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Understanding structured savings products in Asia

In the complex terrain of investment options, structured savings products have emerged as a significant component in the portfolios of discerning investors across Asia. These financial instruments combine the security of traditional savings accounts with higher returns commonly associated with investments. As Asia continues to establish itself as a vital hub for global finance, understanding the nuances of these products is paramount for investors looking to navigate the region’s investment landscape effectively.

What are structured savings products?

Structured savings products are hybrid financial instruments that fuse elements of traditional banking products with investment opportunities. Banks and other financial institutions in Singapore typically offer them, providing investors with a low-risk option for growing their wealth. In essence, these products provide a fixed return on investment and enable investors to participate in the stock market or other assets.

How do structured savings products work?

Structured savings products function through a process known as embedded options. These options are product provisions allowing investors to access specific investment opportunities. Additionally, these options can protect investors from potential losses by reducing their exposure to market volatility.

Types of structured savings products

A wide variety of structured savings products is available to investors in Asia, providing them with diverse options when trading online to suit their investment goals and risk appetite. Some of the most common types of structured savings products include:

  • Structured deposits: These innovative products combine the stability of a fixed deposit account with the potential upside of investing in assets such as stocks, bonds, or commodities. By offering an embedded option, investors can participate in the performance of these underlying assets.
  • Structured notes: These attractive investment instruments are debt securities with a fixed maturity date and an embedded option to invest in underlying assets. They offer the possibility for higher returns compared to traditional bonds, but it’s important to note that they also carry a higher level of risk.
  • Capital-protected products: As the name suggests, these products prioritise the protection of the principal amount invested while still providing exposure to investment opportunities through embedded options. It can be an appealing option for Singaporean investors seeking a balance between capital preservation and potential growth.
  • Autocallable products: These unique financial instruments offer a fixed return if the underlying asset reaches a specific level during the investment period. The investor receives their principal amount at maturity if the predetermined level still needs to be achieved. This structure allows investors to benefit from market movements while still having a safety net for their investment.

By understanding the characteristics and benefits of these different types of structured savings products, Asian investors can make better decisions that align with their financial objectives and risk tolerance.

Advantages of structured savings products

Structured savings products offer numerous advantages to investors, making them an attractive option for many in Asia. These products provide a range of benefits that can enhance investment strategies and offer greater financial security.

With structured savings products, investors can diversify their portfolios by gaining exposure to different underlying assets. This diversification reduces risk and increases possible returns. By spreading investments across multiple asset classes, investors in Singapore can better weather market fluctuations and benefit from the performance of numerous sectors.

One of the critical advantages of structured savings products is their flexibility in terms of maturity dates. Investors can choose a timeline that aligns with their investment goals. This flexibility allows them to tailor their investments to their specific needs, whether saving for short-term goals or planning long-term financial milestones.

Structured savings products are designed to protect from market volatility. The embedded options in these products act as safeguards, offering a level of security that traditional investment options may lack. This feature particularly appeals to risk-averse investors seeking more stability in their investment choices. Considering these advantages, investors can make informed decisions about incorporating structured savings products into their portfolios.

Considerations for investing in structured savings products

While structured savings products may offer attractive benefits, it’s vital to consider certain factors before investing. As with any investment, it’s crucial to understand your time horizon clearly. Structured savings products typically have a fixed maturity date, and investors should be prepared to hold the investment until then. It ensures you align your investment goals with the product’s timeline, allowing for better planning and decision-making.

While structured savings products offer lower risk than traditional investments, risk is still involved. Assessing your risk tolerance and considering the potential loss before making investment decisions is essential. By understanding your comfort level with risk, you can choose the appropriate structured savings product that supports your investment goals and offers a suitable risk-reward balance.

It’s essential to understand the charges associated with structured savings products. These include management fees, early redemption charges, and spread or commission fees. By being aware of these costs, you can accurately evaluate the overall return on your investment and make better decisions about which structured savings product best suits your financial needs.

Considering these factors will help you make a well-informed decision when considering structured savings products as part of your investment strategy. By understanding the nuances and details of these products, you can maximise the potential benefits while mitigating potential risks.

All in all

Structured savings products have become a popular investment option in Asia, offering investors opportunities for potential growth while prioritising security. By understanding how these products work and considering their individual investment goals and risk appetite, investors can make better decisions that align with their financial objectives. As with any investment, it’s crucial to do thorough and regular research and seek professional advice before making any decisions.

Leighton Jon
the authorLeighton Jon