DEPENDING on whom you talk to, structured products are either clever ways of hedging specific portfolio risks or another demon from Wall Street.

As vehicles that use derivatives to protect or enhance an underlying stock, bond or index, structured products are sold by nearly every major bank and brokerage house — and more than $34 billion of them were sold in the United States in 2009.

Yet they are not for investors who don’t fully understand them, because they are riddled with complexity, are mostly opaque and have lost money for investors in the past. (With a grant from the Nation Institute. a nonprofit organization that says it was established “to extend the reach of progressive ideas,” I have been researching structured products for months.)

“These are complicated investments. and people should know what they’re buying,” said Tom Balcom, a fee-only adviser with Ibis Wealth Management in Boca Raton, Fla. He said he had “yet to put more than 35 percent of a client’s portfolio in structured products,” adding, “If you don’t understand what these products are, stay away from them.”

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BUYER BEWARE Tom Balcom advises caution when considering structured products. Credit Marc Serota for The New York Times

Sean O’Toole, 43, who owns and operates an event-marketing agency in Fort Lauderdale, Fla. worked with Mr. Balcom to add structured products to his portfolio.

“I’m not betting the farm,” Mr. O’Toole said. “I like diversification. I’d rather be over-conservative if we see another double dip.”

An ultracautious investor concerned about the prospect of another huge stock market decline, Mr. O’Toole has two-thirds of his portfolio in cash and one-third managed by Ibis in structured products like buffered return enhanced notes, which put a cap on the potential gain in return for protection against a market decline. He pays no commission for the vehicles and a 1 percent annual asset management fee to Mr. Balcom.

Before Mr. O’Toole bought structured products, he had experience with options strategies, an essential prerequisite for anyone interested in structured products.

While structured products are not household names, they are hot sellers, and sales growth is estimated to be about 24 percent this year, according to structuredretailproducts.com. a service that monitors the industry.

Banks continue to market them aggressively as well. Structured note offerings are up 58 percent this year (through August), according to Bloomberg. The global market for these vehicles exceeds $1.6 trillion.

But the numerous disadvantages of structured products make them ill-suited for investors who want low-cost, government-guaranteed or liquid investments.

Once you invest your money, you are essentially locked in for the duration of the contract. Brokers may say they can buy them back, but often little or no secondary market exists for many of them. They may charge you another commission to do so and not guarantee the price you initially paid. Despite their many promises of principal or downside protection, investors can still lose money. Investors in principal-protected notes issued by Lehman Brothers, which filed for the largest bankruptcy in history on September 2008, found out the hard way that they held unsecured Lehman debt. Their principal was not protected, and most lost all of their investment.

Structured products have been linked to an estimated $1 billion in investor losses in the Lehman notes alone. UBS, the Swiss bank and brokerage firm, was one of the largest sellers of the notes and is being sued by investors and regulators in the United States and Britain.

“UBS properly sold Lehman structured products to UBS clients, following all regulatory requirements, well-established sales practices and client disclosure guidelines,” said Alison Chin-Leong, a spokeswoman for UBS. “Any client losses were the direct result of the unexpected and unprecedented failure of Lehman Brothers, which affected all Lehman bondholders.”

Other structured investment vehicles like reverse convertibles and equity-linked notes are also the subjects of state investigations and investor lawsuits.

“Deservingly, the architects and marketers of these bizarre investments are now facing a long-term battle with investor rage and regulatory scrutiny,” said Lou Straney, a consultant and expert witness for Arbitration Insight in Santa Fe, N.M.

Investors interested in structured products should contact a registered investment adviser or fee-only certified financial planner who understands them and has vetted them thoroughly. “Look at the payout options,” Scot Jurczyk, a chartered financial analyst and registered investment adviser, tells clients. “Ask, ‘How am I going to make money? What’s the tax impact? How much is the adviser being paid?’ ”

Mr. Jurczyk, managing director of the Financial Solutions Advisory Group in Chicago, said he carefully reviewed client portfolios before placing them in structured notes — and he avoided broker-sold notes altogether.

Don’t be cowed by the daunting calculus employed to hedge risk and produce returns. A competent adviser should be able to explain — and clearly illustrate — all risks (credit, market and liquidity), conflicts and expenses like commissions, underwriting fees, bid/ask spreads and embedded derivatives costs.

If you don’t get a clear explanation or are uncomfortable tying up your assets in a virtually illiquid product, move on. These products don’t lend themselves to comparison and you can’t monitor them like you would a stock or mutual fund .

Most structured notes are “a hot mess,” said Janet Tavakoli, president of Tavakoli Structured Finance in Chicago and author of several books about them. “Most professionals can’t analyze them. When I have done it, I find these notes are loaded with hidden fees and hidden risks.”

And as with all investments, remember the timeless principle that higher return always means more risk. Wall Street continues to profit on that oft-forgotten rule.

A version of this article appears in print on October 21, 2010, on page F8 of the New York edition with the headline: An Investment for the Experienced. Order Reprints | Today’s Paper | Subscribe