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No Risk Stock Market Investing with Absolute Return Notes

March 2, 2009 | Credit Reporting | Financial Tips | Stocks | 2 Comments

Do you know you can invest in the stock market with no risk of losing the money you initially invest?  There’s a fairly new type of security called Absolute Return Notes which offers investors a chance to earn investment returns tied to the stock market’s performance, without risking any of the money invested.  Your principal investment is 100% guaranteed.

Absolute Return Notes started in Europe and have recently become popular in the U.S. as investors struggle to cope with the depressing stock market.

During a set time period, the notes pay the absolute value of the performance of a stock market index, within a specified range.  As an example, if the S&P 500 goes up or down 8%, the note will pay 8%.  However, if the market goes out of that range, for example 20%, you will make no money but will get back 100% of your principal.  Now if the index gains 25%, you still get no money but it may hurt thinking you could have made a nice return.

Issuers of Absolute Return Notes include UBS, Barclays and Merrill Lynch.  Fees for the notes are typically included into the formula that determines the payout.  If you pay $10K for a note that offers 100% principal protection, you will get at least $10K at maturity.

Absolute Return Notes is a good short-term investment strategy if you believe the stock market will trade flat or sideways and you want to capitalize on its volatility in either direction with very little risk of losing your money.





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2 Comments to “No Risk Stock Market Investing with Absolute Return Notes”

  1. Leo
    12:26 pm on May 8th, 2010

    Of course there is always a risk for every kind of investments. I just always recommend to diversify your investments. “Don’t put all your eggs in one basket”. Following this golden rule, will give you a solid portfolio.
    .-= Leo´s last blog ..“Revolvers” =-.

  2. Bass Drum Mallets
    1:05 pm on May 15th, 2010

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