Capital guaranteed funds are an investment vehicle presented by definite institutions that assures the investor's preliminary capital investment from any losses.

Although these products put a stop to investors from losing their invested capital, they also restrict the amount of return that investors can obtain if the investments realize. This is how the offering institutions can pay for to guarantee the principal investment. After years of low interest rates and frequently substandard returns from shares and managed funds it is not unanticipated that many people think they need to play catch-up, particularly if they missed the property rumble. The spectrum of elevated global interest rates is also the reason behind anxiety related to future share market returns.

Even then with numerous complex new products on the market, and the reminiscence of corporate collapses and outright scam fresh in many people’s minds, it is also not astounding that anyone within the retirement age, or already retired, is likely to abhor risking their capital. Thus the surfacing of a rash of new high-risk, high-return products with a capital guarantee involved. These products are intended at vigilant investors who want recovered returns than cash or bonds but who also want to sleep at night. Promotional material characteristically uses restful terms such as secure, safety net and capital protection to lure edgy investors into products they may normally consider too clever by half.

Numerous capital guaranteed funds offer access to a portfolio of substitute assets providing diversification from traditional shares, property and fixed interest. This is a giant selling point after years of deficit by mainstream fund managers. One more attribute is their long time frame. Capital guaranteed products typically necessitate a long time frame of 6-10 years. Even if the product is scheduled and readily trade able, returns are geared towards holding until maturity.

How Capital Guaranteed funds work?

These are hybrid funds whose underlying assets include primarily of a key share of fixed interest asset, typically bonds or government securities and the residual portion in stocks and shares. This composition permits the fund to function like a dream investment vehicle for the public whereby they can have the best of both worlds i.e. “Yes to Profit Yes, No to Loss!”This wise instrument first made its presence in Malaysia in the year 2002 when several risk averse people were in search for a safe haven to “invest without risk.” The Capital Guarantee is gained by compound interest earned by the fixed interest asset of the Fund. All Capital Guaranteed Funds demand the investor to stay invested in the fund for a minimum of 3 years or 5 years as the fixed interest and bond components need a fixed time frame to arrive at maturity. The fund dejects the investor from early withdrawal prior to its’ maturity period by removing the capital guarantee feature as well as paying an exit charge in the event of early redemption.

Investing in Capital Guaranteed funds without Risk!

Is it really possible to invest without risk? Obviously not! The risk may be least, nevertheless, the risk/return tradeoff still applies and when we invest in Capital Guaranteed Funds with little or no risk, we pay for it by compromising on latent returns.