Stock Index w/ no risk?

Discussion in 'Stocks' started by RetiredInvestor, Oct 21, 2005.

  1. wether u or your adviser has to have an idea of future development of the market
    u r investing in.

    no idea , no product, no investment

    take one of the ETF. TLT i.e.
    yields will go lower (my idea)
  2. I'm not sure what you are saying.

    If I'm reading the index-linked notes (structured product) material correctly, these stocks offer protection when the market is falling.

    Does anyone out there have any experience with these things? They look good to me and I was hoping someone had bought them before and could report on their results.

  3. I would speak to a few advisors & get some other opinions before following that advice.

    IMHO, its likely that both short term interest rates keep rising, and then long term follow.

    The "safe" investments are typically those where you give up your upside in return for some additional interest yield. Typically these are offered as part of annuities. Special annuities can be VERY complex. Go cautiously. Your real rate of return after fees may be less than you thought it was going to be.

    With that said, you might want to consider a fixed annuity if you want to keep your $$ safe. While yields stink now, they will probably rise in a few years. Its not sexy, but for a retiree, it may fit the bill and prevent you from outliving your capital.

    Usual advice applies, consult with your investment, tax, legal advisors to determine if this is an appropriate decision for you. I am not a financial advisor, blah blah blah.
  4. keyser1


    whats the catch with these? anyone know?

    how can someone guarantee you that you'll match/beat the market on the upside and not lose any principal on the downside?
  5. I looked at the links from the first post. There was a link from one of them to

    At that website there was alot of information on these securities. The basic idea is buying a zero coupon bond along with a call option on a stock index.

    If the stock market drops a lot, you'll get your money back because of the zero coupon bond.

    And if the market rallies, not only will you get your original money back (zero coupon bond) but you'll get the appreciation from the index call option.

    This looks very interesting!
  6. What you miss out on over 5 years or however long the term is are the dividends. And historically, dividends on an index provide a very large portion of your overall return if reinvested.

    So to save on the structuring fee that the IB's make, just buy a treasury strip and long term call options on whatever index you think will perform the best.
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  9. I considered recommending a family member buy a put option on the SP500, and I then found out that long term options cost a fortune. Its most definitely not cheap insurance.

    Pulling money out and going to cash beats paying for an option any day, In my mind. On the call side, its also crazy to pay the kind of premiums they charge to take advantage of a recovery or uptrend. If someone wants to get you into something low risk, they probably have something up there sleeve- fees fees fees, and there are also probably incapable of extracting a profit from the markets.
    #10     Oct 22, 2005