Risk is predictable

The egg-laying woolly milk sow is a hybrid creature that does not exist. A truth that can be applied to financial investments in particular. A risk-free, high-yield and at the same time constantly salable financial product may be a legitimate desire of every investor. It just isn’t feasible.

The only remedy for investors is diversification. In order to distribute and secure the risks and still generate a positive return, you need various financial products in your own portfolio. This includes stocks, funds, bonds and also structured securities such as certificates.

Private investors like to take refuge in safe investments, especially in uncertain times. This includes capital protection products. They often offer a small plus in return compared to overnight and / or fixed-term deposits, and they are ideal for risk-averse investors. protection certificates enable the investor to benefit from price increases in the underlying. At the same time, the nominal value of the certificate is guaranteed. This means that even if the underlying falls sharply, the investor will get the nominal value back at the end of the term of the certificate. Due to this capital protection, however, you will not benefit 100 percent from the increase in value of the base property. The issuer sets a lower participation rate.

Example: An investor would like to benefit from a share price increase that is currently quoted at 100 euros. Under no circumstances should a loss be suffered. That is why he acquires a capital protection certificate, which guarantees a payout of 100 euros at the end of the term, but therefore has a participation rate of only 60 percent. If the share rises to 150 euros by the end of the term, the investor only receives 130 euros. If, on the other hand, the share falls to 50 euros, the investor will get at least the nominal value of 100 euros back at the end of the term. However, investors should know that the capital protection only takes effect at the end of the term. If, for certain reasons, the certificates have to be resold before the end of the term, a loss in value may well occur.

A look at the statistics shows that capital protection products are extremely popular with Germany’s private investors. protection certificates and structured bonds alone account for a good 40 percent of the total market volume of almost 70 billion euros.

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