The following article was written by Paul Stadden, UK Sales Manager at iDAD.



The Assurance Of Structured Deposits In A Noisy Market

In a world where the cacophony of investment opportunities and risks can be overwhelming, investors seek refuge in financial instruments that provide a stable foundation for their hard-earned capital. One such instrument gaining prominence in recent years is the structured deposit—a financial product that not only offers capital protection but also serves as a beacon of stability in the midst of market noise.

A haven amidst market volatility:

The unpredictability of financial markets, exacerbated by global events and economic uncertainties, has left investors searching for lower risk investments. Structured deposits emerge as a haven of stability, providing a sense of security that may have been lacking in other, more volatile investments.

Recovery from Investment Setbacks:

Individuals who have experienced losses in riskier investments, such as equities or high-risk bonds, often seek to recover and rebuild their portfolios. Structured deposits, with their capital protection feature, offer a chance for investors to regain their financial footing without exposing themselves to the same level of risk that led to their initial setbacks.

Disillusionment with Low Returns:

Traditional savings accounts and conservative investment options have often failed to keep pace with inflation, resulting in disappointing returns for investors. As individuals grapple with the erosion of their purchasing power, structured deposits present an attractive alternative. While offering the security of traditional deposits, they also provide the potential for higher returns linked to market performance.

Preservation of Capital:

The harsh reality of financial markets is that not all investments yield positive returns. After facing losses, investors prioritise the preservation of capital over aggressive wealth accumulation. Structured deposits align with this sentiment, offering a balance between the desire for returns and the imperative to protect the principal amount invested.

Seeking Stability in Uncertain Times:

Economic downturns, geopolitical tensions, and global pandemics have underscored the importance of stability in investment portfolios. Structured deposits, with their focus on capital protection and predefined risk parameters, resonate with investors looking for a more stable and controlled investment environment in the face of ongoing uncertainty.

Consider a practical example of the decision-making process for a typical Structured Deposit:

Firstly, assess your comfort level with the credit risk associated with a leading global bank, like the Royal Bank of Canada (RBC), boasting a robust Standard & Poor's rating of AA-. Importantly, recognise that the Financial Services Compensation Scheme (FSCS) offers protection up to £85,000 in the event of the bank's failure.

If you find yourself at ease with the aforementioned credit risk, the next consideration involves your confidence in the performance of well-established indices like the FTSE 100 or Euro Stoxx 50. Are you optimistic about their potential to remain stable or even experience marginal growth in the coming years? Bear in mind that there is a safety net of protection in place if these indices were to decline.

Should your response to these two critical questions be positive, the next aspect to evaluate is the potential reward. Structured Deposits, aligned with these considerations, offer a potential annual return of approximately 8% to 9%. This straightforward decision tree approach contrasts significantly with the complexity of decisions involving Model Portfolios, which lack a defined return/outcome and entail multiple assets moving in different directions. Moreover, Model Portfolios are influenced by various economic factors and the current intricate geopolitical landscape, making them considerably more daunting in comparison.

In a world where the investment landscape is cluttered with noise, structured deposits stand out as a beacon of stability. Combining the safety of traditional deposits with the potential for market-linked returns, these financial instruments offer a compelling proposition for investors seeking low-risk options. As individuals navigate the complexities of the financial markets, structured deposits provide a welcome respite, allowing them to invest with confidence in a world full of investment noise.

Paul Stadden

UK Sales Manager iDAD



Structured investments put capital at risk