With the rise and rise of domestic and international share markets over the past couple of years, investors are beginning to look for investments that allow them to protect their capital, yet still maintain a direct holding in these sectors. As a result several leading managers have introduced products with the objective of providing diversification, capital growth and enhanced income with the peace of mind of capital protection.

What is a capital protected investment?

An investment that provides access to traditional investments, both Australian and international, with the knowledge that should a market fall there is a floor to ensure return of your original outlay upon maturity of the investment (generally a 7 year time horizon).

These same investments will continue to provide tax effectiveness and the potential for capital growth along with enhanced levels of income that non-capital guaranteed investments traditionally provide.

How they can be used?

Capital protected investments can be utilized by all investors. We will look at the main three investment life stages and how they can best be used.

1. The Wealth Accumulator
With the enhanced level of income that can be generated through the use of certain capital protected investments this can give rise to assistance with home loan repayments or in the instance where this excess income is not required it may be channeled to further enhance greater level of investing with the objective of creating wealth over the longer term.

Given the individual circumstances of the investor, gearing strategies can be strategically put together to enable immediate tax benefits with long term wealth creation objectives.

2. The pre-retiree
With retirement looming the pre-retiree may need to bolster their nest egg. The use of capital guaranteed investments will provide this investor with the comfort that they can still access growth investments without the fear of capital loss should there be a dramatic decline in markets.

In taking this approach the investor can maintain an allocation to markets that traditionally fluctuate with the view to improving their retirement lifestyle.

3. The retiree
A common view of retirees is that they wish to protect their capital that they have so long worked for, particularly at this important stage – ‘retirement’. This can generally lead investors to withdraw their allocation to assets that promote growth.

With the increasing levels of life expectancy this may ultimately mean that the retiree runs out of money later in life. Through the use of the capital guaranteed investments the investor maintains access to growth assets with the added benefits of enhanced income in an environment that is secure.

The structuring of the capital guaranteed investment will depend on the individual’s circumstances, however they have the flexibility to allow you to invest your own capital or borrow 100%.

Why wouldn’t you want to bolster your wealth in a protected environment?

Should you wish to explore in greater detail how capital protected investments could work for you, please contact Thornton Group and speak to one of our advisers.

 

Anthony Prior – Financial Adviser
Ben Woolvett – Financial Adviser

Disclaimer: The article above contains information for general use only. These articles are not based on individual needs or meant to give advice. Additional information and professional advice regarding issues raised in this publication may be obtained from Thornton Group advisers, who are authorised representatives of Thornton Group (Australia) Pty Ltd trading as Thornton Group (License No. 223670)