Tracker Bonds
A Tracker Bond is a fixed term stock market - based investment. The terms of each issue vary, but will usually be for a minimum of 5 years and no withdrawals can be made during the term of the Bond.
The Bond is related to, or TRACKS the performance of particular stock market indices such as the FTSE 100 in London, the Dow Jones in New York, the Dax in Frankfurt etc. The return on the Bond at maturity is directly dependent on the growth in these indices during a specific period.
As with all stock market based investments no specific return can be guaranteed as the value of the funds may fall from time to time, as well as rise. Many Tracker Bonds guarantee that the capital invested will be fully secure in the event that the values of the indices fall. In return for this security the potential profitability of the Bond where the value of the index rises is pegged to a fixed percentage of this rise. Some Tracker Bonds guarantee only 60/80 % of the capital invested but offers the prospect of participating at a much higher level in the growth of the indices.
Features of a Tracker Bond may include:
- Each issue of a Tracker Bond is open for investment for a limited period.
- A minimum investment amount will be set for each issue
- Invested funds grow tax free
To ensure that any last minute fall in the value of the indices doesn't significantly reduce the performance of the fund, the final levels of these indices are usually calculated at the average of their levels over the last 6 months of the term.
For medium to long-term investment of surplus cash. Early encashment is not allowed, except in the case of death. A poor stock market performance in the selected 'index' can result in a poor return, but exceptional gains in the 'index' can make your investment very profitable.
