Bristol & West has introduced the guaranteed equity bond individual savings account (Isa) which tracks the performance of three stockmarket indices.
This guaranteed Isa is available as a mini cash Isa or a Tessa only Isa. It returns investors' original capital in full however the FTSE 100, Eurostoxx 50 and Nikkei 225 perform over a five-year term. Bristol & West believes linking the Isa to three indices gives investors greater growth potential than investing in just one index. Investors receive 70 per cent of any growth in the indices.
To calculate the final returns, the level of each index is recorded at the start of the term and an average of the last 12 months is taken as the final index level. Seventy per cent of any growth in each index is then added together and divided by three, giving an average which forms the final level of return for investors.
The full capital guarantee is likely to prove attractive to panicky investors erring on the side of caution, but there are two ways of looking at this Isa. On the one hand, it has more diversity than a product investing in just one index. Global stockmarkets tend to move in the same direction, whether up or down, but not necessarily at the same rates. The presence of two other indices could boost investors' returns where one index may be falling at a faster rate or rising at a slower rate than the others.
However, the opposite is also true. The worst performing index could drag down investor's final returns whether the trend is towards an upward or downward curve.
The Eurostoxx 50 index rose from 1664.41 points on September 13, 1996 to 3282.59 points on September 14, 2001 an increase of 97.25 per cent.