my spending were ever i could and ofc i was able to invest more.
a few years down the line i managed to 10x my income by doing business and providing what ppl need.
the saved money on food and so on did not move the needle for me at all in the end.
for me having money is not about retirement, i dont care if i have 1million or a billion when retired.
i care about my flexibility. i care about beeing able to do what i love.