Structured products and inflation: should you invest?

The may 11, 2022

Structured products and inflation: should you invest?

 

These are products that allow you to boost your portfolio while protecting your capital. Many structured products are proposed on the market, Wealth A7 explains how they work:

 

What is it?

Structured products are so-called "tailor-made" products because they can have different objectives and guarantees. In principle, they are inserted into a life insurance or a PEA. In concrete terms, the product will combine several asset classes in a portfolio: a bond part for the capital guarantee and an optional part, which can be, for example, shares or even an index.

 

How does it work?

To explain it simply, a structured product works over a limited period of time, for example 12 years, with gains often capped. Generally, the product offers quarterly or annual coupons, the rate of which is announced at the outset in the subscription contract. This means that every year until the end of the product, you will receive interest calculated on your initial investment.

 

How does the product end?

First of all, a reference index is fixed at the beginning of the investment, this index allows to evaluate the profitability of the product. Each year, if the coupons are annual, the index of the year will be compared to the one at the beginning. There are several solutions, either the index is higher than the initial one, in which case the product can be terminated and you will get back your coupon as well as your capital, or it can be extended and in this case you will receive your coupon. In the event that the index is below a predefined floor amount in the contract, your coupon will be stored until the next valuation.

 

How is my capital protected?

The capital protection is deployed at the end of the structured product, in fact if the repayment is anticipated it means that the desired profitability has been reached. This product is said to be tailor-made because it adapts to all needs. Some offer a protection of the total capital, which in return offers a lower remuneration but corresponds to a need for security. However, for people who want a more dynamic product, the capital can be guaranteed up to a drop in the reference level of 30 to 50%, which offers an effective protection.

 

Why invest in structured products now?

The increase in inflation in recent months has shown that conventional investments are no longer sufficient to remunerate household savings. As the basket of shares or indices (such as the CAC40) is defined in advance in the contract, it is reassuring to know in advance in what the savings are invested. Moreover, while some investments offer total protection but a shorter investment horizon, structured products differ in that they have a longer investment horizon, which can be advantageous in fluctuating market conditions, and capital protection adapted to the needs of each investor.

 

Want to invest? Your wealth management advisor can select the structured product that will meet your needs and be adapted to your savings. 

In a changing world, Wealth A7 is there to bring your desires to life.

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Article by : Darina Attanasio

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