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Capital Guaranteed

Discussion in 'General Investing Discussion' started by bonecrusher, 27th Mar, 2007.

  1. bonecrusher

    bonecrusher Member

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    Hi all

    Just like to ask what sort of returns CAPITAL GUARANTEED Products return. I am looking for some income.

    I would think the return would be lower?

    Cheers
    BC.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    A guarantee generally doesn't come for free - and a guarantee is only as good as the company who offers it.

    There are two main issues to consider:

    1. how much will YOU be paying for that guarantee ?

    2. is there a chance that the company offering the guarantee will not be around to service that guarantee ?

    I haven't invested in any capital guaranteed products myself, but from what I've seen, many of them do sacrifice some upside potential in return for that guarantee.
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    Hi Bantam

    There's been some previous threads on this issue.

    http://www.invested.com.au/search.php?searchid=107182

    In a nutshell, as Sim said, there's a cost associated with the capital guarantee. That cost is that either they take a big percentage of you invested capital and lock it away in the bank or they spend a smaller amount on an ongoing basis to buy various derivative products to give the same result.

    I reckon the best way to protect your capital is to invest in good assets with reasonable but not too wide diversification across asset classes and within asset classes.

    Don't make things more complicated than they need to be. You don't need these "sexy" structured products.

    The whole capital protection angle is just marketing spin for nervous nellies in my view...it's a way of luring the ultra-conservative investor into investing in growth assets and asset classes they'd never even consider otherwise. By way of example, some of the money in one of the capital guaranteed products I'm aware of is invested in "distressed debt" and vulture funds which look for distressed companies for potential break up or turnaround. Many would say that's a high stakes game with plenty of "misses" where you could do your dough...but if it's wrapped up as part of a "capital guaranteed" product then conservative investors seem happy to dive into that investment... :rolleyes:

    Just my thoughts...of course do your own due diligence, read the PDS and get advice as required.

    Cheers
    N.

    Cheers
    N.
     
  4. bonecrusher

    bonecrusher Member

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    Hi

    Thanks for your replies appreciated

    Nigel
    What do you mean by not too wide diversification
    I reckon the best way to protect your capital is to invest in good assets with reasonable but not too wide diversification across asset classes and within asset classes.

    Cheers
    BC
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Limited downside full upside

    Hi Bonecrusher,

    Perpetual Protected Investments is a capital guaranteed investment across about 12 different managed funds, all being in growth assets naturally, Aussie share funds, International share funds and Property funds as well.

    If you don't want to put your own money in it you can borrow 100% (as its capital guaranteed) and only pay the interest costs. As this has an option attached it costs slightly more than a normal managed fund and the option is European in exercising only on the due date in roughly 7 years time.

    I've also heard about a Macquarie Fusion but don't know too much about it.

    Cheers,

    Dan

    PS Obviously I haven't taken into account your personal situation and disclaim anything above from being true. This is not an inducement to invest in or recommend the abovementioned product. See a FPA registered financial adviser to help you with your situation.
     
  6. handyandy

    handyandy Well-Known Member

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    Hi Dan

    Welcome to the forum. I note that you have only recently joined and have already made some worthwhile contributions.

    I just wonder wheter you could share some of your real live experiences and made give us a insight into the angle from which you source your information.

    Cheers
     
  7. AsxBroker

    AsxBroker Well-Known Member

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  8. crc_error

    crc_error The Rule of 72

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    Are you a registered financial planner or something who is required by law to have this stupid disclaimer?

    General Public isn't required by law to have a disclaimer.
     
  9. AsxBroker

    AsxBroker Well-Known Member

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    Hi crc_error,

    Yes I am a financial planner.
    I'd be disclaiming most things as obviously I can't make a judgement call on anyone's situation.

    Unfortunately there are people who will do things without discussing their situation with a professional adviser, whether it be a financial planner, solictor, accountant or tax adviser.
     
  10. crc_error

    crc_error The Rule of 72

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    ok then, cause your listed on this website as a normal user, not a financial planner...
     
  11. AsxBroker

    AsxBroker Well-Known Member

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    Hi CRC,

    I haven't been able to find any parts under the Control Panel to change my member status. I have emailed Sim.

    Cheers,

    Dan
     
  12. crc_error

    crc_error The Rule of 72

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    I have just noticed some people have logos that indicate a affiliation.
     
  13. Irenel

    Irenel New Member

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    Limited knowledge about capital guarantee. Wish this can help.

    Hey bone crusher,

    I think capital guaranteed/protected investment products are very low risk therefore always give lower return. Their aim is to fight the 2% inflation rate (as targeted in Australia). So, their return, don't know. May be somewhere higher than the 2% but lower than risky investment's return - if market is in good condition.

    What are capital guarantee products? I think may be governemtn bond or some floating charges are one of them. Many financial institute and insurance company do sell them, too. But may be will be a little high risk but also higher return than government one. I think!! I.e. They lend the moeny to someone then plus some interest and the principal are guaranteed.

    Floating charges is a short-term type of debt securities, they allow you to sell the debt (what other people owed you) to another person without your debtor's consent. This type of debt securities is only offerred by a registerred corporation (e.g. proprietary company or public & listed company - bear in mind, public are not necessary to be listed)

    Compare to other "a little bit" riskier investment such as shares. They give more volatile returns than bond in short term but in long term point of view, they will eventually give u higher return (so recommend to hold ur shares as long as possible if you're not very confident in investment strategy).

    Trying to emphassise here. High return investment are risky because they give negative returns 2. But if you average out with the positive returns (in long term) they'll give u higher returns compare to bond. For bond, I don't know they'll give you negative returns or not (because I am still doing my research). But if you are not risk tolerate person bond or some other similar product will give u a better option.

    Diversification means if you have an retail fund then you should not put all of your money into this single fund because once the GFC occur, as it collapse all your money will be gone.

    So, if you diversify your investment (i.e. put some of your money, how many? depends of your strategy/benchmark, into another fund such as industry fund), then once GFC occur you'll be better off. At least one of your investment is still defending the market crashed and when the market is expanding, retail fund will also follow the market trend. So this help you don't have to worry too much whether the market is in good condition or bad.

    Too wide diversification?! I think, it means if you put your money to too many different funds/products, it makes u very hard to keep track on your investment result. So if you are interested/understand how to keep track of your record. You can do a wide diversification investment strategy yourself.

    But this is very time consuming.

    So, financial advisor is there to specialised in this area to help you to keep track and set investment strategy for you. They will help you to switch your moeny to one another depends on the market performance. And keep track, etc.

    Wish these can help:p.
    If I have confuse u. Please let me. I'll try to reply and do some research for u.
    Cheers. ^^