SIX Swiss Exchange: Attractive Alternative To Cash Investments

With interest rates remaining persistently low, conventional cash investments have become considerably less attractive in recent years. Savers are facing completely new challenges. Similarly, only very low yields can be obtained on the bond market now, particularly for investors who only want to entrust their money to borrowers with a relatively high credit rating. Equities are an interesting alternative, but not if they are just tracking sideways.

The search for attractive alternatives to cash investments thus remains intense. After all, the current low-interest environment is likely to stay with us for quite a while still, especially if the world's major central banks keep to their expansive monetary policy with negative interest rates in some cases and market liquidity therefore remains high. This makes it all the more worthwhile to take a look at yield enhancement products right now.

Enhancement as an investment objective

The common perception is that decent yields can only be generated on the equities markets when prices are rising. However, this is a fallacy. And you don't even need to bet on falling prices (short position) to disprove it. Yield enhancement products allow for attractive yields to be achieved when markets are trending sideways. At the same time, various investment ideas can be implemented even with a low initial investment, which benefits particularly investors who are keen to ensure diversification.

The strengths of yield enhancement products thus become particularly clear on sideways-trending markets. But in contrast to a direct investment, for example in shares, the investor does not receive dividends or voting rights at the Annual General Meeting. In addition, it is possible that some or all of the capital invested may be lost if the price of the underlying moves in the wrong direction.

A real bargain

One of the best-known types of yield enhancement products is discount certificates. Discount certificates enable investors to buy an underlying at a discount. The investor therefore receives the certificate at a price less than the current price of the underlying. In return, the maximum potential profit on a discount certificate is capped.

In addition to the conventional version, various different types of discount certificates with special functions are available nowadays. For example, investors can gain greater security by choosing barrier discount certificates. These provide conditional capital protection, which protects the investor in the event that the underlying falls into negative territory but does not reach the barrier.

For more information: www.six-structured-products.com.