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Protected funds 
If your primary concern for your investments is the risk of losing money, then it would seem counterintuitive to consider an equity fund. But there is a halfway house and growing numbers of investors are taking it. Some investors are turning to protected funds to capture some of the upside potential of equities but with a cushion of capital protection in the event of a market correction. One way to build security in with your investment is with a protected fund. It’s a trade-off between equity exposure and reduced risks. Protected funds, often called ‘structured products’, offer investors the chance to achieve stock market returns but with a safety net to protect their capital. The protection is usually achieved by following one of two strategies: either a large slice of money is placed in cash, providing the cushion, with the remainder invested in ‘call’ options, designed to provide a kicker if markets rise; or the bulk of your money is held in equities with a small amount invested in ‘put’ options, which soften the blow in the event of a market downturn. The sophistication and variety of protected funds on offer is multiplying as the derivatives backing them become more popular and therefore more liquid. Protected funds can be confusing so you should always take professional advice. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |