What are structured products and how do they work?

Can I invest in them through my broker?

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Hi Suchetha, 

A structured product is created when you combine two or more instruments to form a single standard product which can be offered to clients . 

A classic and simple example of a structured product is the "Capital Protection" with growth option thats offered by many asset management companies. Lets say you invest Rs.10,00,000/- in this scheme..the  fund manager will invest about Rs.800,000/- @ 12% in a fixed income scheme for 2 years..which will yield approximately Rs.10,00,000 at the end of 2 years thereby guaranteeing your capital.

The balance Rs.200,000/- will be invested in good blue chip companies with an expectation that the stocks will grow and thereby giving you capital appreciation + dividends. So if things go well in, in 2 years you are not only guaranteed you capital but also a decent return. 

In this structured product the fund manager has combined 2 instruments across 2 asset classes - Fixed Income and Equity and the combination of the two has been offered as a standard package to the client.

Typically investment banks offer structured products....the most popular one (within the Equity framework) being Constant Proportion Portfolio Insurance (CPPI). You can read more about it here

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To add on to what Karthik said, that Rs 2lks is also used in futures and options and the leverage giving a potential to earn quite a bit on the upside with complete protection on the downside. These products are sold by Asset Management companies, so it is similar to like buying mutual funds. There are brokerages who sell this on behalf of an AMC, like mutual funds. You as a retail trader with some experience can deploy a strategy like this on your own .