The name is not enough (ETF, PAC, Certificate, etc.): what counts is the underlying asset, the context and the protection you put behind your investments

For many novice investors, the feeling of "having made a good investment" arises the moment they choose a name: a "global" ETF, an automatic PAC, a barrier certificate, a "prudent" bond fund. It's an understandable psychological mechanism: faced with the complexity of markets, the brain looks for shortcuts and relies on the instrument's label.

The problem is that the name says almost nothing about what you're actually buying, and especially what will happen . What determines the outcome over time is not whether you're using an ETF, a PAC, or a certificate, but the underlying asset, the market environment , and how that risk is balanced within the portfolio .

1. The underlying: the only thing you're really buying

ETFs, PACs, and certificates are containers. What matters is what's inside .

A global equity ETF today has about 60–65% exposure to the United States , with a heavy concentration in a few large technology stocks. A PAC built on that same ETF doesn't change the nature of the risk: it dilutes the timing, but doesn't eliminate the dependence on the US equity cycle .

The same goes for certificates. A barrier-linked certificate with a coupon may seem defensive, but if the underlying is a cyclical stock basket or a single volatile stock, the risk remains intact. If that underlying falls 30–40% , the protection could be lost, regardless of the product's structure.

The container doesn't neutralize the underlying's behavior. If the underlying suffers, you suffer too—whether it's an ETF, PAC, or certificate.

2. The market context: what makes an instrument “right” or “wrong”

Many investors use the right tools at the wrong time. And this isn't refined market timing; it's a lack of context .

In recent years we have experienced very different contexts:

• 2012–2019 : Inflation below 2% and falling rates → Bond ETFs and fixed income funds returned an average of +2–3% per year with low volatility.

• 2021–2022 : inflation above 7–8% and rapid rate increases → the same instruments lost between –10% and –17% , surprising many “prudent” investors.

• 2023–2024 : Concentrated growth and strong sector divergence → ETFs and certificates linked to US technology have benefited from cumulative increases of more than +40% , while many diversified strategies have lagged behind.

  
  

A certificate built in an environment of low volatility and stable interest rates can perform well. The same certificate, purchased when implied volatility rises and the cycle worsens, suddenly becomes fragile.

The point is simple: you don't invest in the name, you invest in the market...which is dynamic .

3. Diversification: not how many instruments, but what risks

One of the most common mistakes is to confuse the variety of instruments with real diversification.

A wallet with:

• two equity ETFs

• a monthly PAC

• three index certificates

  
  

It may seem complex, but in reality it depends on just one factor : the performance of global stocks.

True diversification is not having different names, but different roles :

• Stocks : Economic Growth and Earnings

• Bonds : Stability in the slowdown

• Raw materials : hedging in inflationary environments

• Gold : Protection in times of stress

• Currencies : correlations and diversification

• Liquidity : reducing decision risk

  
  

A certificate can be a useful tool if included as an income component or partial protection , not as an unwitting substitute for equities. Likewise, a PAC only works if the underlying asset is consistent with the context and the rest of the portfolio.

In 2022, portfolios built by roles significantly limited losses, while portfolios focused on stocks or bonds recorded drawdowns exceeding –18 / –22% .

The truth that few explain to the inexperienced investor

The outcome of an investment does not depend on the name of the product, but on three fundamental questions:

1️⃣ What is the real underlying asset I'm buying? (index, sector, stock, implied risk)

2️⃣ In what market context am I buying it? (inflation, rates, economic cycle, volatility)

3️⃣ What other tools do I have to balance this risk? (Functional diversification, not aesthetic)

An ETF, a PAC or a certificate can be good or bad instruments depending on the answers to these three questions.

Conclusion

The name of an instrument may provide reassurance, but it doesn't protect. Protection comes from understanding the underlying asset, the context, and the overall structure of the portfolio.

An investor who starts with these three pillars doesn't look for the "best" product. He builds a coherent strategy and sticks to it as long as the environment holds.