Structured Notes

‍ ‍Canadian structured notes are investment products usually sold by banks and brokerages that combine a safer investment, like a bond, with derivatives tied to the stock market or other financial assets. They’re designed to offer a mix of protection and growth potential, which is why they’re often marketed to people who want better returns than a GIC but less risk than directly investing in stocks. A common example is a note tied to a market index where you might receive part of the market’s gains while still getting your original investment back at the end of the term, as long as you hold the note until maturity.

The way structured notes work is that the bank uses most of your money to secure the principal and the rest to create exposure to the market through options or other derivatives. Because of this structure, the return rules can become very complicated. A note may only give you a percentage of the market’s gains, may limit your maximum profit with a cap, or may only protect your investment if the market does not fall beyond a certain level.

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