Guaranteed Investment Products

In this day and age of highly complex financial instruments and financial products that are not easily understood by the average investor, we find an increasing requirement amongst our investors for simple investments with guarantees. We always have a range of such investment products that are open for investment at any time. Guaranteed investments can come in many different forms covering both guaranteed regular savings products and guaranteed lump sum investments.

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Are all guarantees the same?

No. This is critical to understand.

When looking at guaranteed investments it is of utmost importance to understand who is providing the guarantee and what conditions (if any) are attached.
Some investments carry a guarantee by a AAA-rated bank whereas others (typically property related) carry a guarantee from the product promoter or property developer. Clearly these two guarantees do not carry equal weight. Most investors would prefer a guarantee issued by a top bank rather than a guarantee issued by a smaller company with no formal credit rating.

There are a multitude of investment opportunities that we can advise on and where possible we would advise investors looking for a guarantee to focus on institutions with a good rating from a recognized credit rating agency.

The Difference between “Guaranteed” and “Capital Protected” Investments

This is an area that can cause confusion and understandably so.

A guaranteed investment provides an assurance that the investor will receive a certain level of return at a certain date irrespective of other conditions such as the performance of stock markets.

A capital-protected investment usually provides that an investor’s original investment is safe subject to certain specified conditions. For example a capital-protected investment might ensure the return of the investor’s capital as long as a certain stock index does not fall by a certain specified amount (for example 50%). In the event that such a threshold is breached then the investor’s capital may not be returned in full.
These are crucial differences that should be fully understood when considering investing into different products.

Some Uses of Guaranteed Investments

We are firm believers in offering guaranteed investment options where possible. As always, diversification is the key but here are some occasions when a guaranteed investment may be particularly appealing:

  • Regular savings to fund university fees or school fees. If a reasonable estimate can be made of a future liability for education fees then why not consider a guaranteed investment?
  • Investing a lump sum where resources are limited or where an investment loss would be extremely difficult to bear. All investors have a different attitude to risk and guarantees but in general, if you are dealing with limited resources then your capacity to weather a loss will be limited compared to someone else for whom the investment is not so critical. Of course where an investor is relatively risk-averse with perhaps more limited means then investments that carry a guarantee from a first class bank will be of particular interest.
  • Investing for retirement. There are times when it may feel comfortable to know that simply maintaining agreed contributions over an agreed period will provide a particular sum at a certain date. For example if you felt that you wanted the assurance of building up half a million dollars by the time you reach age 65 then we can guide you by calculating exactly how much you need to allocate to savings over what time period in order to meet your goal.

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