Structured deposit in foreign currency

Dear Sir,

I saw your blog on structured deposit. I had observed our local banks' structured deposits are out there to make a lot of money, in particular one bank which I really dislike.

I have help my parents to invest wrongly in one of the structured products with formula involving CMS (interest rate swap).

However, I had satisfactory experience with foreign banks. Their rates are competitive and the structured products are better. I had one with a formula with CMS, but almost 3 yrs till today, I still get 6 percent coupon payment, but suffered forex loss (mainly I did not hedge the investment).

I obtained almost 10 percent on my investment with a foreign bank. Luckily, I sold off recently before it plunged a few percent (due to credit rating).

I am thinking if you are writing a investment related book ? I had a good working experience with my friends in United States and we had published a book under John Wiley. I wish to thank you for working on your blog. I like to read your articles very much.

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REPLY:

If you invest in a foreign currency product, you can get a higher return (as interest rates on foreign currency deposits are higher than Singapore dollar deposits). You stand the risk of foreign currency loss.

If you hedge this risk, the return will be reduced to almost the same as a Singapore dollar deposit After deducting the charges on the structured product, you will be worse off.

You can only get a higher return by making the right timing on the foreign exchange, but this is uncertain.