Citibank - 18 Month Market Linked Deposit

save-a-lot

Hi

I have been looking at using Citibank to invest some money, the product to do this is their "18 Month Market Linked Deposit" which is detailed at the following URL...

http://www.citibank.co.uk/personal/banking/citigold/mldindex.htm

I am interested, but this would be the first time I have exposed my money to the stock market, I know there is a risk that over the 18 month holding period I may not net me a profit, but, how big of a risk would it be? I know that is a rather open ended question, I just want a few other opinions as to whether this could be a better option than just placing my money in a savings account.

Cheers

dunstonh

am interested, but this would be the first time I have exposed my money to the stock market

You are not exposing your money to the stockmarket with these awful products. You are tracking the index (and in the FTSE100 not a very good index at that). However, you are not invested in the stockmarket and you get none of the benefits from it. Such as no dividends.

You would be better placed dipping your toes into the water with a lower risk equity fund or two just to get used to it. That doesnt mean diving in at the deep end as investment risk isnt on/off but a sliding scale. You can start at the shallow end and see how you get on.

Dont use a naff GEB product like this and certainly do not use Citi. They are notorious within the industry for poor quality advice and high pressure sales.

jamesd

You lose 1.5% initially to subscribe. Then you lose inflation at say 4.5% for 18 months, 6.8%. Now you're down 8.3% even if the guarantee pays out. Embedded charges of up to 1% are also chargeable, I don't know how those are accounted for. You now need 9.3% to break even. The income is all paid in the final tax year, increasing the chance that your income will have higher tax liability.

I don't see which currency the markets are priced in, so a decrease in the value of the Pound, which seems likely in 18 months, could reduce the effective value of the two non-UK markets and decrease the potential return.

You suffer the effect of a fair stock market drop just for choosing this product.

For an alternative you might consider a mixture of UK equity income and UK corporate bonds in a unit trust or other collective investment. The downside risk of a 50:50 mixture is not likely to be far off the costs of this product. Adding European property and global corporate bond funds might increase performance without large increase in risk, reducing the link to the UK economy.

save-a-lot

Hi

Thanks for the advice, I have a telephone call with them on Monday and I believe this is what they are going to offer me. So, I am either not going to bother or listen to what they have to say and be armed with the correct information