Capital Protected Tracker - Counterparty risk

[Shakespeare]

I'd love some advice/thoughts on the following:

I have Eur 100k - cannot afford to lose a dime. A certain institution's financial advisor is encouraging me to invest it in a 4 year investment offering 100% capital guarantee and 45% of any growth in the Euro Stoxx 50 index over that time (growth after 3 yrs 11 mths adjusted to reflect average growth in theindex taken every month over the final 6 months).
With interest payable on the returns I'm not convinced I'm likely to get much more than keeping it on deposit but I've 2 particular questions.....

1. While noone knows for sure, is 4 years long enough to get any kind of stock market return going? (particularly seeing as you only qualify for 45% of this growth - has it any chance of a worthwhile return?)
2. The counterparties are PTSB and Societe Generale S.A. - Any particular knowledge of the risks of those institutions that I may not be aware of - I can't afford for the 100% capital guarantee not to be safe

Of course I can get 3.5% on deposit and then move it every year for the next 3-4 years with easier access and if interest rates rise (which unfortunately, they probably will), then odds are that deposit rates will also, so how great a return would I need in the stock market to make the investment worthwhile? - I know I should be able to figure this out but my head is wrecked from trying to decide what to do and I can't see the wood for the trees right now.

Any comments, points to consider, would be much appreciated. I need to make up my mind pretty quickly.

Thanks in anticipation
S

 

[iriondevral]

Can't really comment on your first question, you'd have to hope the eurozone economy might have recovered in 4 years but no-one can really say for certain.

The capital protection part of a tracker is usually provided by bonds issued by a bank or government (in this case PTSB) so if you're concerned about not getting your money back then its this counterparty risk you should focus on.

SocGen provide the returns on the EuroStoxx index so your risk here is that you might not benefit from the growth if they can't make good on this to but your initial capital should be safe.

Presuming whatever instrument PTSB are providing is covered by the gov guarantee than your initial capital is as safe (or unsafe) as investing in an Irish gov bond.

 

[NorfBank]

I have Eur 100k - cannot afford to lose a dime.
S

You should stop there.
If you cannot afford to lose a dime then you should not be investing your money. You should be saving it.

Stick it into a secure financial institution and take your 3.5%. Otherwise for the next 4 years you are just going to constantly fret about whether Soc Gen or PTSB will be able to fulfil their guarantee. At the end of the 4 years you may make more on deposit.

Nobody knows what's around the corner.

 

[Sunny]

Yeah, if you cannot afford to lose a cent, forget about investing in this product. Capital guaranteed is not the same as risk free.

 

[GSheehy]

invest it in a 4 year investment offering 100% capital guarantee S

If you look at the documentation, I don't think that you will see the word 'Guaranteed' written anywhere. They will use the words 'secure' or 'protected' but not 'guaranteed'.

If memory serves, I don't think that the 'G' word is on the National Solidarity Bond documentation either.

GS

 

[mercman]

cannot afford to lose a dime. A certain institution's financial advisor is encouraging me to invest it in a 4 year investment offering 100% capital guarantee and 45% of any growth in the Euro Stoxx 50 index over that time
S

In the first instance do you think the Financial Advisor is working on a free basis ? -- in case you didn't realise it they would be earning a hefty commission for his persuasions.

As others have pointed out that if can't afford to loose a dime, stop trying to gamble with your money. Howevewr if you have a change of heart find an independent broker or some other type of institution other than a Bank or its subsidiaries. Have you not seen what Banks have done to this country, the UK, Greece, Netherlands, Portugal, Spain, the US etc. Give yourself a break and do NOT invest with in or around a Bank

I have placed enough real life stories on AAM depicting a real set of circumstances. A four year battle which I called to a halt last week, took a loss of over 100 k simply to get a decent night's sleep. Not a single word of apology and the Ombudsman has closed the file on the entire, even though he did mention the problem of trust and the part the Institution played in that regard..

So in case you are unable to allow other's opinions assist you well I will happily give you all the advice as to why not to. The hard bit is up to you -- find an institution offer product that is up front and honest -- now that really is a job.