Guaranteed Capital Account(GCA) 3.5 years

Poundzhound

Does anyone know the innards of the GCA (offered by HSBC)? The basic premise is that the amount of money thats put in over an agreed period (3.5 or 6 years) is split 50/50 into Income & Growth.

Can anyone tell me why the total amount FALLS below the original amount, as I've been lead to believe that the INCOME part of the investment will always be rising, as it's BOE base rate plus and the Growth part is the share performance average of the top 100 companies ???

dunstonh

These products are usually quite naff. They have all the right soundbites for features but fall apart when you realise what you are not getting in the name of a guarantee.

The FTSE100 has been underperforming for 10 years now and you get no dividends. You would be better building your own GEB. It would be cheaper and offer greater potentail.

jamesd

You lose by inflation if the growth part doesn't do so well. Better to investigate a mini stocks and shares ISA holding high yield bonds and absolute return funds if you want a somewhat weaker guarantee and add a UK equity income fund for more growth potential. Add a cash ISA for the pure interest part.

You need 11% total over three years or 19% total over five years to keep up with inflation at 3%. The guarantee is of the initial capital only, so you can lose that much of the growth part without them having any liability at all. That's equivalent to a substantial stock market fall.

You don't get any of the dividends from the stock market being tracked, so you lose a significant part of its real growth. That's likely to be enough to eliminate the loss due to 1.03% inflation, if you were getting it. Alternatively, it's comparable to reducing the FTSE100 gain by 40%+ over 6 years before this product counts any growth as having happened.

If doing it yourself you can protect yourself from a stock market crash at the end by gradually shifting the money into bonds starting a year or so before the end of the term. Though by that point you've probably seen enough growth that even a major crash would leave you up on where you started.