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Product matters

Is it always bad luck to walk under a ladder?

Supposedly it is but as yet I have not had a bucket of water dropped on me. Anyway, looking at the recently launched HSBC Ladder plan, will something unpleasant fall on my head?

Structured products are getting more competitive and launching a boring 100 per cent blah blah blah product is pretty common now.

This new product from HSBC combines 100 per cent capital protection, a minimum return of 106 per cent that will help offset the ravages of inflation, lock-ins and growth linked to the performance of the FTSE 100. The return an investor gets is based on the monthly performance of the index over a five-year period.

When the cumulative return is 25 per cent, that growth is locked in. Even if the cumulative return was lower at the end, investors would still get back their original investment plus 25 per cent. There is a second lock-in at 50 per cent.

Obviously, to provide all these wonderful bells and whistles there have to be some negatives. In this case, it is the fact that the maximum monthly return is capped at 5 per cent while there is no cap on the downside. However, in the last 20 years there have been only 25 months when the index has fallen more than 5 per cent. Being capped on the upside but not on the downside is a negative but the trade-off is a minimum return and the lock-ins.

Do I think it would be bad luck to walk under the HSBC Ladder? No, not really.

Ben Yearsley is an investment adviser with Hargreaves Lansdown

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