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Structured Investment Products

The world of investments is a complex one indeed, particularly in a time when putting money into stocks and other investment products is much riskier than it once was. The good news is that there are still products to invest in that keep your capital safe and provide a decent interest return. The solution is structured investment products that provide you with a higher rate than fixed products for less risk than other types of investments.

Definition
A structured investment product combines two products into one, offering return potential on one or both of the products involved. One product is generally a money market account that pays a fixed rate periodically and the other is put into an option that offers a variable rate of return. This allows the structured investment product to produce a return even when the markets fall.

In uncertain economic times, a structured investment product protects your capital investment and provides you with earning opportunity. In fact, structured investment products are fixed-term investments, meaning you get to decide the minimum and maximum earning potential of the product you choose. In some cases, the rate is linked to an underlying benchmark, such as interest rates, commodities or foreign exchange markets.

The product is referred to as "structured" because the investment structure is set when one purchases the product. This means that investors have some control over the type of returns they can look forward to. The products pay a fixed amount of income during periodic intervals or they can pay out the growth of the investment depending on how the markets perform.  

Structured investment products have hit a boom in these uncertain economic times, with many investors snatching up the opportunity to protect their initial capital when the rest of the market is unpredictable at best. In fact, according to an article in the UK Telegraph last summer, 2008 saw a record number of structured investment products get bought up by investors. It does not appear that the factors the products are linked to are making much of a difference in their popularity. The overall low risk option is the perfect choice for those looking to make a decent return without riding the tide of the market too dangerously.

Versatility
While structured investment products are considered less risky overall, there is enough versatility in the types of products to allow investors to determine precisely how much risk and potential return they want to undertake. Factors like risk tolerance and goals can be manipulated to meet an investor's specific needs. There are also non-standard additions investors can make to their product, such as exposure to less accessible markets and swaps. Many of these features do carry additional risks and may incur extra charges, however,

Overall, structured investment products are seen as a nice addition to most investment portfolios. While the returns may not offer as much potential as riskier products, the benefits appear to far outweigh the lower returns in the volatile market today. If you are interested in structured investment products, contact your private banker for more information and to find out what your options are.