Maximizing Returns Through Structured Trades
Structured trades have become a buzzword during the past few years due to the higher
return on investment offered by structured products over traditional deposits. Structured products are usually linked to the performance of underlying benchmarks or assets, such as commodities, equities and foreign exchange rates. An underlying asset may be exposed through different modes, such as individual securities or a basket of securities.Structured Trades: Weighing the Pros and Cons
Structured investments may be customized to achieve income, capital growth or even a combination of both. Besides, most structured products accompany capital protection, wherein a bank vouches for the safety of the principal. The value of this capital protection is established by the issuers creditworthiness. This makes it crucial to ascertain the creditworthiness of your issuer.
Other important considerations pertaining to structured trades are:
Although you may obtain a guarantee on the principal, there is no assurance about the returns.
Redemption of an investment results in removal of capital protection. Moreover, you may even have to bear some premature termination charges.
The structure of some products may be complex, such as a tiered rate of return system, which may become quite troublesome.
Structured Trades: Reviewing Your Options
Principal Protected Structures are perhaps the most commonly traded structured instruments. These debt instruments are issued by a creditworthy bank or financial institution issuer, which guarantees the safety of the principal. This is an attractive means to earn higher returns, while benefiting from greater insurance/safety.
However, keep the following pitfalls in mind before committing your funds to a principal protected structure:
Interest-rate risk: This implies the inherent chance that the investment's value may change due to an alteration in the absolute level of the interest rates or the spread between two interest rates.
Fee risk: A principal protected structure is a managed product, which makes it subject to higher fees. This is because the principal guarantee on such investments is basically an additional insurance.
Liquidity risk: This implies the lack of marketability of principal structured products. These products typically have a maturity period of six to ten years.
Dual Currency Deposit is another popular element of structured trades; wherein the principal is repaid in an alternative currency at a predetermined strike rate upon the maturity date. Dual Currency Deposits are a highly sought-after investment vehicle, since they let you earn more than 10%, a significantly higher rate of return than the average bank rate of 1% per year.
Structured Trades: The London Pearson Advantage
To execute profitable structured trades, seek the assistance of a professional investment and brokerage firm. At London Pearson, you benefit from customization of your trade ideas to best suit your risk-return expectations. We can also create zero or low-cost structured trades based on your desired risk parameters. Moreover, our expert panel communicates lucrative trade ideas to the clients based on new market opportunities on a weekly basis. So, always remain in tune with the pulse of the market with London Pearson.
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