What is a structured product?
It's a type of fixed-term investment that ties up your money for a set period, such as five years. It relies on the performance of an underlying asset, such as an index, commodity or currency. The aim is to maximise your return while also controlling risk.
Where have you heard about structured products?
Structured products are sold under many different banners, including Guaranteed Capital Plans and Guaranteed Equity Bonds, which you may be familiar with. But you shouldn't place too much emphasis on the word ‘guaranteed’ as it's not 100% certain you'll get the returns offered.
What you need to know about structured products...
With a structured investment, you're buying two underlying investments - one to protect your money and the other to provide a bonus. The interest you receive depends on how well the stock market index or other measure performs. If the index performs particularly badly, or the firms providing the underlying investments fail, you might lose some or all of your original investment.
Structured investment product providers must provide you with information about the risks involved, so make sure you read it carefully.