Transcript Structured Investment Products

http://www.bankinginfo.com.my/01_plan_your_finances/0105_structured_investments/structured_in
vestments.php?intPrefLangID=1
They are fixed term investments
Structured investment is a form of
investment that can potentially bring
about higher returns, compared to other
investment products, like fixed deposits.
Although it promises higher returns, it
also comes with higher risks.
Structured investments are often linked
to the performance of various underlying
assets such as interest rates, foreign
exchange, equities, fixed income
instruments or market indices.
A structured investment has a maturity
period depending on the features of the
products. If redeemed before maturity,
your investments may lose part of the
returns and/or principal.
They can either be principal protected
or non-principal protected.
The level of risks involved in non-principal
protected structured investments are higher
compared to principal protected structured
investments. There is no guarantee on the
amount of money you will receive on nonprincipal protected structured investments
even if you hold them to maturity.
The returns on structured investments vary, are usually not
guaranteed and are dependent on the performance of the
underlying assets during the investment period. You may face
losses if the performance of the underlying assets differs from what
you have anticipated. The returns on certain structured
investments may also be affected in movements in foreign
exchange.
Non-principal protected structured investments usually give
higher returns compared to principal protected investments. This
is mainly because of the higher risks involved in the investment.
Structured investments can be used for income growth purposes.
However, as in any investment, there are potential risks involved.
As a savvy investor, if you are considering to invest in high-risk
investments such as structured investments, you should have an
asset portfolio that includes low risks assets such as fixed deposits.
As the name suggests, dual currency investment (DCIs) is
a form of structured investment dealing with foreign
exchange risks where your investments will be made in
one currency (called 'base currency').
At maturity, you will either be paid in the base currency
or in another currency (called 'alternative currency'). As
an investor, you can choose both the base currency and
alternative currency.
However, remember that if the banking institution pays
you in the alternative currency, you could experience a
loss on your principal when you convert it back to the
base currency if the foreign exchange rates did not move
in the direction you anticipated.
HOW STRUCTURED INVESTMENT PRODUCTS
WORK
Structured investment is a form of investment that
can potentially bring about higher returns, compared
to other investment products, like fixed deposits.
Although it promises higher returns, it also comes
with higher risks.
Structured investments are often linked to the
performance of various underlying assets such as
interest rates, foreign exchange, equities, fixed income
instruments or market indices.
Interest rate-linked structured
investment
For an interest rate-linked structured investment, the
returns are usually linked to some interest rates. There is
usually a formula that refers to a specific floating interest
rate (e.g. the Kuala Lumpur Interbank Offer Rate
(KLIBOR).The actual returns depend on the interest rate
movements. For example, if KLIBOR moves WITHIN the
agreed band during the investment period, you will receive
a positive return on your investment. On the other hand, if
KLIBOR moves OUTSIDE the agreed band during the
investment period, there will be no investment return for
you. You will only receive the amount of your initial
investment.
Difference between Fixed Deposits and Structured
Investments
Fixed Deposit
Minimum amount
required
RM500
Return: Fixed interest
rate
Yes
Potential enhanced return/interest (performance
pay-off)
Structured Investments
Floating rate negotiable instruments of deposits: RM100,000
Investments linked to derivatives:RM250,000
(Only applicable for investments with a minimum interest
feature)
No
Yes
Full principal sum
payable on
i. Maturity
Yes
(Applicable for principal protected investments only)
ii. Early withdrawal
Yes
Investors may lose part of their return and/or principal. The
amount to be paid to investors depends on the market value
of the underlying assets.
iii. Early redemption by
bank
Not Applicable
Yes
Relatively
risk-free
Return can be affected by various types of risk such as
interest rate risk, market risk foreign currency risk, and
early termination risk.
Yes
No
Risks involved
Protection by Malaysia Deposit Insurance
Corporation