Hi Tom & Iqbal. Sorry if i'm intruding. I'm by no means an expert on this, but i have looked at some similar products that were linked to the S&P instead of the Nikkei. I assume the structure would be similar.
Fwiw, here's my take on it:
1. The product makes a lot of sense for investors who want to participate in the upside of an equity market, but are concerned about the downside risk. However, its not quite the 'free lunch' it sounds like. When going through the prospectus, i'd consider:
2. The upside participation is usually a little more complex than it first would appear. It is usually based on quarterly or annual averaging of returns. So, if the Nikkei goes from 15k to 30k, your investment may or may not grow by the amount you assumed. It would depend on the return over each averaging period.
3. Your broker will probably kill me for suggesting this, but it appears to me that most investors can bypass paying the charges and fees by creating the product themselves. You could do it by buying a treasury strip and JPN index options. (Iqbal, let us know if you see a flaw in this logic).
Again, i'm not an expert, so this is all MOO (my opinion only) ggg!
Vince |
