  Popular investment structured products in Puerto Rico are stock market tied
Individual Retirement Accounts (IRA), which offer some stock market growth
while protecting the principal. The performance of these retirement strategies
has not been studied. This work examines the expected return and risk of Puerto
Rico stock market IRA (PRIRAs) and compares their statistical properties with
other investment instruments before and after tax. We propose a parametric
modeling approach for structured products and apply it to PRIRAs. Our method
first estimates the conditional expected return (and variance) of PRIRA assets
from which we extract marginal moments through the Law of Iterated Expectation.
Our results indicate that PRIRAs underperform against investing directly in the
stock market while still carrying substantial risk. The expected return of the
stock market IRA from Popular Bank (PRIRA1) after tax is slightly greater than
that of investing in U.S. bonds, while PRIRA1 has almost two times the risk.
The stock market IRA from Universal (PRIRA2) performs similarly to PRIRA1,
while PRIRA2 has a lower risk than PRIRA1. PRIRAs may be reasonable for some
risk-averse investors due to their principal protection and tax deferral.
