Structured Deposit vs Fixed Deposit

Structured Deposit

While searching for Chinese New Year fixed deposit promotions, I came across the above promotion advertised. The bank is offering structured deposit that offers up to 12.1% returns over 6 years. It sounds very attractive to me given the high interest rate.

As I am not familiar with structured deposit, I decided to do some further research on it.

What is a structured deposit?

A structured deposit is actually a deposit that is combined with an investment product. The returns on the structured deposit will depend on the performance of the underlying financial asset, product or benchmark.

According to MoneySENSE website, structured deposits can be equity linked, bond linked, interest rate linked or credit linked. There are no further details on the above bank promotion what investment product it is linked with. If you happen to be interested, you should clarify with the banking officer prior to taking up the structured deposit product.

Benefits

  • Structured deposits have the potential to offer higher returns compared to traditional fixed deposits.

Risk

  • Structured deposits are riskier products than fixed deposits. The returns may be lower than expected.
  • Structured deposits are not protected by the Deposit Insurance Scheme. If the bank defaults, we may lose all of our deposit.

 

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