Bristol & West has introduced issue 14 of its five-year guaranteed equity bond, which is linked to the FTSE 100, Eurostoxx 50 and Nikkei 225 indices.
Investors with between £500 and £1m are guaranteed the return of their original capital regardless of the movements in the three indices. They will also receive 70 per cent of the average growth in the indices.
To calculate the returns, the level of each index is recorded on June 14, 2002 and these figures are added together to produce an average. This figure is then compared to an average produced by adding together the average monthly closing levels of each index between June 14, 2006 and June 14, 2007.
Cautious investors who are looking for an introduction to stockmarket investing, without the possibility of losing their capital, could see this bond as a worthwhile product. But there are an array of products offering variations on a similar theme which could be more appropriate, depending on investors' views of risk and reward.
One example is the guaranteed equity bond from National Savings and Investments, which offers 65 per cent growth in the FTSE 100 index over a five-year term. When choosing between the two products, investors would need to decide whether to put all their eggs only in the FTSE 100 basket or to diversify geographically, with the risk that the Nikkei 225, for example, could drag down the returns of the more promising UK and European indices.