If you’re an investor in Singapore, you would know how crazy choosing over a lot of products can get. All of those numbers, charts, and jargon are getting more complex. However, over the years, different institutions have started crafting new products by pulling out complicated products and putting them all in one pot. Then, they called Structured Products.
The Structured Product is a type of investment that offers a chance to make interest returns bigger than traditional fixed deposits’ returns. Structured products’ returns are pegged to the performance of an underlying asset – usually equities, currencies, and bonds.
Recap: What are Structured Products?
Structured products are simply blends of conventional securities like bonds and stocks and derivatives like indices, swaps, currencies, commodities, metals, and even interest rates of foreign countries. Structured products are the only financial instruments capable of offering a considerable degree of customization of risk-return profiles. They also allow your investment to take advantage of the profitability of ranging markets and bearish markets, which will depend, of course, on the client’s own risk profile.
Why Start Investing In Structured Products?
Here are three reasons:
- Structured products are flexible enough to target different financial aims like capital security, capital appreciation, diversification, fixed income stream, and leveraged returns.
- A recurring trait and benefit of differently structured products are the capital protection (to a certain degree) it provides. A structured product that protects the capital shields a portion (normally 100% of it) of the capital you invested.
- It is a convenient way to synchronize the performance of your investment with the global and international finance markets with minimum to zero capital risk.
All in all, a structured product is a definite choice of investment instrument that can be added to a portfolio to diversify it and to spread risk. It will give you the versatility you need to be able to customize an investment structure, based on your priorities, risk appetite, and target deadlines, to achieve your particular financial goals.
Who is this for?
If you are the risky type of investor, structured products also allow you to expose a portion of your capital to non-conventional markets and the derivatives market. The increased risk comes with your opportunity to gain potentially big returns, which your personal banker should clarify with you.
How can I start investing in structured products?
There is no standard procedure in investing in structured products since companies have different and unique structured products to offer and structured products themselves are malleable in nature. You can go to a particular financial institution that provides these products and they will tell you the step-by-step process.
The more important matter an investor must take note of is the due diligence investing requires and the risks structured products pose. The provider of the structured product may provide a guarantee. The investor must determine how much money will be compensated. Third parties may provide guarantee too but they may not be able to commit to it.
A person who is interested in starting a structured product investment must determine the following to maximize returns:
- How much are the returns compared to conventional financial instruments?
- How much does the reward outweigh the risk?
- Is it stable? What kind of protection can the company offer me?
- How much commitment can I offer to study a complicated product?
- Can I achieve the same returns in another product that is simpler and less risky?
- What is the time horizon needed to reach optimum returns?
- Why is this suitable for someone like me? For my risk appetite?
- How will this achieve my financial goals?
- Can you provide a record of this product’s historical performance?
- Have I understood everything about the product? Did I miss out anything?
- Most importantly: Does this product meet my investment objectives and needs? Will this help me achieve my financial goals?
In products as complicated as Structured Products, the only way to invest properly is to do your part as an investor and research as much as you can.
She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen).
Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).
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