Can principal-guaranteed products help an investor better manage portfolio risk? Ken French explains that principal protection would certainly be attractive if it were free. Unfortunately for investors, it is not. French discusses potential problems with principal-guaranteed products and argues that before purchasing these instruments investors should consider portfolio solutions that are simpler, transparent and more cost effective.
Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to Dimensional Fund Advisors LP.