Structured products: are they a risk worth taking? With fears of a double- dip recession growing, the idea of making money when markets fall is an appealing one. So too is the possibility of tripling the best cash deposit rates the banks and building societies have to offer.
Supporters of the products say they offer investors the chance to get equity exposure without having to endure the stomach- churning volatility of the stock market. Critics say structured products are designed to lure punters in with eye- catching headline rates that can blind investors to the downside. The Morgan Stanley FTSE Booster product promises to return twice the level of the FTSE1. If the FTSE is at 5,0. Even if the FTSE halves to 2,5. If it falls to a quarter of its starting value you get half your money back, but if the FTSE soars, returns are capped at 6. Barclays Capital's FTSE1.
Autocall product pays 1. Autocall products are also called . So if the FTSE is at or above its starting level on the first anniversary of the product, your money is returned, plus a 1. If it is not, but is on the second anniversary, your money is returned plus 2. If you get to the end of the six- year term and the FTSE is still below its starting value, you get your money back, unless the FTSE has fallen by more than 5. But not all financial advisers are convinced. Adrian Lowcock, senior adviser at Bestinvest, said: .
So they tend to offer downside protection when markets have already fallen considerably. The rational thing to do when markets have fallen is to invest in equities, take the contrarian view and buy equities when they are cheap. Part of your cash, usually around three quarters, buys a bond from a financial institution to pay whatever sum the product promises to return at the end of the product's lifespan. For a capital- protected product, a bond returning 1.
Structured products offer investors the potential to earn returns tied to the performance of an index or basket of securities. Rates of return vary and are generally. DICOM Structured Reporting by Dr.
A further portion of your investment, typically between 5 and 6pc goes on administration costs, adviser commission and the product provider's profit. The remainder of your investment is then invested in whatever options or other derivatives that the structured product invests in, typically the FTSE1. If this happens, you could lose some or all of your investment. In this event you will not be covered by the Financial Services Compensation Scheme (FSCS), although deposit- based structured products, typically offered by banks and building societies, do not carry this risk.
What Goes Well with Student Keyboard Workbooks: Ultimate Guide to Keyboarding: K-5 (teacher book–free with K-5 student workbooks) Ultimate Guide to Keyboarding. The structured products industry has become a substantial, but widely misunderstood, business. Structured products, though often deemed capricious. Daily Rate Special pricing of a structured settlement annuity (or other payout annuity) by the annuity issuer's actuaries. Sometimes book rates may be improved upon. The new market environment has made it crucial for investors to identify areas of growth and to diversify their credit and market exposures. Fetauring top speakers.
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For example, should the FTSE1. And you should remember that your money is tied up. Structured product providers argue that they can be high or low risk. Ian Lowes of Comparestructuredproducts. Choosing one is a question of understanding what the product does, and whether you are comfortable with all the potential outcomes.
And no one should go into them without fully understanding the risks.