Structured Products are an investment class where the investor is issued a bond or a note whose principal is at least partially protected and the payout is tied to the performance of some underlying linked index, commodity or other security. Thus while it offers some of the principal protection of an income investment, it offers the possibility of a rising income owing to a rise in the underlying linked investment. These investments are primarily available to the European market, though they are making their mark in US market as well now. Does this belong in your portfolio as well?

The primary competition for structured products are variable annuities - which offer some of the same protection of principal and offer growth through a rise in value of underlying mutual funds or other investment vehicles. Structured products may offer more variety in the underlying investments they are linked to, and a less complicated structure in terms of their payout. On the downside, structured products (SPs) do not fully reveal the details of its portfolio, thus making it difficult to gauge its price on a day-to-day basis.

SPs are tradable and thus offer an easy entry and exit methodology - though this has not begun in the US stock markets yet. In fact, only a few select mutual funds (Fidelity, Schwab) have begun offering these products - though the numbers are likely to climb.

Because of the easy of trading of SPs, their popularity is likely to climb - especially when a secular bull-market trend has been spotted - such as one in commodities underway right now. It would be an excellent investment to put a portion of your income oriented assets to work in a SP which is linked to the commodity index - and this will offer you increasing payouts as the bull run plays out. Once the run nears its end, along with moving your stock investments out of that particular bull market, you can switch proceeds from that type of SPs to those where a new bull market is just being formed. This offers you a fine way to have both your income and capital appreciation portions of your portfolio partake in the bull run.

As in all investment situations, it is useful to maintain overall asset allocation for diversification - for a truncation of a bull market by some unforeseen event should not leave you in an unrecoverable situation. We welcome the addition of structured products to the available set of securities accessible to the wealth builder - and hope that their numbers and range will rise in the coming years.