Few things to consider before investing in capital guaranteed investments
Posted: May 04, 2017
Capital guaranteed investments may interest you if you want to have exposure to investment markets. But before going further, you need to decide- Are these investments right for me? Ultimately the answer to this question will depend on what you are hoping to get out of your investments, and how much risk you are willing to bear. Also, you need to find out whether you need a regular income or need access to your capital. For instance, if you are young and have a long investment horizon, you may want more exposure to growth assets. On the other hand, people who are retiring may be more interested in preserving their savings.
How does capital guaranteed investments work?
Capital guaranteed investments offer you the benefit to get a market-linked investment return while having the security of knowing that you will at least get back the dollar value of your initial investment at the maturity date, if the investment markets turn sour. Most of these investments are for a fixed term, generally for a term of five years or more with the condition that fees will apply if you exit the investment before the term is complete. The guarantee only applies if you hold your investment for the full term.
How is the guarantee offered on your investment?
The guarantee on your capital is achieved by structuring investments in a variety of ways. Some provide protection by investing through a life insurance company while others use a portion of your money in bonds and other derivatives.
No two capital guaranteed investments are same. So you need to pay close attention to the structure, investment maturity date and terms and conditions that apply. You should research properly and hire expert services to help you invest sensibly. These investments are structured complex investment products. They have a different investment and legal structure. Make sure you read and understand the Disclosure Statement or the prospectus for an investment properly to find out how guarantee is provided. It is also important to identify where you stand as an investor if the investment turns sour or the company offering the services gets into turbulence.
Before you invest, make sure you do your homework. If you are clear on your investment goals, you have a solid ground to evaluate whether capital guaranteed investments are likely to meet your investment goals or not.
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