INVESTOR
EDUCATION
INVESTOR
EDUCATION
Equity Linked Notes (ELNs)
Equity-linked notes (ELNs) are a type of financial instrument that are correlated with the performance of specific stocks or stock indices. They are structured notes that combine characteristics of both stocks and bonds. In an equity-linked note, investors purchase the note, and its returns are linked to the performance of the underlying stocks or stock index. If the linked stocks or index perform well, investors can earn higher returns. However, if the stocks or index perform poorly, investors may face the risk of reduced returns. One distinguishing feature of these notes is that they specify the underlying stock or index on the face of the note. For example, an equity-linked note may be linked to the stock of a particular company or to a stock index such as the S&P 500 or Dow Jones Industrial Average. The returns on the note are typically calculated based on the performance of the linked stocks or index, often in a predetermined ratio, and settled at maturity. Equity-linked notes are commonly used in investment portfolios to diversify holdings and provide exposure to the stock market. Investors can gain returns from specific stocks or stock indices in the market without directly purchasing and holding those stocks.
Equity-Linked Notes (ELNs) are financial instruments that combine elements of both stocks and bonds. When investors purchase ELNs, their returns are linked to the performance of specific stocks or indices. However, like any financial instrument, ELNs also carry risks.
Risk disclosure
Here are some potential risks associated with Equity-Linked Notes:
1. Market Risk: The returns of ELNs are influenced by fluctuations in stock prices or indices. If the performance of the related stocks or indices is poor, investors may face losses in their invested capital and returns.
2. Credit Risk: The issuing institution of ELNs may face credit risk. If the issuing institution encounters financial difficulties or defaults, investors may not receive the promised returns on time.
3. Legal Risk: Some ELNs may be subject to legal risk, meaning investors may not be able to achieve the expected returns from the equity-linked notes due to legal or other factors.
4. Liquidity Risk: ELNs may lack liquidity, making it difficult for investors to trade or transfer them to other investors when needed.
5. Call Risk: Some ELNs may require investors to purchase related stocks under certain conditions. If investors are unable or unwilling to fulfill these requirements, they may need to bear additional risks or costs.
Investors should assess these risks and understand the specific terms and conditions of ELNs based on their investment objectives, risk preferences, and financial situation. It is recommended to consult with professional financial advisors or wealth management experts before considering ELN investments to ensure a good understanding of the risks involved and to choose suitable investment options.
For the basic knowledge and trading mechanism of Equity Linked Notes (ELNs), please refer to the information provided by Investor and Financial Education Council. You should pay careful attention to the Liability Statement section on the homepage of the website of The IFEC at “www.ifec.org.hk” when referring to information using this link.
Equity Linked Notes (ELNs)
Equity-linked notes (ELNs) are a type of financial instrument that are correlated with the performance of specific stocks or stock indices. They are structured notes that combine characteristics of both stocks and bonds. In an equity-linked note, investors purchase the note, and its returns are linked to the performance of the underlying stocks or stock index. If the linked stocks or index perform well, investors can earn higher returns. However, if the stocks or index perform poorly, investors may face the risk of reduced returns. One distinguishing feature of these notes is that they specify the underlying stock or index on the face of the note. For example, an equity-linked note may be linked to the stock of a particular company or to a stock index such as the S&P 500 or Dow Jones Industrial Average. The returns on the note are typically calculated based on the performance of the linked stocks or index, often in a predetermined ratio, and settled at maturity. Equity-linked notes are commonly used in investment portfolios to diversify holdings and provide exposure to the stock market. Investors can gain returns from specific stocks or stock indices in the market without directly purchasing and holding those stocks.
Equity-Linked Notes (ELNs) are financial instruments that combine elements of both stocks and bonds. When investors purchase ELNs, their returns are linked to the performance of specific stocks or indices. However, like any financial instrument, ELNs also carry risks.
Risk disclosure
Here are some potential risks associated with Equity-Linked Notes:
1. Market Risk: The returns of ELNs are influenced by fluctuations in stock prices or indices. If the performance of the related stocks or indices is poor, investors may face losses in their invested capital and returns.
2. Credit Risk: The issuing institution of ELNs may face credit risk. If the issuing institution encounters financial difficulties or defaults, investors may not receive the promised returns on time.
3. Legal Risk: Some ELNs may be subject to legal risk, meaning investors may not be able to achieve the expected returns from the equity-linked notes due to legal or other factors.
4. Liquidity Risk: ELNs may lack liquidity, making it difficult for investors to trade or transfer them to other investors when needed.
5. Call Risk: Some ELNs may require investors to purchase related stocks under certain conditions. If investors are unable or unwilling to fulfill these requirements, they may need to bear additional risks or costs.
Investors should assess these risks and understand the specific terms and conditions of ELNs based on their investment objectives, risk preferences, and financial situation. It is recommended to consult with professional financial advisors or wealth management experts before considering ELN investments to ensure a good understanding of the risks involved and to choose suitable investment options.
For the basic knowledge and trading mechanism of Equity Linked Notes (ELNs), please refer to the information provided by Investor and Financial Education Council. You should pay careful attention to the Liability Statement section on the homepage of the website of The IFEC at “www.ifec.org.hk” when referring to information using this link.
