Structured Investments
Is it a risk worth taking for retirement?
Structured Investment may provide potentially higher returns, as compared to savings products like Fixed Deposits, making it a viable vehicle to grow your retirement income. Nonetheless, as it may offer higher potential returns, it also comes with higher risks.
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A Structured Investment is essentially an investment linked to the performance of various underlying assets such as interest rates, foreign currency and equities. Unlike Fixed Deposits, a Structured Investment is complex and should not be entered into without fully understanding how it works and the risks involved.
Interest Rate Linked Structured Investment
This is designed to potentially provide you with higher rates than the deposit/market rates, depending on a particular interest rate indicator’s movement. For example, the investment could be linked to the Kuala Lumpur Interbank Offer Rate (KLIBOR). Depending on the formula used in the Structured Investment, the actual returns will hinge on the interest rate movements. If the rate moves as anticipated, you stand to gain a positive return on your investment.
For each structure, the interest payment formula and frequency, interest rate indicator, investment tenure and other terms & conditions are predetermined and made known to you before the investment is traded. This is to ensure you won’t be unpleasantly surprised along the way.
Foreign Currency Linked Structured Investment
The potential returns from this Structured Investment will depend on foreign currency movements. It may provide potentially higher returns compared to the corresponding currency deposit rate, depending on the currency’s market movement. There are numerous FOREX structures that can be developed to suit your investment objectives.
The interest rate paid, required currency benchmark, investment tenure and other terms & conditions are made known to you at the start of each investment to ensure that you are fully aware of what you are investing in.
Equity Linked Structured Investment
This is a safer alternative than direct equity investments. Firstly, the risk exposure is spread out over several underlying equities either within a basket of stocks or by using an equity index. Since these stocks may not be directly correlated to each other, the total volatility of the investment could be significantly reduced and/or balanced out. Furthermore, for structured investments, the bulk of the principal amount is invested in risk free bonds and fixed income instruments which help to generate the interest to fund the repayment of the principal upon maturity. As such, customers can enjoy higher potential returns by capitalising on the price movement of the underlying stock(s) but are still able to retain the agreed percentage of their principal amount when the investment matures.
According to your investment needs, you can choose from structures with returns dependent upon movements of a predetermined index, group of indices or basket of stocks.
