No doubt you’ve already read numerous financial articles that all began with…”In these difficult times.” These days everyone seems to have a different opinion of why the markets are down (including yours truly).
But the fact is this isn’t the first time we’ve experienced severe turmoil in the financial markets, and it won’t be last. But it seems the big industry players in the market never learn from their mistakes. Indeed, time and time again, sooner or later, the pain withers, and the greed factor comes back.
We have lived through investment bubbles and calamities for centuries. In the 1800s, it’s said that even the British royal family got swept into the investment fad at the time. If you want to go back even further, the Dutch traders had their own famous bubble in 1636 when speculators inflated the price of tulip bulbs.
Yes, the speculative bubbles and crashes may differ over time but one thing remains the same: When all is said and done, everyone wishes they had cashed out just before the bubble began in the first place. But as we all know, only a few fortunate investors manage to get out in time.
But imagine how wonderful it would be to not have a care in the world when the market falls another 300 points. Imagine not even bothering to check your account statement because you already know what it will say no matter what. Wouldn’t it be fun to watch CNBC and laugh out loud when you hear the markets just plummeted again? Saying: “Haha - not me! You can’t touch me!”
It’s all possible…with “capital guaranteed investments.”
The Ammunition You Need to Laugh at the Markets
I call them “capital guaranteed investments.” But they’re also known as principal protected notes, or structured bonds.
These investment products allow you to gain all the advantages of investing in the markets, but your investment capital is fully protected in case the market drops. In other words, you guaranteed to get back your original investment - no matter what.
You may be asking: How does that work?
The concept is actually quite simple. As you know, you usually buy a bond at par i.e. US$1000 per bond. However, you can also buy a bond at a discount, say US$950 and then it matures at US$1000. So what happens to that extra US$50? Your broker could use the extra US$50 to buy you options on a particular index, like the S&P 500. That gives you the participation in the stock market.
Most guaranteed capital investments work that way. These investments are structured so you have exactly the same rewards based on any upside movement. So if the S&P or Dow moves up 30% over two years, then you receive 30%. And if the market crashes or goes nowhere, then you still bought your bond at US$950, so it will mature at full face amount and you walk away with your original principal intact.
The only caveat is you don’t make any interest on the bond, because you essentially used your money to buy the stock index.
Super Bonds = Guaranteed Capital + Triple-Digit Gains
Here’s the norm: If your stock or retirement portfolio is up 15%, then it can only take a single stock sell-off to make that 15% disappear. Plus, your actual principal vanishes as well. But a simple structured bond can save you from that calamity.
Most investors think of bonds as long-term investments that have to be locked in. But that’s not true at all. Let me explain.
Let’s say you’re in a 3-year bond linked to the Dow. Eight months have gone by and you’re now up 12%. With a structured bond, you can promptly sell that 3-year bond and roll the 112% (your initial 100% capital plus 12% return) into another structured bond with a full capital guarantee. This way you lock in your 112% gain no matter if the market goes up, down or sideways.
In fact, you can just sit back laugh because you are now buffered and protected with your 112% gain. Then let’s say another six months go by and you’re up another 6%, you can roll that again and now you sitting on a protected 118%! Isn’t this amazing?
Better yet, you can invest in such structured bonds linked to a whole variety of markets, like commodities, or international stocks. Investing in oil, cattle, copper, sugar or Brazilian equities can be arduous and complex enough…but you can do it all with structured bonds.
Question: Which market will outperform all others in the next few years? Will it be the stock market, Commodities, foreign currencies, or bonds?
Answer: “Who cares?”
With a capital guaranteed investment, you can get the upside of whichever market performs the best and deliver you those gains plus your initial capital.
