LightngMcQueen
Aspirationally Rational
Thanks @st_lopes !The 5-7% return I quoted was net of management fees, but yes their structured products all have fees, which is why they will extend LIBOR or bank prime rates on the leverage (eg Scotiabank Investor Solutions) because they make it up in management fees.
In the example being discussed, park 1000 to receive 2000 in leverage if reinvested at bank or 750 if you want to self manage. You also could put that 750 at IBKR and stack leverage, though that is flying close to the sun. So 3000 of exposure at 5-7% (150-210) annualized for 1000 of capital, 15-21% (“low risk”) before interest charge return on your pre leverage capital.
Becomes more a matter of do you want to continue self managing and navigating positions through any macro pullbacks or live with the 5-7% return with guaranteed capital (for future estate as an example). Trading off the risk for guaranteed return and capital for what may be better return if you self manage.
Talking about multigenerational wealth preservation rather than accumulation.
concept of leveraging principal protected product blew my mind, it truly looks like risk free leverage.
Do I get it right if I rephrase it like this in traditional brokerage terms: essentially it looks like a product with margin requirement of ~33% _and_ you can never get a margin call because principal amount is guaranteed.
Do you know if the distributions and eventual end gain taxed as ordinary income or capital gains? I just read up on Principal Protected Notes and the results are somewhat inconclusive... some products seem to structure distributions as ROC but I am not sure if this is common practice.