Investment help

clancyoo7

I have little experience of the investment markets and I have about 15k. I recently spoke with an investments manager in AIB and he recommended locking my money away for 5 years and 1 month. The money you could earn will be calculated by adding together the returns on the basket of indicies made up of:

iBoxx Euro Sovereign Bond Index
Dow Jones UBS Commodity Index
Dow Jones Eurostoxx 50

Your are guaranteed your investment plus a return equal to 85% of any increase in the value of the basket of indicies over the same period without any limit
The Plan is AIB Secure Tracker Fund Issue 103. Any feedback would be much appreciated

clancyoo7

anybody out their got an opinion on this plan or know of a better investment?

pocketdooz

clancyoo7 wrote: »

anybody out their got an opinion on this plan or know of a better investment?

So 85% upside and no downside? It sounds to me like there is a catch here. Do you have a link to this? Seems interesting.

Blackjack

pocketdooz wrote: »

So 85% upside and no downside? It sounds to me like there is a catch here. Do you have a link to this? Seems interesting.

I'd be interested to see what the catch is - has to be too good to be true...

clancyoo7

No info on the site strangely enough but this is the closest info i could get on the Secure Tracker fund http://www.aib.ie/personal/investments/Cap-secure-fund-fixed. The offer closed on the 2nd of April, but the funds advisor said they will bring out the same one again with the policy tweaked differently. The last issue was 103 so the next one will be 104. The document i got from the bank states the investment has 100% capital security. Once your money is locked in no early encashment and if your try you may lose some or all of the money you put in. The fund is managed by Aviva and ark life.

Blackjack

clancyoo7 wrote: »

No info on the site strangely enough but this is the closest info i could get on the Secure Tracker fund http://www.aib.ie/personal/investments/Cap-secure-fund-fixed. The offer closed on the 2nd of April, but the funds advisor said they will bring out the same one again with the policy tweaked differently. The last issue was 103 so the next one will be 104. The document i got from the bank states the investment has 100% capital security. Once your money is locked in no early encashment and if your try you may lose some or all of the money you put in. The fund is managed by Aviva and ark life.

Without viewing the prospectus, I'd say it's employing a strategy that's heavily weighted towards the first index, and holding a number of options and CDS's etc. The lock-in for 5 years is a bit of a catch, but fair enough really for a secured Capital.

clancyoo7

Here are a few pics i took of the prospectus. the pic quality isn't great but sure ye can see it for yourselves. [IMG]file:///C:/Documents%20and%20Settings/Administrator/My%20Documents/My%20Pictures/pg2.JPG[/IMG]

thomasm

pocketdooz wrote: »

So 85% upside and no downside? It sounds to me like there is a catch here. Do you have a link to this? Seems interesting.

I imagine that 85% is the participation rate in any upside. So 10% increase in index gets you an 8.5% return

pocketdooz

thomasm wrote: »

I imagine that 85% is the participation rate in any upside. So 10% increase in index gets you an 8.5% return

Yep - I get that but if the index tanks 50% I reckon there is a catch that makes you suffer some sort of capital leakage.

If not it seems interesting to be honest.

thomasm

Not quiet so sure why this is been seen as a good investment unless I'm missing something. It's a basic tracker bond. The particiaption at only 85% is not very attractive.

Off the top of my head I can think of a couple of bonds on sale at the moment that offer
1) 100% capital gurantee and 100% participation in more actively managed fund based on commodities
2) 95% Capital gurantee and 150% participation in a bond tracking currencies. The potential upside more than makes up for the potential 5% loss of capital.
3) There are also a number that offer potential returns of up to 150% over 18 months with soft capital gurantee as long as index level does not go below 50% of strike price.

All of the above are for max term of 3 years which is more attractive than locking it away for 5 years in my opinion

clancyoo7

thomasm wrote: »

Not quiet so sure why this is been seen as a good investment unless I'm missing something. It's a basic tracker bond. The particiaption at only 85% is not very attractive.

Off the top of my head I can think of a couple of bonds on sale at the moment that offer
1) 100% capital gurantee and 100% participation in more actively managed fund based on commodities
2) 95% Capital gurantee and 150% participation in a bond tracking currencies. The potential upside more than makes up for the potential 5% loss of capital.
3) There are also a number that offer potential returns of up to 150% over 18 months with soft capital gurantee as long as index level does not go below 50% of strike price.

All of the above are for max term of 3 years which is more attractive than locking it away for 5 years in my opinion

Hi Thomasm just wondering if you had any links to those products you are referring to

Speculator

Another option:

http://www.bcp.ie/

Returns capped at 50%, equivalent to 12.5% per annum (CAR 10.7%).
Growth locked in annually. Cannot be lost thereafter.
4 Year Investment Term. 100% capital security provided by Bank of Ireland.

thomasm

clancyoo7 wrote: »

Hi Thomasm just wondering if you had any links to those products you are referring to

Hi Clancy007, Not sure on board rules re posting 'product advertising' as such on the forumn so I will PM links to these offers. I note only now that you have 15k to invest and some of the ones I refer to have a minimum entry level at 20 and 25k. As an aside I would not go to any bank for a structured product like this. Speak to an independent adviser who preferably charges a fee.

clancyoo7

Just to let people know AIB have reissued this product the most notable changes are the return has been increased to 95% but on the downside your money is tied up for 5 years and 11 months

Zenith74

Is a guarantee (and bear in mind nothing is 100% guaranteed, especially when backed by an Irish bank) on your initial investment a requirement for you?

If not then you might consider just buying ETFs based on those three indices or similar, it's easily done through most brokers. No guarantee on initial capital, though if you're thinking longterm investment remember the stock market on a whole has never failed to recover from losses, once you've diversified enough you will eventually bounce back if it goes pear shaped for a while. The upsides are 100% of any profit (after ETF costs) goes to you, annual charges are presumably lower (not sure the AIB charges?), you can withdraw whenever you want to take profit or stay in if it drops towards the end and you want to wait for recovery, you can add to it whenever you want if it's looking good, or diversify it further, you have no worry of AIB/BOI folding and leaving you in limbo (unlikely, but a factor to consider). Are AIB/BOI giving you any dividends returned from the companies in the Eurostoxx 50 index or are they just giving you the index price at the end and keeping the dividends? Not sure the exact figure, but the dividends on the Eurostoxx 50 part of the fund could be in the 3% per annum range, if AIB are keeping these this would be another reason to buy the ETFs yourself, 3% adds up over the longterm, especially in an accumulating ETF.

Of course this is all pie-in-the-sky if you want a guarantee on initial investment, just thought I'd throw in my two cents as you didn't specify .

clancyoo7

Zenith74 wrote: »

Is a guarantee (and bear in mind nothing is 100% guaranteed, especially when backed by an Irish bank) on your initial investment a requirement for you?

If not then you might consider just buying ETFs based on those three indices or similar, it's easily done through most brokers. No guarantee on initial capital, though if you're thinking longterm investment remember the stock market on a whole has never failed to recover from losses, once you've diversified enough you will eventually bounce back if it goes pear shaped for a while. The upsides are 100% of any profit (after ETF costs) goes to you, annual charges are presumably lower (not sure the AIB charges?), you can withdraw whenever you want to take profit or stay in if it drops towards the end and you want to wait for recovery, you can add to it whenever you want if it's looking good, or diversify it further, you have no worry of AIB/BOI folding and leaving you in limbo (unlikely, but a factor to consider). Are AIB/BOI giving you any dividends returned from the companies in the Eurostoxx 50 index or are they just giving you the index price at the end and keeping the dividends? Not sure the exact figure, but the dividends on the Eurostoxx 50 part of the fund could be in the 3% per annum range, if AIB are keeping these this would be another reason to buy the ETFs yourself, 3% adds up over the longterm, especially in an accumulating ETF.

Of course this is all pie-in-the-sky if you want a guarantee on initial investment, just thought I'd throw in my two cents as you didn't specify .

Hi Zeneth there are no dividends and the only plus being 95% return on any profit it may make with each profit from each year locked in so if your investment goes pear shaped in the final year you will have the profit from years 1 - 4. Capital guarantees is not an absolute necessity. I would be willing to consider buying stocks but i suppose as the old saying goes 'a fool and his money are soon parted' and i don't have enough knowledge in that area to start risking the few bob i have managed to hold on to. In the long term I would like to go into the stocks but as said i would have to put serious time into research.

Zenith74

In that case you might consider speaking to one of the stockbroking companies who will advise you on good purchases based on your circumstances, investment capital, stomach for risk etc etc. I can only speak for Campbell O'Connor because they're who I use, but advice with them is free (well, it's built into the commission of any shares you buy through them in theory), all you need to do is open an account (free) and fill in a 'Know your client' form (free, government requirement) then ask their recommendations. Just a thought, at the end of the day you need to decide what's best for you...