Poles are not a thrifty nation, but those who want to secure some capital for the future are looking for proven banking tools. One of the recently fashionable solutions are, however, so-called structured products. See what they characterize.
We often come across examples of financial products that are presented to us as a good alternative to bank deposits. It is no different in the case of the so-called structured deposit. This is not a new proposal, but right now this form of investing capital is gaining some popularity. Is it worth using it? What threat does it carry? In what situations is it beneficial to open a deposit? We will try to answer these and many other questions in the text below.
What is a structural product?
It is nothing more than a financial instrument, which consists of some other, less complex instruments. Individuals can thus invest through intermediaries in areas to which they do not have access. It is important to know that these types of products may bring a greater return than others, but the investor must take into account the proportionately greater risk of such action.
Some see them as a chance to increase their assets, for others they are an unproven and not very reliable instrument. Certainly, the shortcomings of this solution include the risk of losing some of the capital. It is largely due to the lack of regulations on the market regarding, among others, investment valuation. It is also important that structured products belong to one of the most complex and hardly available for ordinary Kowalski. A team of professional and specialized brokers is working on the transaction. However, this does not exclude the possibility of making a mistake or making a wrong assessment or calculation. Even experts from the financial market, dealing with these issues on a daily basis, are only people.
Legal point of view
The essence of structured products is difficult to absorb for one more reason. Norms regulating this subject have not developed in the Polish legal system. It is true that certain rules and restrictions are introduced by the EU directive on financial markets, which has been in force since 2004. It even lists instructions as to the scope of information about a given product that should be included in its description. It also specifies that the investor and issuer are parties to each contract. For this reason, some provisions of the Polish Civil Code related to civil contracts also apply. It is in particular the principle of payment of profit, all collateral for capital in a difficult situation or various types of deadlines, including the duration of the investment.
One of the undoubted advantages of using structured products is the protection of the capital we have invested. Investors, thanks to specialists brokering operations, can buy foreign, hardly available shares or commodities. The advantage of these products is also a wide selection of financial instruments. In our country, for example, insurance policy and structured deposit can boast of great popularity.
Structured deposit what is it?
Certainly many of you have heard of this type of instrument. It is a structured product of savings and investment character. Otherwise it is called “structure”. A structured deposit in theory provides a similar effect as investing independently in financial markets. Institutions that offer this product also convince clients of a capital return guarantee.
Structured deposit in practice
The bank or other entity whose offer has been used by the investor, distributes the funds received from it in such a way as to minimize the risk of loss. He places them on different planes. The client, thanks to the help of an intermediary, does not have to independently analyze where it is worth investing. Money is allocated, among others, to government bonds, shares of raw materials or indices on the stock exchange. One of the most important hallmarks of this deposit is investing at different risk levels. The investor’s portfolio is accordingly diversified, which increases the chance of final success. However, let’s not forget that the deposit is primarily a savings product. Therefore, the bank leaves the majority of funds (up to 90%) on an interest-bearing account.
What to look for?
In the first place for all commissions and additional fees. In many cases, the bank reduces the amount of funds by the margin for servicing the entire transaction. So before signing the contract, let’s ask the consultant about this possibility. It is also worth discussing the duration of the contract. Usually it is several years. In this context, it is necessary to check the possibility of termination and the costs that this step brings. Preferably, before signing, meet with a lawyer to discuss the provisions of the contract. Structured deposits can be profitable only if we have a favorable contract and the conditions are clear to us.
Structured deposits as an alternative?
Similarly to traditional deposits, they are offered by banking institutions. The consultants of these entities encourage almost each of their clients to set up a structured product. The main argument they give are guaranteed high rates of return. For this reason, many consumers treat structured deposits as a good alternative to outdated and less profitable instruments.
Deposits structured reviews?
Of course, these products have their supporters and die-hard opponents. The latter are afraid of investment risk, they do not believe in easy and high earnings on banking instruments. As we have seen before, a structured deposit resembles an investment measure rather than an investment measure. And that’s how it really is. Is it worth reaching for it? It all depends on the motivation and goal we set for ourselves. A traditional deposit is a product thanks to which we are able to secure our savings and – at a good interest rate – multiply them. There is a risk of loss for structured products. The choice, however, belongs to every consumer.
Is it profitable?
Banking institutions ensure that at the end of the investment the customer will receive at least all of the capital invested. In most cases this is the case. However, inflation should be remembered. It may turn out that the investor will receive all transferred funds after a few years of the contract, but the value of money will be lower than at the time of payment. The structured deposit is addressed mainly to people who value peace of mind and want to try what investing looks like.