bmo ppn double | General financial discussion | Discussion forum

That is confirmed on page 4 of the Information Statement. The index used is a price return index and not a total return index:

For the purposes of determining whether the Index Performance Coupon will be paid, the Index Return will be calculated using the price return of the Index, which does not reflect the value of any dividends or distributions declared on any of the constituent securities comprising the Index.

On page 1, it says there is no CDIC coverage:

• The Deposit Note is not eligible to be insured by the Canada Deposit Insurance Corporation or any other entity. Therefore, a Holder will not be entitled to Canada Deposit Insurance Corporation protection.

Bud said
So the fund ppn manager keeps the divvy  

money dont grow on trees so yeah they need money from somewhere to pay for the principal protection for the investors, among other fees such as their profit 🙂

GICinvestor said
When you deal with BMO marketing there is one winner and one loser.

BMO
You  

That applies to all FIs, not just BMO to be fair. 100% principal protection is not bad for the risk averse.

Products are offered for one purpose for the bank which is to make money. Different products may suit different investors with diff risk appetite.

Can be a win-win situation.

Bud said
This is a Rbc ppn note is min max coupon 1.75-6% annually or 1.75-6% return spread out thru the 6yr life of the note? Annually right. Good deal maybe?

This Note is a 6 year investment designed to provide annual income based on exposure to an equally
weighted Canadian Equity Portfolio. Investors will receive a minimum coupon of 1.75%, to a maximum
of 6.00% in years 1-6 based on the price performance of a portfolio of 10 Canadian companies.  

Bud - Could you tell me what are the 10 Canadian companies? I presume the offering material has that info. That would be useful in determining the potential for this.

Bud said

RBC Principal Protected Guaranteed Return Enhanced Yield LEOS Series 214

BCE Inc.
The Bank of Nova Scotia
Brookfield Property Partners L.P.
Canadian Imperial Bank Of Commerce
Capital Power Corporation
Company Name
Enbridge Inc.
IGM Financial, Inc.
Power Corporation of Canada
Riocan Real Estate Investment Trust
TransAlta Renewables Inc.

http://www.rbcnotes.com see anythin worth buyin  

Bud, while that's a principal protected note and market-linked and market-indexed GICs are a type of principal protected note, two things of that PPN:
(1) It's not a deposit instrument for the purposes of the CDIC Act. Translation: it's not CDIC insured; and,
(2) It's manufactured by RBC Capital Markets and sold, principally, to institutional investors (i.e., non-profit organizations, governments, municipalities, pension funds perhaps, and others) and to high net-worth clients through RBC Dominion Securities, their full-service investment advisory business. It is not sold through RBC Royal Bank or RBC Direct Investing;

For market-linked or stock-indexed GICs, you want this website:

https://www.rbcroyalbank.com/investments/gic-rates-arent-high-enough.html#marketsmart

Click on RBC MarketSmart GICs.

See the information statement. It looks like, though, as I suspected, that's a minimum total return, not a minimum annual return.

Also, RBC may guarantee the principal, which is fine, but it's not guaranteed by CDIC. Not all PPNs are CDIC insured.

Nonetheless, thanks for pointing out that rbcnotes.com website. Hadn't seen that before.

Cheers,
Doug

cruzinalong said

Start small and build over years. Set goal. Pick 4-5 quality blue chip stocks. For starters. A large Canadian bank. A Canadian utility. Now pick your last 2-3 from other sectors. Have fun.

That's more likely to produce a good return than the RBC Principal Protected notes.

The minimum annual payment is 1.75%. The maximum annual payment is 6%.

However, the calculation of each annual payment is rather funky. One can get a 6% payment in a year only when all 10 shares are above its initial price, just before the annual payment date.

Each payment's percentage is the average of the adjusted percentage change of each of the individual share's prices from the issue date. Before being averaged, the percentage change of each share is adjusted so that (1) any negative percentage change is no worse than -10% and (2) any positive percentage change is replaced with +6%!