What Are Structured Products In India?

Structured products are designed to achieve specific goals for risk-return. These targets are accomplished by bringing in conventional underlying assets and substituting non-traditional payoffs from other underlying assets for their average returns. Returns from structured products are essentially related to traditional returns from underlying investments. 

However, in the event of an upside or a downside, they are paired with swaps, futures, and other derivative instruments to take advantage of greater participation. Structured products provide investors with the ability to select a personalised pay-out that is usually a combination of fixed and variable market-related returns over the investment period, balancing their own risk-return targets with efficient tax planning.

Structured products in India are also linked up to the capital deployed to NIFTY output and downside covered.

Structured products in India have the following aspects:

• The bond element guarantees capital security. If the underlying asset does not perform as predicted at some point in time, the investor gets a 100 per cent return on the capital invested.
  
  
• The underlying asset increases the investment's return. A single instrument or basket of tools could be an asset class, such as equity, debt, index, ETF, currency, or interest rate, which will be the underlying factor.
  
  
• The variable of derivatives helps to define the overall risk in the object. The products that are generally used are options on the underlying asset. The derivative calculates that, by customising the underlying asset classes to meet defined financial targets, the instrument allows investors to get a targeted return on investment.
  
  

Features of structured finance products:

• These products are typically long-term in nature, requiring a minimum lock-in duration of 12 months and an investment horizon of two to three years for full returns to be achieved.
  
  
• Structured goods, like any professionally operated financial instrument, often attract fees that may vary.
  
  
• The amalgamation of multiple financial instruments integrated to achieve a predetermined objective is often a structured product.
  
  
• The risk of standardised goods varies solely according to the way they are standardised. It can, depending on your choice, vary from conservative to aggressive.
  
  
• Structured finance products could be covered entirely, partly covered by the principal or without any expenditure in principal security.
  
  

Bear in mind that structured investment products are dynamic. They are a mix of various risk-bearing methods, like derivatives. As an investor, you need to consider the threats to the inherent investment.

You need to determine the level of risk tolerance and how much money you will be comfortable risking before investing in structured products.