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Discussion Starter #1
Hi all,

Quick ask for advise- I fired my private equity manager and moved all my funds over to my self SDRSP. There was one TD money note fund that was transferred in kind, and I'm trying to decide if I should sell it or not.

https://www.tdstructurednotes.com/snp/noteDetails.action?noteId=2279

Bought 31,000 units at average cost 1.00 ($31,000 value).

Currently sitting at $21,313.43.

Before I fired the financial adviser he was saying that the 21K is not the real value, that there is some kind of floor etc and the real value is higher by a couple thousand.

I have a general idea of how it works - if it performed well it would give the 4.5% per half year etc. however it hasn't performed well at all. It's currently held in Self Direct RSP account.

Question: Would you sell this now or ride it for a bit and sell it later?

Thanks!
 

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Structured notes are complicated and usually favour the seller. But you know that.

Just looking at the 5 banks it represents I calculate their average dividend is 5.65% and they have indeed been beaten down by the plague, but will probably recover.

I don't know how liquid that note is, but just for simplicity alone I would get rid of it and if you like banks, then invest in those five candidates or others or even a simple Bank ETF like "ZEB (BMO Equal Weight Banks Index ETF CAD)" or equivalent. It has a yield of 4.85% and probably a lot more upside than that structured note.

Others may disagree.

ltr
 

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I glanced at the link you provided, and at the Investor Summary linked via that page.

A couple of points:
--Assuming I read the summary correctly, if the basket of securities is less than 80% of the starting value, the holder takes the loss. (That's bad!) However, if they are between 80% and 100% of the starting value, your principal is guaranteed. Currently, it is about 81%.
--If the basket sinks below 80%, the semi-annual payment is halted, as it was in May.

Here is the key takeaway though:
The current value is listed as 81%, or $81 per $100 of face value. The current bid from TD to take back the notes is $68.75.
Unless you're willing to take 15% haircut, you're stuck with them.

The other argument for keeping them is that if the banks stumble along at a flat level until 2026, you still might get all your principal back, plus some payments.
 

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I would not touch structured notes with a 5m pole but to the extent one does, there is really no secondary market and they are best held to maturity or until they are called.

It is my view such engineered products should be banned.
 

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Before I fired the financial adviser he was saying that the 21K is not the real value, that there is some kind of floor etc and the real value is higher by a couple thousand.
My guess is that the $21K value is based on the "bid" -- which is what TD will pay to take the notes back.
Your ex-advisor was saying the actual value is higher -- which is true, but only if you stick with the notes till maturity.

As AltaRed indicates, this is one of the issues with structured notes. There is no viable secondary market. Once you buy them, you are all but stuck with them.

As LTR pointed out, most investors would be better with something like ZEB, which they could sell for current value at any time.
 

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I would keep them until maturity (or as long as you don't need the cash). In the absence of a transparent market, you almost certainly will be selling below the intrinsic value of the contract. TD will make a tidy profit.
 

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It is my view such engineered products should be banned.
I agree (not that this helps the OP). But I always hope that conversations like we're having now help others who are googling around, before being talked into buying these things.
 

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I would keep them until maturity (or as long as you don't need the cash). In the absence of a transparent market, you almost certainly will be selling below the intrinsic value of the contract. TD will make a tidy profit.
Good point, and six years isn't too long to wait.
 

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Discussion Starter #9
Hi all,

Thanks so much for the input - I don't need the cash now so I'll hold onto it.

If you read my money diaries, I've been following the progress of my financial advisor and comparing him to my own index funds. This is the year his performance really didn't match and was quite shitty so he got the boot. Now these small details are just clean up.

Thanks all!
 

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Congrats Erome1. I think you will be pleased with your decision. I know I was when I made the switch. I don't always beat the benchmark but I do save a ton in fees by going it alone. I also enjoy learning about Personal finance and Investing. I consider it part past time and part financial literacy. Enjoy the journey!
 
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