This structured product ticks all the boxes…
1. Low risk: Strictly invests offshore. So it eliminates any risk in South Africa, ahead of the December ANC conference.
2. Well diversified: Invests your money in every major market from US to Japan, including emerging markets.
3. Total capital protection: Your capital is guaranteed in dollars, plus you will get a further 4% guaranteed return.
4. Gears your returns: You can get 2X the market return. This means, that for a 1% improvement in global markets you get a 2% improvement in your investment.
5. ONLY taxed as capital gains when you take your money out.
6. All returns are after fees: Tells you exactly what your return should be, with no extra cost.
7. Will give you returns well-above the long-term average of the market, but returns are capped at 50%. You may see this as a downside, however, that’s an average compounding return of 8,5% per year. If this does not sound impressive, remember it’s in US Dollars. In rand terms the return translates to about 15% per year or close to the long-term average return of the JSE.
In simple terms, this means my pick would only underperform the market, if we see stock market returns for the next five years, well above average.
This is a very unlikely scenario given the fact that we have already seen an eight-year global bull market in stocks.
That’s a pretty good deal, I think.
What’s more, beyond the simple mechanics of the product, it is also ideally suited to the current domestic environment.
You see, as we head to the end of the year we face ratings downgrades, an ANC conference and a probable US Fed interest rate hike.
All these factors dramatically increase risk for the South African investor.
In such volatile times, a little insurance could be extremely useful
Before I go, I’d like to add one more thing.
Since I started focusing on structured products the number of products on offer have risen dramatically. At the moment you can buy products from several companies including Sanlam, Investec, ABSA, Standard Bank and BNP to name just the biggest.
Unfortunately, due to their complicated nature it is often difficult to determine how attractive they actually are... With that said the structure product I like is the Investec Offshore Protected Share.
If you want to know how to get invested or just understand more about these unique investments, you can contact me on firstname.lastname@example.org