StructuraWisor by Finwisor · AMFI-Registered Distributor (ARN-166452) · Educational platform, not a solicitation to invest
A structured product is a promise from an issuer. If the issuer cannot pay, the cleverest payoff is worthless. Credit is the risk people forget to price.
When you buy a structured product, you are lending money to an issuer who promises to pay a defined payoff. Every diagram on a brochure assumes that promise is kept.
That makes the issuer's creditworthiness a first-order risk, not a footnote. A higher coupon offered by a weaker issuer is partly compensation for that weakness.
Start with the credit rating, but do not stop there. Understand who the issuer is, what backs the note, and whether there is any security or guarantee.
Be wary of reaching for yield by stepping down the credit ladder. The extra coupon can disappear in a single default.
A higher coupon from a weaker issuer is partly payment for taking on that weakness.
Concentrating a large allocation in a single issuer's notes concentrates credit risk in one name. Spreading across issuers spreads that risk.
Treat the issuer as carefully as you would treat the underlying. Both have to perform for the structure to deliver.
This article is educational and does not constitute investment, tax or legal advice, nor a solicitation to invest. Any figures are indicative illustrations of mechanics, not forecasts. Refer to official term sheets and consult a qualified professional before investing.