NDF Possible 13% PA (14.5% with Premier)- but will stock market rise in next 6 years?

Mikeyorks

meester wrote: »

The return falls each year:

Y1 16%
Y2 (on previous year): 13.8%
Y3: 12.1%
Y4: 10.8%
Y5: 9.8%
Y6: 8.9%

Not according to my specification it doesn't?

Year
1 16.00%
2 32.00%
3 48.00%
4 64.00%
5 80.00%
6 96.00%

meester

Mikeyorks wrote: »

Not according to my specification it doesn't?

After 2 years you get £132 from £100

After 1 year you get £116 from £100

£16/£116 is only a 13.8% increase year-on-year.

If the product was designed to continue indefinitely, and you had it for 100 years, afer 100 years you would still only be getting £16/year (16% of the original amount). By this time of course inflation would make that £16 worth nothing.

dunstonh

I would be quite happy with 96% on year 6. Whilst it wont equate to 16% a year it would near double my money in 6 years and that would be quite acceptable!

meester

dunstonh wrote: »

I would be quite happy with 96% on year 6. Whilst it wont equate to 16% a year it would near double my money in 6 years and that would be quite acceptable!

It would be acceptable certainly. Assuming there is no investment risk, the effective 6th year return of 8.89% is quite acceptable. However given the choice of taking £180 or leaving it invested to grow to £196 accepting the risk that it might fall below the start value costing you £80, it is not a good bet.

Basically, if this product has not matured after year 1, then it is effectively a losing bet at that point (because the price has fallen, and the bar is now higher than simply 'above the start point').

Mikeyorks

dunstonh wrote: »

I would be quite happy with 96% on year 6. Whilst it wont equate to 16% a year it would near double my money in 6 years and that would be quite acceptable!

Exactly my inference.

It's a GEB .... and they work on simple interest. If you want compound ... you don't choose a GEB. The return is only optimum after Year 1 ..... if there's an equal product available in which to invest. If you have to revert your capital into eg a 6% savings account ..... then I would much prefer the Premier conclusion around Year 5!

ukdutypaid

We may be being a bit sour puss over this now. It's a punt, it's that simple.
Show me where I can possibly obtain the same return that I may do with this, whereby it has a parachute attached to it...
Even if it all goes pear shaped, I still get a reasonably soft landing, albeit my parachute has a couple of holes in it....

Yes it's 16% P.A uncompounded, but we could all read the docs that came with it.... It says 16% per year of the original sum invested...
Hell I saw a GEB today that gives it large about 8.5% over three years.. Yes that's right over the whole term...! (www.scarboroughbs.co.uk... Yes I wonder what the BS bit at the end stands for . lol)

Searcher2

My IFA told me why she hadn't advised the Premier (16%) product as opposed to the NDF (13%) product... She said the NDF is 13% and they get 3% commission. If she recommended the Premier product she would still take the 3% commission but it comes out of product this making the 16% only 13% to me.... so they would be equivalent.

I guess I can get the Premier direct though (though my IFA pointed me in this direction) and save any commission thus getting potentially 1.5% more than the NDF.

dunstonh

3% is expensive. Sure its the maximum on these products but it is above the typical average of 1.8%.

Searcher2

dunstonh wrote: »

3% is expensive. Sure its the maximum on these products but it is above the typical average of 1.8%.

That's what I thought too. That's why I am not going to feel too guilty about cutting her out of the equation. If I put £200K in she was going to give me £1K back from their (£6K) commission. (that was a big IF by the way with the £200K)

dunstonh

Searcher2 wrote: »

That's what I thought too. That's why I am not going to feel too guilty about cutting her out of the equation. If I put £200K in she was going to give me £1K back from their (£6K) commission. (that was a big IF by the way with the £200K)

At £200k you would be better off on fee basis. Small transactions are better on commission but larger transactions are cheaper on fees (which can include customer agreed remuneration which is where you agree a fee but use the commission to pay it with any surplus being used to improve product terms or give a rebate. Sometimes referred to a hybrid fee option).

£6k (or evern 5k) for arranging one of these is greedy and she is now getting zero whereas had a much smaller but still reasonable amount been agreed she would have got something for the effort and time.