Capital Protected Investments

Protecting your capital in volatile times

A capital protected investment usually promises to at least repay your original investment at the end of a minimum period. With some products, this guarantee applies no matter how financial markets perform. With other products, capital protection or other promised returns may be limited or cancelled, if markets or shares perform poorly.

Complex capital protected products differ in terms of the guarantees and promises providers make. Some promise that you should get back at least the dollar value of your initial investment even if  financial markets turn sour. Others offer capital protection that is cancelled if markets or particular shares decline by a certain amount.

For example, a capital protected investment linked to the top 50 Australian shares may pay investors a return equal to 80% of the cumulative growth in the S&P/ASX 50 share index over 5 years. The guarantee is that even if the index makes a cumulative loss over this time, you will still get back the original amount you invested at the end of the 5 years.

But no investment is 100% secure. In certain extreme circumstances, for example, if the company providing the guarantee goes belly-up, you can still lose money with these capital guaranteed or protected investments.

Another type of more complex capital protected investment, also linked to shares, may pay investors an agreed rate of interest that is typically higher than conservative investments, such as term deposits. However, the capital protection or the advertised return may be cancelled if the market value of underlying shares falls by a pre-determined percentage.

There are risks associated with Capital Protected Investments

It is not possible to predict the returns that will be achieved by the investment. Investment returns are volatile and cannot be guaranteed and past performance is not indicative of future performance. You may lose money regardless of the investment made.

The actual return that you receive will also be affected by factors such as the date on which you invest, the length of time you hold your investment and when you choose to withdraw. In general, the longer you hold your investment, the less likely it is that an overall loss will be incurred.

General Advice Disclaimer

This information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Professional Investment Services (PIS) Authorised Representative before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Professional Investment Services nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.