Structured products

DEFINITION AND CHARACTERISTICS

Structured products generally combine derivatives such as options with more traditional assets such as stocks or bonds, either to reduce or eliminate the risk associated with certain financial instruments or to improve investment returns.

A structured product often consists of a ‘low-risk and return’ component, e.g. a bond product, and a ‘higher-risk and return’ component (a derivative, a share, an index, currencies or commodities) to improve performance.

The price of a structured product is defined by the value of its underlying assets.

ADVANTAGES

Structured products can be tailored to the needs of individual investors (e.g. income structure, product mix, etc.).
Structured products can provide access to generally less accessible asset classes (e. g. gold or oil).
Portfolio diversification is facilitated without the investor having to buy all components of the reference index.
A structured product can achieve a positive performance even if markets do not move or are on a downward trend.

DISADVANTAGES

The disadvantages associated with structured products are product-specific and are generally detailed in the Key Information Document (KID) of the product in question. You should therefore consult this document before investing in the structured product or seek relevant advice from an advisor
The complexity of structured products makes it more difficult to understand them

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