MITTS Investments MITTS: The Only "Can't Lose" Stock Market Investment on Earth
* Republished with permission from the Oxford Club Research Department
Despite the gloom associated with a global recession, a widespread bear market and a largely unpredictable war, there exists an investment opportunity that's 100% immune to it all.
These securities feature unlimited upside potential, zero risk to principal and, best of all, guaranteed profit. In other words, they are the Holy Grail of investing…and they form the perfect centerpiece for our Oxford Fortress Portfolio.
These securities are neither obscure nor newfangled. In fact, they were created by one of the largest financial institutions in the world. They're highly liquid and traded on both the NYSE and AMEX.
They're called market index target term securities (MITTS). If you don't already own them, it's probably because you didn't know they exist. But now you do, and here's why MITTS investments should be a part of your portfolio…
What Are MITTS Investments?
Market Index Target-term Securities (MITTS), also known as equity-linked notes, are essentially bonds linked to an index or a series of stocks. MITTS investments are designed to do two things: 1) limit an investor's downside risk while 2) producing a return that's tied to the performance of a group of stocks. Initially created by Merrill Lynch, MITTS are traded on the New York Stock Exchange and the American Stock Exchange.
The enticing aspect of MITTS is that no matter what the outcome of the stock, investors are guaranteed to get their money back come maturity time. Should the stocks rise higher, investors get some of that upside return.
MITTS Investments: A Rock-Solid Financial Foundation
In fall 2001, the Oxford Club introduced a bullet-proof portfolio of recommendations. It later became known as the Oxford Fortress Portfolio. As the Fortress Portfolio has evolved, it's also become more simplified to the point where it consists of just a single investment type: MITTS investments. Unlike single-stock investments, MITTS offer you the chance to invest in sectors, indexes, or even regions of the world, for example:
- S&P 500 MITTS (AMEX: MLF) are based on the S&P 500. And owning it allows us to capitalize on an eventual rebound in U.S. large-cap stocks. This one matures July 1, 2005.
- Euro/Pacific MITTS (AMEX: EUM) are based on the 11 biggest markets outside of the U.S.- Germany, the U.K., France, Switzerland, Spain, Italy, the Netherlands, Sweden, Australia, Hong Kong and Japan. The maturity date is May 26, 2006.
- Nikkei 225 MITTS (AMEX: MNK) The Nikkei 225 stock index is a benchmark tracking the performance of the 225 largest stocks on the Tokyo Stock Exchange, and is the equivalent of our S&P 500. The maturity date is 3/30/09.
That brings our total to three MITTS investments in the Fortress Portfolio, and that's not by accident…
Not Just Seeking the Holy Grail…Finding It
It's these MITTS investments, and their guaranteed profits, that form the heart and soul of our Oxford Fortress Portfolio. So what are investment MITTS? Here's a brief primer on MITTS investing:
For seekers of the mythical Holy Grail, this strategy is no fantasy. It delivers exactly what it promises. MITTS are publicly traded securities created by Merrill Lynch for investors who want capital appreciation coupled with complete protection of principal.
Let's take our Russell 2000 MITTS (AMEX: RUM), for example. Merrill Lynch brought these securities public at $10 a share when the Russell 2000, the U.S. small-cap index, was at 449.4. RUM shareholders are guaranteed to receive 100% of the percentage increase in this index over the benchmark index value (494.3) at the time they mature on Sept. 30, 2004.
In other words, if the index doubles (to 988.6), the MITTS will be worth $20 at maturity. If the index triples, they mature at $30. And so on.
However, even if the index declines over its lifetime, Merrill guarantees that the shareholder will not receive less than $10 per share at maturity. That's the absolute minimum. In other words, you have the unlimited upside of the index, but with no risk to principal (provided, of course, you pay $10 or less when you buy them). And right now, you can.
How Are MITTS Purchased?
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