KCLau's Money Tips Forum

[leon]

Hi, really sorry, but i seem to difficulty to understand exactly the meaning of structured products
From personal money magazine, and also KClau website, but i cant seem to fully understand.

If there is management fee; and sales charge; then isnt it similar as normal unit trust which also have sales and management fee? and, structured products also is managed by fund manager, right? (similar as UT)

sorr.. please help me understand the difference, thanks

[KCLau]

structured products is just one kind of unit trust funds. I'll put it in a simple form:

Say you intend to invest, but you don't want to lose money. In order not to lose money, you need to protect your capital. If you have RM10k and you want to invest it but you also want to "guarantee" that no money is lost after 5 years, you can :
1. Put RM8219.27 in an FD, that guaranteed 4% p.a. for 5 years term. After 5 years, your initial sum of RM8219.27 will become RM10,000.
2. So now you are left with RM1780.73. Let's say you want that money being invested in real estate, the only choice is to buy a REIT stock. After five years, these portion of the money is your net gain.

Unit trust companies just introduce Structured Products to the public with the above features. Of course the investment tool they will be using are different. Instead of FD, they can use ZNID. (http://kclau.com/investment/what-is-a-zero-coupon-negotiable-instruments-of-deposit-znid/)

Instead of buying REIT, they can have their own properties being turned into REIT. I am talking about different scale but the concept is the same.

[leon]

Thanks for the explanation! Its clearer for me now.

So basically; it is 'between' of FD and UT? Thanks for the explanation!

[KCLau]

So basically; it is 'between' of FD and UT? Thanks for the explanation!

I would say it is slightly riskier than FD. Maybe safer than bond funds.

[Hubertonghc]

Investment should be simple & easy to understand for investor.
Investor only need a well plan & long time commitment to achieve their goal.


Any investment product that is too complicated, please run away.
We are not fund manager.
Otherwise, you may stuck with them. Those invested in Lehman brother bond, HSBC minbond (a kind of structured product too) lost 100% because the guarantor bank go burst too. Well done to our Bank Negara as Lehman brother bond (& other too complicated product) is allowed to sell here.