Investors in Scottish Widows' extra income & growth plan have had a wake-up call about their investment expectations after seven of the 30 stocks in which the fund inv ested crashed through its safety net in its first month.
The plan invests in a basket of 30 shares from the FTSE 100 index and offers a 10.25 per cent annual income plus return of original capital as long as none of the shares falls by more than 20 per cent during the investment period.
Investors' capital is at risk if the shares are not at their original value by the end of the term.
The stocks which have fallen through the 20 per cent barrier are 3i Group, ARM Holdings, CMG, Colt Tel ecom, Logica, Marconi and Reuters.
Five more stocks also came close to falling through the safety net.
Head of IFA marketing Bob Gibson says: “CMG is the only stock now below 20 per cent. Although the safety net has been breached, it only becomes relevant at the end of the term. The investment still has three years to run and income payments are not effected.”
Hargreaves Lansdown head of research Mark Dam pier says: “In these volatile markets, 20 per cent is not much of a barrier and large companies are just as vulnerable to risk. These plans which pro mise protection have been getting more and more risky. Sooner or later, one of them was going to go wrong.”