Guaranteed Stock Market Bond

Guaranteed Stock Market Bond

On this page we will provide details of Guaranteed Stock Market Bonds issued from time to time by well known high street banks in England. Investing in the stock market is always risky as prices can go up as well as down but the “guaranteed” bond lets you enjoy the potential gains of playing the Market, but reducing the risks.

This example of a Guaranteed Stock Market Bond (GSMB) allows you to invest equally in three Indices – FTSE 100, Dow Jones Euro Stoxx 50 and the Nikkei 225. You do not have the expense of managing a portfolio of shares and the capital you invest is guaranteed however, the return you achieve is more limited and is shared with the bank concerned.

You can invest any sum from a minimum of £2,500 over either a three or five year period. For both terms your original investment is secure however it can not be withdrawn during the term period chosen..

For the five year investment GSMB you could benefit from a potential return of up 70% gross of the improvement in value of the shares. Your funds will be split equally between the following Indices: FTSE 100, Dow Jones Euro Stoxx 50 and Nikkei 225. The returns for each Index/exchange are entirely independent of the performance of other exchanges and you will be entitled to receive at the end of the period 70% gross of the increase in value of the index during the bond period.

If a three year GSMB is chosen, you could benefit from a potential return of up to 30% gross. Your funds will be divided into three equal amounts and invested in each of the indices: FTSE 100, Dow Jones Euro Stoxx 50 and Nikkei 225. The return on each amount, again independent of each other, will be the relevant percentage rise of each index, subject to a maximum of 30% gross.

The Main Benefits:

  • The Bond is available to all individuals aged 18 or over, charities, limited companies and pension funds.
  • Minimum deposit is £2,500.
  • Deposits may be made in joint names or by sole traders, partnerships and companies.
  • Subject to the initial 14 days right to withdraw period, once deposited, your money is “locked in” until maturity (five year term or three year term depending on your selection) therefore withdrawals or further deposits cannot be made. If you think you may need access to your money you should consider placing some of your savings in a Demand Deposit account.

What is Guaranteed?

In the past, investors always had to weigh the potential growth of a stock market against the potential risk to their capital. That`s where this Bond is different because if the various Markets fail to perform, or even if some or all of the fall, you will still get your original capital back.

How does the GSMB work and how will Your Capital be Invested

5 year option

The initial capital will be split into three equal amounts and the return on each amount will be the percentage rise of each of the following Indices: FTSE 100, Dow Jones Euro Stoxx 50 and the Nikkei 225 over the five year term, subject to a maximum return of 70% gross of the original investment, (if each of the Indices achieves a return of 70% over the period, this is equivalent to an AER of 11.20%)

AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded each year.

Example: £9,000 invested:

(a) FTSE 100 Index rises by 60%

(b) Dow Jones Euro Stoxx 50 falls by 10%

(c) Nikkei 225 rises by 120%

The return on your investment would be:

(a) 60% rise = 60% return on £3,000 = £1,800

(b) 0% fall = nil return on £3,000 = nil

(d) 120 % rise = 70%(max) return on £3,000 = £2,100

Total gross return £3,900

3 year option

The initial capital will be split into three equal amounts and the return on each amount will be the percentage rise of each of the following indices: FTSE 100, Dow Jones Euro Stoxx50 and the Nikkei 225 over the three year term, subject to a maximum return of 30% gross of the original investment, ( if each of the Indices achieve a return of 30% over the period, this is equivalent to an AER of 9.14%).

Example: £9,000 invested

(a) FTSE 100 Index rises by 40%

(b) Dow Jones Euro Stoxx 50 Index falls by 5%

(c) Nikkei 225 rises by 40%

The return on your investment would be:

(a) 40% rise = 30%(max) return on £3,000 = £900

(b) 5% fall = nil return of £3,000 = nil

(c) 25% rise = 30%(max) return on £3,000 = £750

Total gross return £1,650

What are the FTSE 100, DOW JONES EURO STOXX 50 AND NIKKEI 225 Indices

  1. 1.The FTSE 100 Index measures the performance (excluding dividends) of the shares of the top 100 companies quoted on the London Stock Market. These include companies such as Vodafone Airtouch, Glaxo Wellcome and BP Amoco.
  2. 2.The Dow Jones Euro Stoxx 50 Index measures the performance (excluding dividends) of the shares of the top 50 companies within the EMU. These include companies such as Nokia, Deutsche Bank, Philips, L`Oreal and Siemens.
  3. 3.The Nikkei 225 Index measures the performance (excluding dividends) of 225 leading Japanese companies such as Honda, Sony, Toyota and NTT.

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