Structured Products are gaining traction again even after the 2008 financial crisis. A particular type of Structured Product, called Structured Notes, led to the undoing of many retail investors in Singapore at the advent of the crisis.

The public seems to have forgotten the crisis itself because there has been growth in demand for structured products, particularly structured deposits, which somehow offers a guaranteed return of capital, unlike structured notes.

What are Structured Deposits?

Structured Deposits work like having someone win a card game for you (with money at stake) so that you can win the pot. The deal won’t be on until you put some money down and you can’t withdraw from the bet until someone wins. If your proxy wins, you share the pot. If your proxy loses, you lose a part of your money.

Unlike traditional deposits, structured deposits offer variable growth rate, which depends on the performance of any instrument, security, or derivative. For example, if a structured deposit tracks a basket of equities, the structure deposit’s returns increases as the equities perform better.

Structured deposits have variable maturity dates. There’s a chance that your structured deposit that has a maturity of 3 years won’t necessarily last until the third year, depending on the bank’s decisions. When the bank that issued your Structured Deposit goes bankrupt, your structured deposit cannot be recovered, unlike fixed deposits, which can be recovered up to $50,000 worth of deposit insurance coverage.

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What are Structured Notes?

Structured Notes are flexible investments products whose performance of returns in connected to another asset’s performance. These assets may be indices, equities, bonds, baskets of securities, fixed-income securities, forex rates, derivatives, interest rates, commodities, credit swaps, futures, options, and even head funds.

The returns of the structured note can exist in the form of interest returns or return of principal, which are both linked to the performance of the underlying asset/benchmark.

Structured Notes are the investment vehicles greatly involved in the 2008 financial crisis. Unlike its recently popular sibling, Structured Notes do not come with a guarantee of principal capital return. Its true use lies only in the performance of the underlying assets it is pegged on.

Investors are advised to pay no heed to salespeople who market their Structured Notes with “capital protection” because Structured Notes do not come with anything like that.

Which is better, Structured Notes or Structured Deposits?

You may see Structured Notes as risky and tainted with a bad reputation. Structured Deposits, on the other hand, has a sweeter appeal to people.

Structured Deposits returns start at 1% rate and returns may grow bigger and bigger in time. Fixed deposit rates are capped at 1% until maturity. Structured Deposits are also less risky than equities, and can actually guarantee a return of principal.

Like any other managed investments, Structured Deposits charge opportunity cost. And like any other investment, Structured Deposits can’t guarantee returns. You will also need bigger funds to start your Structured Deposit, compared to fixed deposits.

Structured products like Structured Deposits can be a very lucrative investment, but like any other investment, it should answer a specific problem or help you achieve a specific goal, in spite of all the risks it brings.

If your goal is to secure a stable retirement life, don’t invest in Structured Deposits. It is always wiser to secure a stable inflow of cash and a sufficient amount of savings and emergency funds before you invest, particularly in risky investments like structured products.

A better question: Which investment type is best for your needs?

Any determined investor can go through thick complexity. Some investors managed to survive the financial crisis. It takes in-depth financial knowledge, a lot of digging, a lot of analyzing, and guts to go against the market flow to save your money as the crisis builds up.

In order to know the answer to this question, make it a habit to constantly increase your Financial IQ. Instead of asking which investment yields more money or which investment is easier to invest in, ask which investment best fits your needs. Remember: There is no one-size-fits-all type of investment.

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Founder @ The New Savvy
Anna Haotanto is the Advisor (former CEO) of The New Savvy. She is currently the COO of ABZD Capital and the CMO of Gourmet Food Holdings, an investment firm focusing on opportunities in the global F&B industry. She is part of the founding committee of the Singapore FinTech Association and heads the Women In FinTech and Partnership Committee. Anna is the President of the Singapore Management University Women Alumni. Anna invests and sits on the board of a few startups. Anna is also part of the Singapore Chinese Chamber of Commerce & Industry Career Women’s Group executive committee. Anna’s story is featured on Millionaire Minds on Channel NewsAsia. She hosts TV shows and events, namely for Channel NewsAsia’s “The Millennial Investor” and “Challenge Tomorrow”, a FinTech documentary. Anna was awarded “Her Times Youth Award” at the Rising50 Women Empowerment Gala, organised by the Indonesian Embassy of Singapore. The award was presented by His Excellency Ngurah Swajaya. She was also awarded Founder of the Year for ASEAN Rice Bowl Startup Awards. She was also awarded the Women Empowerment Award by the Asian Business & Social Forum. Anna has been awarded LinkedIn Power Profiles for founders (2018, 2017), Tatler Gen T, The Peak’s Trailblazers under 40 and a nominee for the Women of The Future award by Aviva


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