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Securitized Notes / Debt

Today, asset allocation has become more important than ever to the individual investor. The lesson learned from the 1990s bull market is that, while stocks as an asset class can provide long-term growth in a portfolio, they can be extremely volatile. This has led many to turn to fixed-income securities seeking to cushion their portfolios in a down-market through diversification. Fixed-income investments are usually suitable for retired individuals who rely on their investments to provide a regular, potentially stable income stream and also for individuals who seek a strategy to maximize overall portfolio benefit.

Fixed-income encompasses a variety of debt obligation types: bonds, notes, loans, CDs (certificates of deposit) and commercial paper. The unifying feature of these products is a legal, contractual obligation for the issuing entity to pay the creditor a stated rate of interest plus the full principal invested over a defined time period. This contractual obligation is what makes fixed income the generally lower-risk asset class when compared with equities. Debt instruments with maturities over ten years are generally called bonds and those with shorter maturities in the one-year to ten-year range are called notes. They can be used as a "core" investment to build the foundation of a balanced portfolio, because of the wide range of maturities and interest payment terms to fit most portfolio needs.

Securitized Note programs provide investors the opportunity to buy fixed-income securities through private offerings. The program sets forth the terms and conditions of the loan with a fixed-interest rate and maturity date that dictates when the principal is paid back in full to investors. With a variety of payment frequencies; typically monthly, quarterly, and semi-annually, fixed-income investments are not only flexible but can be tailored to an investors’ portfolio. To help reduce the risk associated with lending, notes are often securitized by financial assets such as real estate, natural energy (oil and gas) producers, equipment leases, or royalty payments.

For investors who want to diversify while positioning themselves effectively for a volatile environment, they should explore an array of securitized notes for their portfolio.