Structured investments allow investors to gain enhanced exposure to a range of domestic and international growth opportunities. But instead of using your money to invest, you use someone else’s – the Banks. In exchange for using their money, you are charged an interest only rate from 7-14% per annum in advance (depending on the financial institution and product).
There are several benefits in taking this approach:
Any interest you pay on the investment loan is 100% tax deductible.
This offsets any capital gains made at the end of the term (ranging from 3.5 - 5.5 years).
Your investment loan is 100% capital protected.
For example, if you decided to borrow $25,000 to invest in the market, and the value of your investment dropped to $15,000, you are not required to top-up or pay back the $10,000 capital loss. You can simply walk away, sign over the shares and owe the Bank nothing. The same principle applies if you decide to realise any gains in the investment value before the end of the term.
- Worst case scenario is that you’ve lost the amount of interest paid on the loan to-date.
- You can exercise the ‘walk-away’ feature at any time during the investment.
Gains are amplified through leveraging (as are the losses, however the difference here is that you are protected against any loss).
Features on these types of investments vary dependant upon the product issuer as do interest rates. However, they provide an alternative to gaining exposure to the market without having to spend, or risk, a substantial lump sum of your own funds, with the added benefit of being tax deductible. Although, as with every investment, it involves risk, so ensure you get financial advice to determine whether this is the best approach for your circumstances.
SPECIAL OFFER – LIMITED TIME
Until November 22, 2013, we can help you secure a limited time only interest rate with a guaranteed 4% dividend return per annum on structured investments (subject to approval). Contact an Australian Finance and Securities Group (AFSG) financial adviser for more information today.