Structured Deposits or Fixed Deposits?

[kurt111494]

Hi guys,

I have been trying out FDs for some time now, and many banks have been recommending me SDs for the higher returns. I'm well aware of risks like insolvency (since the capital won't be covered by SDIC), opportunity loss and better offers (although high risk) out there. One of the plans involves SGD interest rate stability and it got me thinking about the potential returns on various assets/indexes.

I'm not saying that I will be signing up for anything yet; I would just like to find out more info and about your experiences

Does anyone have any past (whether good/bad) experience with structured deposits? If possible, please share on any recommendations as well! Thank you!

 

[w1rbelw1nd]

While I do not have much experience in structured deposits, having worked in a back office of the wealth business of a bank gave me insights of the margins that banks earn through these complicated financial products....

So my advice is.... Unless you are using these products to hedge risks that vanilla financial instruments are unable to hedge, steer clear of these products. You may be better off buying a mixture of bonds and equity etfs.

 

[gantan88]

Structured Deposit is not covered under SDIC. Your return is capped even though the investment is performing much better. And the may be forced to redeem even before the tenure is up. If structured deposit is bond + investment, consider buying bonds and doing investment separately. Its funny. Structured Deposit is like selling u bread and butter in a package when u can buy them separately. Lol.

 

[kurt111494]

While I do not have much experience in structured deposits, having worked in a back office of the wealth business of a bank gave me insights of the margins that banks earn through these complicated financial products....

So my advice is.... Unless you are using these products to hedge risks that vanilla financial instruments are unable to hedge, steer clear of these products. You may be better off buying a mixture of bonds and equity etfs.

But the risk for buying those will be higher right?

 

[w1rbelw1nd]

But the risk for buying those will be higher right?

At least i can be sure that I can be duly rewarded for my risk. For SD, the salesman and the bank will be happily spending our money without taking on much risk

 

[Shiny Things]

Hi guys,

I have been trying out FDs for some time now, and many banks have been recommending me SDs for the higher returns. I'm well aware of risks like insolvency (since the capital won't be covered by SDIC), opportunity loss and better offers (although high risk) out there. One of the plans involves SGD interest rate stability and it got me thinking about the potential returns on various assets/indexes.

I'm not saying that I will be signing up for anything yet; I would just like to find out more info and about your experiences

Does anyone have any past (whether good/bad) experience with structured deposits? If possible, please share on any recommendations as well! Thank you!

Oh hey.

In my past life, I used to work as an options trader, and I was on the other side (the bank's side) of a lot of structured deposit business.

I loved you if you did structured deposits, because the bank made SO MUCH MONEY from it.

You should NEVER invest in structured deposits. No dual currency deposits. No "Bonus Notes" or "High Notes" or sh!t like that. No bets on interest rate stability.

Ask yourself this: what do you know about interest rates that the bank's interest rate traders don't know, or what do you know about stocks that the bank's stock traders don't know? Because you're going to be across the table from them if you do this trade, and they're going to take a huge chunk of money from you upfront: you'll start about 5% in the hole as soon as you buy the deposit.

Structured deposits are always and everywhere a bad thing. If you want a deposit, get a fixed deposit. If you want to bet on shares going up, buy the STI ETF. If you want to bet on interest rates remaining stable, call your friendly local futures broker and sell some eurodollar strangles. (If you have no idea what I just said, you shouldn't go betting on interest rates remaining stable!)

On the other hand, if you actually want to receive a payout linked to the worst-performing of three randomly-picked stocks that happen to fit a trendy theme (gold, or luxury goods, or biotechs, or whatever) but only if the worst-case performance is worse than minus thirty-six-and-a-quarter percent and Saturn is in Aquarius and the CEO had orange juice with his breakfast instead of coffee... then sure, go ahead and buy a structured deposit.

 

[peacefulday]

It's quite similar in choosing an insurance policy, I believe in buy term and invest myself.
In this case, my take will also go for FD and invest myself

That's to say I only trust myself and who to blame in any clause that lead to my failure -> mylf

 

[Keverus]

the only good thing abt SD is that they are capital guaranteed.

 

[icicic]

I only use srs for step up notes. Capital return at maturity. Sure rates traders know more but compare to base rate... Very hard to see depo go beyond 1% in next 2 years.

 

[-Jian-]

SD = Capital guranteed upon maturity.
You may want to explore into stocks? Blue chips, safer ones

 

[kurt111494]

SD = Capital guranteed upon maturity.
You may want to explore into stocks? Blue chips, safer ones

Any to recommend?

 

[-Jian-]

Any to recommend?

Not a believer in SD. People tend to "Buy at Rumor sell at Fact". You research abit, but always take it with a pinch of salt.

 

[Bravon]

It appears that right now, the best SD promotion is Maybank which is 9.8% guaranteed upon maturity of 5 year tenure. Did anybody come across a better deal than this for now?

 

[kelvin_99]

It appears that right now, the best SD promotion is Maybank which is 9.8% guaranteed upon maturity of 5 year tenure. Did anybody come across a better deal than this for now?

9.8% over 5 years, i.e. approx 2% per year over the 5 years? Is this the yield you are looking for?

 

[Bravon]

9.8% over 5 years, i.e. approx 2% per year over the 5 years? Is this the yield you are looking for?

Yes. do you come across a better SD from other banks?

 

[FP_IFA]

the only good thing abt SD is that they are capital guaranteed.

SD are not capital guaranteed. They are only capital protected.

 

[tk]

SD are not capital guaranteed. They are only capital protected.

As long as the bank dun go insolvent it should be safe right?

 

[kelvin_99]

Yes. do you come across a better SD from other banks?

If your intent is just to get higher returns for your investments for this ~2% p.a. return, I personally think you are better off buying ETFs if your investment view is a long.

My view - for the risk inherent in these SDs, the return is not justified

 

[Shiny Things]

As long as the bank dun go insolvent it should be safe right?

Nope. "Capital protected" has a very specific meaning - it means that if you hold the deposit to maturity, you're guaranteed to get back at least what you put in. If you cash the deposit in before it matures, there's no guarantee you'll get anywhere near what you put in.

 

[Keverus]

To put it simply....with any SDs...whatever u can earn more, the bank will earn even more...

the only good thing is that as long as you stay with the tenure...you wont lose ur capital