L&G Capital Guaranteed Multi-Index Equity Bond 13

grt05

I opened up one of these through Nationwide in 2010 on the advice of my Dad.

I decided to do some research on the bond and found this thread linked below...as im a new user, i cant give you the full link, so just attach the below after the forward slash.

showthread.php?t=2136111

It seems like it is a rubbish choice.

Should I take the money out and put it somewhere else? Or now that it has been there since 2010, should I leave it?

It's 3 grand. How do I know if it's grown or not? Should the current value be on the L&G statement? Or will I only know the growth of the bond once it's finished?

bugbyte_2

Hello and welcome. First thing to understand that although it has 'bond' in the title, it is not a bond as in a financial sense - its not traded, and your investment is protected. Its just a no access savings account. The rate you get is typically linked to some index such as the ftse 100. However, the terms and conditions to get the headline rate are usually very prescriptive - something like 'Guaranteed 75% Bond (FTSE 100 must rise between 300 and 305% between all hallows day and the third moon in April, otherwise 1.5%. If you want your money out, we require a major limb)' or something similar.

Without knowing the details, or if the 'bond' has met its success criteria, I cant say if its good or bad - but 12% in 6 yrs is probably in the 'bad' range. Questions you need to ask are How much time left have you got left on the bond? What are the release clauses? What could I get thats better?

gadgetmind

I've never really got these things. Why not just put some of your money into a savings account and use the rest to buy a call option? Same end result, much lower fees.

Linton

The thread you quote doesnt give any indication of how your bond has behaved. Look at the dates - 2009 was the depth of the credit crunch crash so its hardly surprising that a stock exchange linked bond should perform badly at that time.

Since 2010 the FTSE 100 index has increased by somewhere between and 8% and 35% depending on when in 2010 the bond is based. So I wouldnt see any reason to sell the bond now. If you tell us the terms of the bond we may be able to give you some idea of how your investment is progressing.

marathonic

gadgetmind wrote: »

I've never really got these things. Why not just put some of your money into a savings account and use the rest to buy a call option? Same end result, much lower fees.

I agree with this but most people don't understand options and these bonds seemed easier to understand (despite being significantly more difficult to truly understand - if you did, an realised the scale of the underlying fees, you wouldn't invest).

A 2-year fixed rate ISA at the moment will earn 6.09% interest over that timescale. That means that you could take £5.74 out of every £100 and deposit the rest. The deposit would return your £100 after 2-years and the £5.74 could be used to buy options.

A December 2015 Call Option on SPY at a $160 strike would cost $1,532 and give you exposure of $16,000 to the S&P 500. The $1,532 would require depositing $26,690 in order to ensure that the interest received covers the cost of the Call Option.

You could go a little further out of the money and require a smaller deposit - but the likelihood for profit is reduced.

Personally, I think stockmarkets are over-valued at the moment - but you could follow a similar strategy using Put Options.

grey_gym_sock

marathonic wrote: »

A 2-year fixed rate ISA at the moment will earn 6.09% interest over that timescale. That means that you could take £5.74 out of every £100 and deposit the rest. The deposit would return your £100 after 2-years and the £5.74 could be used to buy options.

yup. but once you've understood that, you'll probably also figure out that stock markets are unlikely to fall than more than c. 50%, so you could put £89.28 in the fixed-rate ISA, which would grow to £94.64 after 2 years; and put the other £10.72 in a tracker fund, and even if that halved in value (to £5.36), you'd still have £100 left.

the main advantage being that you then have an investment which doesn't have to expire after 2 years, but you can let run as long as makes sense.

pqrdef

Some structured products can be hairy, but this is for the Nationwide market and they will have flogged it to a lot of maiden aunts without risking their reputation.

Basically it tracks a triple index, UK/Europe/NY, without dividends, with the redemption value capped at 150p and floored at 112p, per 100p invested.

This corresponds to 7% pa max and 1.9% min. People would bite their hands off for that today.

Check the tax treatment. It was available as a Cash ISA, and there was also a deal that combined it with an exclusive 4.7% savings bond.

How well you're doing depends on the exact strike date. The Footsie topped 5600 in January 2010 but was below 5200 before the end of the month.

Since then it's oscillated around 5500 for 2 1/2 years before going on what looks like a bull run, though it doesn't feel like one.

It's difficult to talk about growth if you haven't got the option of taking profits. Basically you've taken some of the interest you could have had to the bookies and put it on a very unpredictable horse. In 2011 the Footsie fell 900 points in a fortnight. The L&G isn't that volatile because it's averaged over the final year, but still, anything could happen.

There's a quoted valuation of 114.66p, which works out at 4.3% so far, which isn't rubbish. What this means I don't know. The market prices of tradable products depend not only on where the index is, but on where people think it might go.

Personally I think it's time to take profits on the Footsie, but I thought that at 6000, so what do I know.