ETFs ETNs ElkTrusts UITs
What are ElkTrusts?
ElkTrusts are investments related to the performance of a pre-selected ETF with a pre-selected termination date.
Why ElkTrusts?
• Maintain investment diversification
• Stop-loss and market timing downfalls
• Interactive example
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Equity Linked Trusts (ElkTrustsTM)
ElkTrusts are investments related to the performance of a pre-selected ETF. ElkTrusts are designed for investors who believe the ETF will appreciate over the term of the trust. If the ETF appreciates at maturity, investors will realize such appreciation subject to a maximum cap. If the ETF declines below the buffer level, investors will lose 1% of their investment for every 1% decline in the Reference ETF beyond the buffer level. An investor’s loss is not limited to the buffer level and could be significantly worse. There is no assurance that the trust will achieve its investment objective.
Hypothetical Example
Below is a comparison of a 3 year hypothetical investment in a Reference ETF versus a 3 year hypothetical ElkTrust investment linked to the ETF with a 10% downside buffer and capped upside returns.
Move the slider up and down to see how ElkTrust's performance at maturity changes relative to the performance at maturity of the ETF.
Chances of Market Loss
In any one year, there is a higher chance of market loss than some other unforeseen events in your life.
1. Calculated based on American Housing Survey 2013 and USFA Residential Building Fire Trends. Retrieved 2015-02-22. Calculated as number of residential fires (374,000) divided by number of households (132,832,000).
2. US: Centers for Disease Control. The age-adjusted death rate: 731.9 deaths per 100,000 U.S. standard population in 2013. Retrieved 2015-02-22.
3. US Department of Transportation Traffic safety facts 2012. Calculated as Police-reported motor vehicle traffic crashes (5,615,000) divided by number of registered vehicles: NCSA Revised Using Polk and FHWA Data (265,647,194).
4. Calculation is based on number of calendar years between January 1, 1974 and December 31, 2014 when S&P 500 Index price return was below zero. Calculated as 9 negative years divided by 40 years. Source: Google Finance. Retrieved 2015-02-22.
It can take years to recover from a loss
Recovering at 5% annualized rate of return
1 Calculated using the formula TimeToRecovery = -Ln(1-OneTimeLoss)/Ln(1+RecoveryRate)
Traditional solutions are not enough
Low yield fixed income investments typically fail to provide growth opportunities and may be negatively affected when interest rates rise.
Putting a portion in cash means sitting on the sidelines with no upside potential to keep up with the cost of living.
What about diversification?
Diversification has been the buzzword in safe investing for a long time, and to a certain extent this strategy makes sense.
But diversification may not be there when you need it the most. Even if your portfolio is meticulously diversified by asset class, many investments can become highly correlated in a major market downturn.
This example is for illustrative purposes only and is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy. Past performance is not indicative of future returns.
What about stop-loss orders and market timing?
Stop-loss is a fine way to stop a downturn, but you have to carefully time when you get back into the market. When is the right time to reinvest? Should you wait until the market drops a bit to get more bang for your buck? Research shows that just a few days account for most of the returns and it is difficult to get the timing right1.
Protected investments can take some of the common worry and anxiety out of the investing experience for you.
1 Calculated based on daily returns of S&P500 between January 3, 1995 and December 31, 2014. 2015 Guide to Retirement, JPMorgan Asset Management ; Impact of being out of the market. P 33. Retrieved November 2, 2015
You can lose money by investing in the portfolios. The portfolios might not achieve their investment objectives. The portfolios' return are subject to a capped upside and partial downside protection. The portfolios' investment strategies are designed to achieve their investment objectives over the life of the portfolios.
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, please call 630.384.8700. Read the prospectus carefully before you invest.