Here are some factors to consider when you are investing in structured products:
Mr. Prabhakar's Structured Product Investment
Mr. Prabhakar wanted an investment that would provide a monthly income.
He invested an amount of Rs. 1 lakh in a structured product for 2 years.
The value of the underlying financial instrument in the structured product increased by 30% over the 2 year period at a participant ratio of 60%. Therefore, on maturity, Mr. Prabhakar earned the following:
1,00,000 X 30% X 60% = Rs. 18,000
In addition, he received his initial investment amount of Rs. 1 lakh on maturity.
However, in the same case, if the value of the underlying financial instrument fell by 30% at a participant ratio of 60%, Mr. Prabhakar, on maturity, would receive only his initial investment amount of Rs. 1 lakh because the structured product is secured.