Every investment instrument has an objective associated with it. People have plenty of expectations for an increase in wealth and capital. They want higher and better returns so that they can prepare to save for the future from the current day itself. As you know, troubles could take place at any moment, and one must be ready to face the worst scenarios, even high-net-worth individuals.
Investing in structured products helps retailers access the derivatives quickly. In today’s volatile market, such products enable them to survive and gain from volatility. They can control the risks involved owing to the fluctuation of prices in the market and benefit from them.
Why are structured products unique?
When you begin investing in structured products in India, investors get to choose customised payoff, which is a combination of fixed and variable market-linked return over the investment period. It should suit the risk-return objectives along with useful tax planning agenda. These then get linked to stock performances such as NIFTY and the downside protected up to the capital deployed.
Following are the characteristics of such products –
Tenure
The structured finance products last for extended periods with a commitment of at least 12 months and an investment horizon of two to three years for gaining maximum profits.
Fee structure
Every investment and financial instrument need some payment for operating smoothly. Similarly, such investments also ask the investors to pay some fees which varies between the financial institutes.
Combination of conventional instruments
Such investments are a mix of several financial instruments which help investors achieve their fixed goals.
Ticket size
A minimum investment of INR 10 lakh is needed for direct investments. The ticket size differs from issuers. If the investor opts for PMS routes, the minimum rate of ticket size will be INR 25 lakh under the PMS guidelines in India.
Risks involved
The risk of investing differs on the way the products are structured. The risk can conservative or aggressive, based on the preference of the investor.
Types of investment
The investments can either be fully protected or partially principal protected, without any top protection investments.
Such structured investment products are a combination of traditional financial instruments such as shares and bonds with one or more elements which use derivatives. They are pre-packaged investment strategies based on different products like options, currencies, commodities, securities, and more. They also have other structures with varied functions and rules. There are no uniform sets of standards in such packages.
There are many benefits for investors who love taking high risks. They benefit from the price rise, thereby increasing the gains. Similarly, investors also get some control over them.