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NDF recovery plan wipes away the tears

NDF Administration has targeted the NDF recovery growth plan at investors who have had a miserable time on the stockmarket.

This guaranteed equity bond is linked to the FTSE 100 index and was designed to give investors the chance to recoup some of their financial losses, while giving a degree of capital protection during the five-year term.

Unlike other guaranteed equity bonds, this bond allows investors to receive 100 per cent of any rise in the index during the term. Plus, the original capital will be returned in full unless the index falls by more than 50 per cent and fails to recover to its starting value by the end of the term.

Where these conditions are not met, and the final level is lower than the starting level of the index, investors&#39 capital is reduced by 1 per cent for each 1 per cent fall in the index.

The problem with some guaranteed equity bonds is that investors lose out on a percentage of growth potential if they opt for an element of capital protection. This bond avoids these pitfalls, which makes it attractive to cautious investors.

However, there is no guaranteed minimum return above the original investment, such as that offered by Skipton Building Society&#39s five-year guaranteed growth fund. Also, investors looking for income are excluded from the NDF bond, even if they like the concept, which is the bond&#39s main weakness.

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