HSBC Stockmarket linked savings

Newbie2saving

Quick question, received a call from my bank re the following structured product (18% gross if FTSE 100 rises or stays same after final averaging or 2% gross if it drops after final averaging, investment term 3.5yrs, min £3k) http://investments.hsbc.co.uk/product/4/stockmarket-linked-savings-account?HBEU_dyn_lnk=InvestmentSection_Homepage_HSBCProducts_ProductPromotion_Link3 do any of you feel these have a place in your portfolio for a small amount, or do you steer clear?

pressuredrop_2

Invest and receive 4.84% or 0.57%.

Fixed ISAs are paying 5%.

Newbie2saving

pressuredrop wrote: »

Invest and receive 4.84% or 0.57%.

Fixed ISAs are paying 5%.

Thanks, puts it into perspective. My head must be really muddled today to even bother posting about this! :rotfl:

jimjames

Or invest directly in FTSE and get 3% per year dividend yield plus all capital growth. Obviously risk of value dropping but over long term this should be reduced. Banks wouldnt offer these products if they thought there was a huge risk of them losing money.

dunstonh

Structured products should be a niche product and only considered when the terms are acceptable. That doesnt happen often and currently the terms are quite poor. Although a couple of years ago you could pick up decent terms with limited risk.

The FSA guidelines (from their thematic review - more of a good indication than a rule but go against it at your peril sort of thing) are that you shouldnt have any more than 25% in structured products and no more than 10% with any one market counterparty. Banks frequently flout this with figures as high as 90% going into one market counterparty (themselves). Tied sales reps don't have to consider financial strength and solvency requirements. IFAs do.

So, at the moment, you have generally poor terms and the HSBC terms are rarely any good at the best of times. Plus, its a niche product that many wouldnt consider unless the terms make it worthwhile.

Banks wouldnt offer these products if they thought there was a huge risk of them losing money.

Although they brought Norwich & Peterborough B/S to its knees.

Newbie2saving

jimjames wrote: »

Or invest directly in FTSE and get 3% per year dividend yield plus all capital growth. Obviously risk of value dropping but over long term this should be reduced. Banks wouldnt offer these products if they thought there was a huge risk of them losing money.

Which investments are you referring to to get a dividend in the FTSE? Do you mean a specific company? TIA.

Newbie2saving

dunstonh wrote: »

Structured products should be a niche product and only considered when the terms are acceptable. That doesnt happen often and currently the terms are quite poor. Although a couple of years ago you could pick up decent terms with limited risk.

The FSA guidelines (from their thematic review - more of a good indication than a rule but go against it at your peril sort of thing) are that you shouldnt have any more than 25% in structured products and no more than 10% with any one market counterparty. Banks frequently flout this with figures as high as 90% going into one market counterparty (themselves). Tied sales reps don't have to consider financial strength and solvency requirements. IFAs do.

So, at the moment, you have generally poor terms and the HSBC terms are rarely any good at the best of times. Plus, its a niche product that many wouldnt consider unless the terms make it worthwhile.



Although they brought Norwich & Peterborough B/S to its knees.

Thanks for the advice and percentage breakdowns, looks like a product to be avoided in the current climate.

utigers

These are aimed at those people that have heard the stockmarket is a good thing, but dont like the word 'risk'. It therefore gives them no risk as such and belief they are on to a winner.

jimjames

Newbie2saving wrote: »

Which investments are you referring to to get a dividend in the FTSE? Do you mean a specific company? TIA.

3% is the yield on the FTSE itself. If you selected an equity income fund that it invested in many different companies you would be getting just over 4% annual dividends and any growth on top of that. I wouldn't suggest individual shares as the risk/time/effort isn't worth it in my view but income funds or even FTSE trackers would spread the risk.

With these type of "guaranteed products" you don't get any of the dividends so all you are receiving is the gain in the index. Despite the massive market drops during the credit crunch the market is virtually at the same point it was 3 years ago so you wouldn't have lost money as long as you didn't panic and sell out or needed the money urgently. Hence the reason for saying that stock market investments are long term.

Rollinghome

You'd also pay full tax on the interest if outside of an ISA whereas you wouldn't pay any tax on capital gains of less than £10,100 and the tax rate on dividends is just 10% for a basic rate payer.

Ilya_Ilyich

pressuredrop wrote: »

Invest and receive 4.84% or 0.57%.

Fixed ISAs are paying 5%.

What ISAs are paying 5%?

vv Cheers