The Investment U e-Letter: Issue # 744
Wednesday, December 19, 2007 Principal Protected Notes: How to Make Money Risk-Free Right Now
by the Investment U Advisory Panel Editor's Note: Make money risk-free? What's the catch? Below, please find an excerpt from our latest research project, The Zero-Downside Profit Report. Indeed, you can now get stock-like returns without risking a penny, right on the American Stock Exchange. They're called principal protected notes (PPN) and here's the first one you'll want to own… Excerpted from: The Zero-Downside Profit Report Principal protected notes, also referred to as "Bull Notes" are transforming the way people invest their growth portfolios these days… By design, these securities are for investors who want to participate in the potential gains that stocks offer, but who also desire total protection from losses. They're built to do two things: 1. Completely eliminate an investor's downside risk; and 2. Earn returns that are tied to the performance of a group of stocks. If you don't already own these investments, it's probably because you didn't know they exist. But now that you do, here's why you may want to add them to your portfolio right now… Principal Protected Notes: Ultra-Safe Stock Market Gains Principal-protected notes are essentially bonds with returns linked to a stock or sector index. And, like bonds, these "bull notes" have a term, or maturity date. But no matter how poorly the index it tracks performs, the financial institution backing these notes guarantees you will NOT receive less than your initial investment at maturity. What's more, bull notes are as easy to own as any publicly traded stock. Like stocks, new bull notes are introduced to the market through a public offering. They're typically put on sale at $10 a share. This price is significant because it represents the principal amount of the investment. As long as you've purchased your bull notes at the offering price, whether directly through the sponsoring financial institution or on the secondary market (like the NYSE or the AMEX), you are entirely protected from any downside risk. That means the institution backing the security will pay you no less than the public offering price at maturity. Profits are linked to the performance of an underlying index, like the S&P 500 or the Dow Jones Industrial Average. Only now, there's no reason to sell if the market is down temporarily… Short-term market performance is irrelevant. And since stocks have always outperformed cash and bonds over longer periods, that puts time on your side. Of course, you can take profits early, too. Investors can unload their shares on the market at any time, provided there is sufficient volume. An Entire International Portfolio With Absolutely No Risk Competition within this asset class has spawned many innovative choices. In fact, you can now construct a completely diversified portfolio with global exposure, made entirely of publicly traded bull notes. Here's one to consider… The Morgan Stanley Capital-Protected Notes (AMEX: GBC) allows you to wield some truly awesome investing power. It's linked to a global basket of three international indexes: the Dow Jones Industrial Average, the Dow Jones Euro Stoxx 50 and the Nikkei 225, in equal weights. That means buying shares of GBC gives you exposure to the top stocks of the U.S., Europe and Japan. Owning this single security gives you broad international market exposure - risk free. So you'll position your portfolio to benefit from the current global market explosion. And at the same time, you'll insulate it from any threat of financial shock due to recession, terrorism, an energy crisis, or the like. The prospects for global markets continue to look strong, too… Indexes around the world have hit all-time highs, and the global economy is operating at full steam. In fact, the global economy is growing well ahead of its long-term average. Estimates for world growth this year clock in at a brisk 4.9%. And this Morgan Stanley principal-protected note is your zero-downside ticket to prosperity. In short, your worst-case scenario is breaking even. And your best-case scenario is a heck of a lot of money. Note: The complete Zero-Downside Profit Report is available online. For a list of the opportunities, here are all five "can't lose" investments. One in particular lets you play the gold bang with a 50% downside cushion. Today's Investment U Crib Sheet So how can institutions pull off a risk-free investment? It's simple… When bull notes are brought public, part of the proceeds go into a zero-coupon bond that guarantees the principal at maturity. The rest goes into a long-term index option that locks in the gains of the index over the life of the security. Just like that, you have unlimited upside with zero-downside risk. In other business, you have 116 days left to file your tax return, yet only 12 days left to act… Take five minutes now to increase your total return and check out Alexander Green's recent tax tips. All individual investors can make one or more of these moves. Related Articles - Vanguard Funds: The One Mutual Fund That's Hotter Than a Hedge Fund
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