A structured product is a kind of fixed-term investment whose payout depends on the performance of something else, like a stock market index. There are two main types of structured product:
- Structured deposits – Structured deposits are savings accounts, offered from time to time by some banks, building societies and National Savings & Investments, where the rate of interest you get depends on how the stock market index or other measure performs. If the stock market index falls, you will usually get no interest at all. But – unlike structured investments (see below) the money you originally invest has the same protection as you get with any other savings account.
- Structured investments – Structured investments are commonly offered by insurance companies and banks. Your money typically buys two underlying investments, one to protect your capital and another to provide the bonus. The return you get depends on how the stock market index or other measure performs. In addition, if it performs badly or the firms providing the underlying investments fail, you may lose some or all of your original investment
If you are looking for a structured deposit it’s very important that you don’t take out a structured investment by mistake. Structured investments offer you far less protection than a structured deposit.
In summary a structured product ties up your money for a set time and might be designed to give you income, growth or both. Structured products are complex and can be more risky than they seem, so get professional financial advice if you’re not sure whether they’re right for you.
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