Early in 2008 I was looking to diversify my portfolios . During that period there were many financial products being introduced by the various banks and financial firms. I was particularly interested in the Islamic Sukkuk (bond) launched by CIMB and had gone the local branch to enquire about it.
The lady at the branch told me that they were not handling the instrument instead she talked me into buying another innovative product called capital-protected structured product, and the purchase deadline was only a couple of days away! I was made to understand that the return would be about 20% upon maturity at three years or more at five years. It was like a fixed deposit except that the returns would be much higher. The minimum deposit was 50K. And she told me that the attractive feature was I would get my capital investment back irrespective of the performance of the fund. In fact she tried hard to persuade me to double the investment and to put it there for five years! I wondered whether she would do that if it were her own money.
Now, this product is not listed/quoted as a normal trust fund. Instead it is only accessible after you go through layers of "windows" in the bank website. I was getting irritated due to difficulty in monitoring/opacity and had started to regret buying this product, Dynamic Market Ryder. Normally I would like to think that I was not that gullible, but the word capital-protected was indeed attractive.
A few days ago I came across a Singapore Law Watch article that reported Singapore would ban the use of the term "capital-protected" to describe investment products as many retail investors had misunderstood the term to mean that their capital would be protected upon maturity and apparently this was not the case. This came about following the global financial crisis especially the collapse of financial giants, for example, the Lehmann Brothers in US that issued such products,among others. A financial adviser based in the Lion City had explained that capital-protected was not the same as capital-guaranteed product. The latter is the one which would give you back your investment from day one regardless of the financial product's performance.
I went on the net to check out for myself this so -called capital-protected structured products. There were so many confusing definitions out there but I accept the one given by Barclay Bank UK which clearly stated that, upon maturity, you may not get back your capital if the fund did not perform.
I rang up the same lady at the CIMB bank asking her about this possibility of my capital being reduced but she insisted that I would get back my capital, upon maturity, even if the fund was not performing..... big deal! No wonder Singapore is coming up with the recommendation of not allowing bank staff to sell these financial products as they themselves are not really conversant with the product's profile, definition and risk implications.... the fine prints. They would usually promote rather than taking up an advisory and neutral role. An individual investor has indeed to be cautious.
I just hope that the fund performs that I would get back my capital plus the "expected" return in 2011 when the global financial crisis recovers? Currently this fund, related to property investment, is not performing, much to my dismay. This personal debacle is yet another lesson of financial naivety and the overrated word that is DIVERSIFICATION.
One should only diversify after the risk-reward ratio of a portfolio has been fully analyzed... I am still learning.
The lady at the branch told me that they were not handling the instrument instead she talked me into buying another innovative product called capital-protected structured product, and the purchase deadline was only a couple of days away! I was made to understand that the return would be about 20% upon maturity at three years or more at five years. It was like a fixed deposit except that the returns would be much higher. The minimum deposit was 50K. And she told me that the attractive feature was I would get my capital investment back irrespective of the performance of the fund. In fact she tried hard to persuade me to double the investment and to put it there for five years! I wondered whether she would do that if it were her own money.
Now, this product is not listed/quoted as a normal trust fund. Instead it is only accessible after you go through layers of "windows" in the bank website. I was getting irritated due to difficulty in monitoring/opacity and had started to regret buying this product, Dynamic Market Ryder. Normally I would like to think that I was not that gullible, but the word capital-protected was indeed attractive.
A few days ago I came across a Singapore Law Watch article that reported Singapore would ban the use of the term "capital-protected" to describe investment products as many retail investors had misunderstood the term to mean that their capital would be protected upon maturity and apparently this was not the case. This came about following the global financial crisis especially the collapse of financial giants, for example, the Lehmann Brothers in US that issued such products,among others. A financial adviser based in the Lion City had explained that capital-protected was not the same as capital-guaranteed product. The latter is the one which would give you back your investment from day one regardless of the financial product's performance.
I went on the net to check out for myself this so -called capital-protected structured products. There were so many confusing definitions out there but I accept the one given by Barclay Bank UK which clearly stated that, upon maturity, you may not get back your capital if the fund did not perform.
I rang up the same lady at the CIMB bank asking her about this possibility of my capital being reduced but she insisted that I would get back my capital, upon maturity, even if the fund was not performing..... big deal! No wonder Singapore is coming up with the recommendation of not allowing bank staff to sell these financial products as they themselves are not really conversant with the product's profile, definition and risk implications.... the fine prints. They would usually promote rather than taking up an advisory and neutral role. An individual investor has indeed to be cautious.
I just hope that the fund performs that I would get back my capital plus the "expected" return in 2011 when the global financial crisis recovers? Currently this fund, related to property investment, is not performing, much to my dismay. This personal debacle is yet another lesson of financial naivety and the overrated word that is DIVERSIFICATION.
One should only diversify after the risk-reward ratio of a portfolio has been fully analyzed... I am still learning.
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