The retail investment landscape has been through profound changes in recent times. Furthermore, the limited scope of new avenues for conventional investments such as gold and bank deposits to address inflation, safeguard capital, or ensure capital growth also calls for new instruments to achieve better returns on your investments. In this case, a structured product or structured note works as the best option for achieving complete or partial capital protection for your investments.
The value of structured notes is primarily evident in their capability to provide income on your investment rather than growth. Growth is just an indicator of the fact that the value of your investment has increased. However, the growth in value is valid only if a buyer is interested in paying you the desired amount of money. On the other hand, options that look at generating income such as structured notes can help you keep the cash flow running, thereby making your money work for you.
What is Structured Product and Why It is Important?
First of all, it is important to understand the definition of a structured note. The pre-packaged investment is basically the hybrid security with a combination of multiple payoffs from multiple securities.
The hybrid security generally includes a derivative and a bond.
- The bond is the major component of the structured note as it makes up for major portion of the investment. The bond is essential for providing the principal level of protection for consumers.
- On the other hand, the derivative component constitutes the other part of the investment. The advantage with the derivative component in the structure note refers to the upside potential for investors.
Who Issues the Structured Notes?
Fundamentally, large financial institutions such as JP Morgan, Credit Suisse, BNP Paribas, DBS, Morgan Stanley, and others issue structured products. Investors could also access structured notes on retail platforms, thereby improving their availability. In the long run, investment products such as structured notes can change the way you can offer pre-designed outcomes associated with capital protection. It is clearly evident that structured products are also another variant of risk mitigation alternative with potential for revolutionizing the investment industry.
In addition, it can offer promising benefits such as,
- Maturity Repayment
- Guaranteed Regular Income
- Flexibility for short-term investments
- Reliable avenue for passive and regular income
Components in Working of Structured Products
So, how can you take major decisions when you think of investments in structured notes? Here are the fundamental traits in structured notes that investors could leverage for deciding the variables and necessary adjustments during investments in structured notes.
Unlike underlying assets, structured notes are capable of offering the following important functionalities that make them suitable investment options,
- Capital Protection Barriers
- Pre-Defined Maturity Dates
- Ease of Understanding Results
Conclusion
On a concluding note, structured products can serve as a helpful instrument for balancing the investment portfolio. They are great alternatives for obtaining capital protection and detailed counselling with your financial advisor can help you explore suitable decisions with structured notes. However, just like other investments, it is essential to review structured funds carefully and look profoundly into what companies are offering.
If you are ready to buy structured products, get in touch with Dubai Financial Investments today. Dr. Rafiya is an independent financial advisor who can help you determine whether the structured product helps meet your objective and plan your finances.
Timely consultation with a financial advisor now could help remap your entire financial earnings into a more profitable and secure setting.