Why you should avoid structured products - MoneyWeek Investment Tutorials
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- เผยแพร่เมื่อ 4 ก.พ. 2025
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I love structured products, particularly the ones with defensive kick out. To get around 7-8% non compounded, and be paid out if the mkt is sideways or drifts slightly over 2-7 years is appealing for 15% of my wealth. If the mkt goes up a lot more, then 100% of my plan will be doing well, 85% very well, 15% capped. If the market is sideways or down over a few years, 85% is weak and 15% has the potential to give a very generous return, in excess of the expected return on 100% global equity portfolio. My personal opinion. Maybe they've changed a lot in 11 years!?
Hi. You lose interest because the money in the structured product could be invested in say a bank account instead. And you lose dividends because the fixed return from the product is all you can earn - a FTSE 100 based product will pay you say 70% of the rise in the FTSE but not any dividends paid by the underlying shares. So it's a double whammy...
it doesn't sound like I will ever meet someone who tells me "I got rich investing in structured notes."
I understand the opportunity cost that these products have on the use of your money, but isn't there something to be said for the certainty that they provide? The deal in that you mention in the video is that you get 80% of the FTSE return or your money back. Couldn't this type of deal provide a higher level of certainty than a normal long position?
very informative
Hi, if you loose 1% of the capital for every 1% drop beyond 50%, wouldn't you loose 5% not 55% of the initial capital. I think I'm missing something here. Also, how can you miss out on both the interest and dividend? Unless, you mean you divide your capital in two different investments. Cheers.
if it drops below the institution assign you the shares, so compared to the initial value , -55% is lost
This has to be the worst analysis of structured products I've ever seen. Granted, it was done in 2011 and the market has changed greatly since them. However, every fact sheet I have ever seen is clear as to what you potentially lose as well as what you can potentially gain. It's essentially a bond with a different way of calculating gains. If you buy a bond and interest rates rise the bond value decreases. If you are earning interest then you are not also losing dividends. With any investment options you need to know the pros and cons including the financial strength of the issuer but current products have excellent upside potential and historical rolling returns are available to see what has happened with the indices used over time. As to Lehman brothers, they way over weighted in mortgage backed securities which led to their downfall. The warning signs were there. As to commissions, that is easily avoided by using advisory products. My guess is he lost a lot of business to someone offering what he could not.
No, he's absolutely correct and you can't fathom this video was done 11 years ago and products have changed.
Uhm yes it makes only sense if you use leverage. Not this shitty capital securing certificates.
I fail to see how structured products are bad. They seem like a win win. The FTSE's never going to drop by 50%, so you're guaranteed to get your money back, which is more than you'd get if you put it in a tracker fund. Saying you'd get more if you'd just left it in the bank is pointless, because we could do what ifs all day.
What if you put your £5000 in a bank acount for 5 years and the FTSE goes up? You've missed out on about £2000 assuming 2% interest in the bank account, whereas if you buy the structured product and the FTSE goes down you're only missing out on £500.
What if you put it in a tracker fund? Well, you'd lose more money if the FTSE fell and you'd gain less or more depending on if the FTSE goes up by 50% or not, so structured products are better than that too. These seem like the ideal investment opportunity.
Many people think like that, but I strongly advise you against it
If the FTSE drops, you get your money back. Accounting for inflation, you lose money
@@poohoff Why?
@@jimmywaltone6628 but if you had it in an index tracker, and the ftse dropped, you'd suffer the loss even before you accounted for inflation.