Skipton Building Society has introduced the second issue of its share tracker bond, which tracks the share prices of five blue-chip companies listed on the FTSE 100.
The bond tracks the share prices of BSkyB, GlaxoSmithKline, Shell, Tesco and Vodafone over a two-year term and the return of investors' original capital is guaranteed however the shares perform.
Investors will get 30 per cent growth at the end of the term if the share prices of all five companies rise or stay the same during the term. If the share prices of one or more of the companies fall during the term, the final return will be reduced by the same percentage as the fall in the worst performing share.
For example, if the share price of two companies falls by 4 per cent and another falls by 6 per cent, investors will get a final return of 24 per cent.
The bond could suit investors who are looking for higher returns than they would get from building society accounts but who are terrified of erratic movements in global stockmarkets.
The stocks selected are well-known names and investors will have lost nothing even if the share prices of the chosen companies nosedive during the next two years. They may be missing out on the interest they could have earned from a building society account, but some investors may see this as worthwhile since interest rates have fallen dramatically this year. Other investors may be put off by the risk of ending up with only their original capital at the end of the term.