This may be especially important for those who are currently living outside of their home countries, as domestic investments may no longer apply while fixed deposits are often not enough to stave off risks of inflation and market turmoil. Thus, an increasing number of investors are choosing to opt for a financial vehicle known as a Structured Product.
What is a Structured Investment?
As the name may denote, a structured product is a position that is known as a prepackaged investment. In other words, these products are generally comprised of a number of different individual investments. These positions can include but are not limited to commodities, securities, options and Forex (currency) holdings.
However, these are only a few examples of some of the most common components of a structured product. In effect, there is no “one” rule in regards to what these positions are comprised of. Thus, such holdings are more easily tailored to investors who have a specific amount of return in mind or for those who prefer to spread their holdings into diverse sectors.
What Are the Advantages of Structured Products?
One of the principal benefits of structured products is their ability to spread one’s risk over a variety of different market sectors. This can be important when one is located overseas and may not have the ability to constantly follow a long series of individual equities. Notwithstanding this key aspect, some of the other major advantages include:
- Less exposure to open-market volatility.
- Stability due to their “buy and hold” nature.
- Up to one hundred per cent capital protection.
- A link to more predictable market fundamentals such as interest rates or corporate credits.
- Less of a “knee-jerk” reaction in bearish markets.
So, we can see here that these benefits are ideal for those who wish to place their capital into a position where it will accrue wealth over time. Typically, structured products have a certain amount of time that they must be held before they can be liquidated, these are often the investments of choice for those who may not be in the position to actively monitor their portfolios on a daily or weekly basis.
These are some of the main reasons why Structured Products have proven themselves quite popular to the mid-term, risk-averse investor.
Download: The Advantages of Structured Products.
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