Guaranteed Market Deal

by | Oct 26, 2001 | Archives

Here is one of the few ways you can invest in global markets and be guaranteed not to lose.

Dear International Friend,

Here's the investor's dilemma. To remain in the market or not? Chances are your portfolio has been devastated already and is down 20%, 25% or even more. Should you get out to protect what's left? If so won't you feel rotten if the market suddenly rebounds? You almost feel as if you have to stay in to recoup what you have lost. Yet if you stay, what happens if the market drops another 30% (which history suggests it will)?

One way to stay in the market without risk of capital loss is through a no loss guaranteed deal. I have invested in several of these myself over the years and like the fact that they can go up but cannot go down.

Here is how they work. You invest with a bank or a similar institution which places a portion of your investment in two or three year equity future options that will bring a profit if the market rises. The balance of your investment remains on deposit so that with interest it equals your original investment in a pre agreed number of years. If the market rises, you get a percentage of that rise. If the market falls, you get your original investment back. What you risk is the opportunity value of the investment (in other words what that investment could earn).

I have invested in several of these no loss guarantee deals with Jyske Bank and they have just launched their latest such program.

This program invests 50% in European shares, 25% in US shares and 25% in Japanese shares. This is an investment equivalent to holding a basket of shares around the world. The program requires a minimum investment of 102,000 Norwegian kroner (about US$11,500). The investing period is from December 2001 until January 2004. No guaranteed redemption is allowed until 2004 though there is an early non guaranteed redemption in 2003.

The only risk here is zero return on your investment for three years if all three markets do not rise in that period, plus the potential of a drop in the value of the Norwegian kroner. There is also a 2% up front fee though there is no annual holding costs.

For many investors who are not sure whether to hang on or clear out of the equity market this is an excellent way to lock in potential of rising equity markets, but to eliminate the risk of huge additional losses in your portfolio. You can see complete details below or contact Jyske Bank's Thomas Fischer or Teddy Christiansen or the bank's web site

Until next message, good global business and investing!