Lsd online cheap are often considered as stand-alone investments and compared as direct alternatives to for example cash, equities or corporate bond funds. This approach is based on limited understanding of how to construct investment portfolios that manage risk and create asset diversity.
They work best when used in conjunction with other investments where the defined returns and capital protection can be used to balance, perhaps, higher risk unprotected equity strategies or in lower risk portfolios to offer better than cash returns without risking capital.
In sophisticated portfolios structured products can also offer investors access to other assets or markets such as commodities or emerging economies with capital protection where investors can benefit in any uplift without directly buying into the market. This creates asset diversification into potentially volatile markets without necessarily increasing risk to capital.
Myth 2 – They are too complex for retail investors
Just as there are many kinds of mutual funds, there is great variety within structured products. Depending on their needs investors can select from the vanilla to the complex, similar for example to buying open ended tracker or hedge funds.
What makes structured investments stand out from the crowd is their transparency over how their returns are calculated. Payouts are often described as a formula based upon well known world indices with a specific investment horizon. Such products allow potential investors to clearly understand how a product will perform, both from a positive performance and downside risk perspective.
For a provider of a structured product to deliver transparent payouts that often differ from more traditional funds, products are hedged internally, a task that often needs derivatives. Considered in isolation derivatives are complex, but within a structured product they simplify investing because providers can define investment risk. It is perhaps the success of structured investments and their transparency, that there is a desire to understand these elements.
Myth 3 – Investors cannot get out of them when they want to
Structured investments are designed to payout on a given day in the future and as such are designed to be held until maturity. Terms often range between one and five years depending on the product.
This fixed term nature is often misunderstood as meaning that there is no opportunity, no matter what an individual’s circumstances are, to exit a structured product prior to this maturity date. This is often not the case. Within Europe there is a vibrant and active secondary market in structured products, and there are many possibilities where the ability to sell such products and potentially realise any gains made, can form an important part of a clients regular portfolio review.
What investors must be aware of is that all fees are predetermined and taken upfront on a structured product and there are many market attributes that can affect the current price of a structured product such as interest rates, market volatility (as well as the index level be) and time to maturity. The impact is that even for products offering 100% capital protection, investors can get back less than they invested if they chose to exit a structured investment early.
