Structured Deposits are Banks Consultants' Favourite when it comes to investment for Aunties and Uncles. The catch for these Uncle, Aunties is the word "Guaranteed". This investment instrument either guarantee some interest, usually as low as 1-2%p.a over a period of 5-7yrs or guarantee the principle on maturity. What is a Structured Deposit?
A structured deposit combines deposit and an investment product, where the return is dependent on the performance of some underlying financial instrument such as market indices, equities, interest rates, fixed-income instruments, foreign exchange or a combination of these.
Common Types of Structured Deposits
1) Equity Linked Deposit
* Equity-linked deposits are linked to stocks, or a basket of stocks, as determined by the issuer or to an index such as S&P 500
2) Bond Linked Deposit
* Bond-linked deposits are linked to bonds (for example, Singapore Government Securities).
3) Interest Rate Linked Deposit
* Returns for such deposits are usually linked to a formula that makes reference to a specific floating interest rate
* The payouts on such deposits may also rise or "step up" at pre-determined points in time if the deposit is not redeemed by the issuer
4) Credit Linked Deposit
* Returns on this type of deposit is not linked to the performance of a financial instrument, but rather the occurrence of what is known as a "credit event" (for example, if a specified company becomes insolvent or defaults on its loans)
* Part of info extracted from MoneySense Website: www.moneysense.gov.sg
2 comments:
All this form of deposits do not yield much good return. Infact the interest rate in singapore is so low.
by the way the banks are so rich, they cant wait to borrow you money.
Such products are designed at the expense of the consumer. Bank Advisers and their RMs are making good money out of it.
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