Learn three ways to profit – with no way to lose

by | Jun 6, 2000 | Archives

Here is a diversified portfolio idea which cannot lose. Invest equally in NASDAQ Composite Index, Japan's Nikkei 225 next and Europe's Euro Stoxx 50 Index for the next two and a half years.

What if these markets fall?

You can invest in them without risk of losing your capital through Jyske Bank's JB World Investment bonds.

NASDAQ, Japan and Europe are currently downtrodden markets. As my last message pointed out I am pretty negative about equities now. Yet in this new tech age each can have explosive upwards growth. Investing in such trouble spots while they are down is the best way to reap huge long term profits.

But what about the risk?

Jyske Bank currently offers a guaranteed Three Index Bond (available until June 26). This account invests 1/3 in the NASDAQ composite index, 1/3 in Japan's Nikkei 225 Index and 1/3 in Europe's Euro Stoxx 50 Share Market Index. Yet the investment is guaranteed. You cannot lose more than 3% of your investment over 2 years and seven months.

This means you can make high returns if the indices rise, but you limit your potential for loss.

Let me explain how this program works. Jyske is issuing a zero coupon bond at the offer price of 103. This means a $15,000 bond (the minimum) costs $15,450. The bond pays no interest during its term, but at maturity guarantees to pay $15,000 plus 70% to 75% of the percentage the three indices.

Your actual risk is the interest earning potential of your money for the next two years and seven months plus 3%. The cost of the program is the 25% to 30% of the growth of these indices. This 25% to 30% of the indices rise is like an insurance cost that eliminates downside risk.

There are two negative points. First your money is locked in for two years and seven months. Don't invest money you might need during this time. Second, you give up flexibility. You do not have the ability to take a profit if a market suddenly spurts up. The bond locks in the investment until maturity. If these markets rise, even enormously in the next 18 months there is no way to cash in the bond while markets are on the upswing.

How do these bonds actually work? Jyske uses part of the money invested to sell the three markets short via index contracts for the period of the bond. If the markets drop during this period of time, the profit on the short sale makes up the lose. You don't have to be involved in this risk management. It is all done internally for all the investors who buy the bonds.

I have used guaranteed index accounts twice with Jyske and enjoyed better than average returns. My first investment was in the London Stock Index. This investment rose 38% in two years. Yet it was guaranteed. I could not lose.

The second guaranteed investment was in the Japanese Nikkei Index. It rose about 14%. This does not sound great but is still almost 50% more than I would have earned with money on deposit. Yet my capital was a safe as a CD. If the Japanese market had really taken off in that period I could have earned much more.

I am personally rolling the redemption of my Japanese index into the JB World. I like this type of investment in stock markets when I see so many potential risks that could push markets down. This allows me to be in the markets in case they surprise me and rebound, yet reduces the risk of a sharp and sustained drop.

If you are a conservative investor and the condition of markets concerns you today, this may be a good way to maintain equity positions with very low risk.

You can get more information by contacting Teddy Christiansen at Jyske Bank.

His address: teddy@jyskebank.dk

Teddy is an advisor to the International E-Club. For more information about the club click on http://www.garyacott.com/eclub/

Until next message good investing! Gary