Anyone out there got a crystal ball? FTSE?

Marg

I have been invited to 'invest' in a 12 month bond based on the FTSE & the blurb indicates that this is at an all time low.

What do you think? How much further do you think it could fall in 12 months?

My instinct is to avoid this like the plague but am new to investing so any comments welcome.

Thank you in anticipation of an explanation.

Nagiw

Marg wrote: »

I have been invited to 'invest' in a 12 month bond based on the FTSE & the blurb indicates that this is at an all time low.

What do you think? How much further do you think it could fall in 12 months?

My instinct is to avoid this like the plague but am new to investing so any comments welcome.

Thank you in anticipation of an explanation.

That's just a plain lie - have alook at some historical charts....

http://uk.finance.yahoo.com/q/hp?s=%5EFTSE

Aegis

Marg wrote: »

I have been invited to 'invest' in a 12 month bond based on the FTSE & the blurb indicates that this is at an all time low.

What do you think? How much further do you think it could fall in 12 months?

My instinct is to avoid this like the plague but am new to investing so any comments welcome.

Thank you in anticipation of an explanation.

Only 12 months? What are the terms?

Reaper

You don't say what the product is but it sounds like some form of Guaranteed Investment Bond. They are not highly thought of here. Although they usually provide some sort of protection against a falling market it comes at the cost of reduced growth. Typically they give you no dividends which I would say are of particular importance in the current market - growth is likely to be low while divided yields are high.

Buying more directly into the stock market either through individual shares or (probably better if you are new to it) a tracker would better.

Now for the big BUT...

The stock market is highly volatile, leaping up and down huge amounts in a single day. You are likely to make either big profits or big losses - nothing in between!

You can moderate this by drip feeding money in over time and by investing for the longer term (at least 5 years) but even so do this with money you can afford to lose, not your life savings.

Just my opinion of course.

bjorn_again

Marg wrote: »

the blurb indicates that this is at an all time low.

.

If the blurb knew this were true he/she/it would most certainly not be sharing it with the world.

Marg

Thank you for views so far...

Terms are: If the FTSE closes 50% down or better exactly 12 months after the December launch date I get back my investment + 8% bonus. BUT if it drops to say, 49% I get no bonus and only 49% of my investment back.

Now I've written it down - is my reputable bank turning into a bookies?

PS "all time low" was my interpretation of their comment that FTSE would have to be above 1,937.49 - a level not seen since 1989 - Sorry!

gozomark

so you are risking 50% for a max gain of 8% (actually you could get 5% odd anyway in a savings account, so you are really risking 50% for a max gain of 3% odd) - doesn't sound that great a deal to me....

HankMcSpank

Superimposing percentage peak to trough falls from the 1973-75 downturn (73% fall peak to trough), would see the FTSE down to a feeble 1800 points from last summer's peak.

Some say this is far worse than the 1973-75 situiation.

SmileyG_2

Are you sure this is a bank? Sound like a hedge fund to me......

masonic

Marg wrote: »

Terms are: If the FTSE closes 50% down or better exactly 12 months after the December launch date I get back my investment + 8% bonus. BUT if it drops to say, 49% I get no bonus and only 49% of my investment back.

Let's compare scenarios:-

12 month bond
Performance - Result
0-50% - 0-50% return
50-100% - 108% return
100%+ - 108% return

Direct investment in a FTSE 100 tracker
Performance - Result
0-50% - 0-50% return
50-100% - 50-100% return
100%+ - investment + full increase

Fixed rate savings account
Performance - Result
0-50% - 105% return
50-100% - 105% return
100%+ - 105% return

So the gamble you are taking with this product is that in 12 months time the FTSE 100 index will be 50-100% of its current value, but the payoff for getting this right is only a little more than sticking the money in a good fixed rate savings account. If you are wrong, then you may as well be in a tracker fund as your capital isn't protected - at least then you'd benefit from a big rise.

Marg

Thank you all for your views which have confirmed my thoughts 'don't touch with barge pole'.

Now ask what good rate accounts to put into?