In a response to the very low interest rates offered on cash savings and the reluctance of investors to want to deal with the volatility of the stock markets, many financial institutions offer structured products attempting to provide an element of certainty over your original investment and some upside by placing a bet on the market. In effect, you are normally gambling your interest which may well be better than gambling your whole investment.
There are two main types of structured product –
- Structured deposits are savings accounts offered by banks, building societies and National Savings & Investments often for a very limited period only. The interest you will receive is highly dependent on how the stock market or other measure performs. In many cases if the stock market index falls then you will get no interest at all. Normally the money you originally invest will have the same protection as any other savings account.
- Structured investments are generally offered by insurance companies and banks. Structured products are normally split investments where part of your investment is used to return your money and part to provide an element of upside based on the stock market or other index. The return you receive will depend on how the stock market or other measure performs. There is an important additional risk over structured deposits as, if the firm providing the underlying investment runs into financial trouble, you may lose some or all of your original investment.
We can discuss whether these products may be suitable for you and the products that are available on the market which varies from time to time.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.