Wei Woo from Research Capital has been doing presentations here at our centre for over 10 years, and has working in the financial planning and investment management industry for 16 years. Each month, he provides us with guest blog posts to educate us on a variety of financial topics. Make sure to watch our WSAC calendar to see when Wei will be in the centre doing his Toonie Talk presentations…we promise you won’t be disappointed.
Read his blog below
Autocallable notes, a form of structure notes, are financial instruments designed for income investors seeking regular returns. Let’s break down how they work in simpler terms.
Firstly, when an investor buys an autocallable note, they are essentially entering into a contract with the issuer, typically a financial institution. This contract specifies that the investor will receive periodic interest payments, similar to the way bonds pay interest. The unique feature of autocallable notes is the “autocall” mechanism, which means the issuer has the option to redeem the note and return the investor’s principal along with any accrued interest before the maturity date, under certain conditions.
The conditions for autocall can be linked to the performance of an underlying asset, like a stock or a basket of stocks. If the value of the underlying asset reaches a predetermined level at specific observation dates, the autocall feature is triggered, and the note is called. This can happen even before the maturity date. If the autocall is not triggered, the note continues, and the investor receives interest payments as agreed.
For income investors, autocallable notes can provide a steady stream of income through regular interest payments. The potential for early redemption through the autocall feature adds an element of flexibility and can be advantageous if the underlying assets perform well. However, it’s essential for investors to understand the terms and conditions of autocallable notes, as they come with the trade-off of potentially missing out on future gains if the autocall is triggered.
Click to download an illustration of this concept.
Like any investment that comes with it’s pros and cons, always work with your Financial Advisor on how a particular investment may fit into your retirement portfolio, given your risk tolerance, liquidity needs, and time horizon within the over context of your financial goals.
We want to thank Wei Woo for sharing his experience. Make Sure you check out Wei Woo Toonie Talk on Friday, Feb 23rd, 2024 on this exact topic !
Click HERE to learn more and register now!
If you would like more information please contact Wei Woo:
Wei Woo
Investment Advisor, CIM, EPC
Research Capital Corporation
Private Client Division
Office : 780 – 460 – 6628
Cell : 780 – 299 – 0760
