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Swing of things

Amid recent turmoil in world stockmarkets, advisers are quite rightly recommending investors to diversify into assets other than equities. The property market is looking less profitable than it was and bonds are still unattractive so where do investors go?

A new plan from Meteor (www.meteoram.com) called the Pendulum commodities plan looks very attractive to me.

Investing directly in commodities can be very dangerous but this plan invests in a basket of commodity indices to give a guaranteed return of 15 per cent over six years and two weeks, with an additional 1 per cent for every 1 per cent rise above 15 per cent up to 50 per cent, and 1.25 per cent for each 1 per cent above 50 per cent with no upper limit.

It also provides a hedge against a drop in value. If the basket of commodities falls by more than 30 per cent, the investor gets a 0.5 per cent return for each 1 per cent additional drop in value.

The plan is based on five Standard & Poor’s GSCI Official Close Excess Return indices linked to precious metals, industrial metals, energy, agriculture and livestock. Over the six years to July , this basket of indices rose by 90 per cent. Past performance is, of course, not a guide to future performance but, with China and India becoming more wealthy, demand for commodities is increasing.

Minimum investment is £10,000. The plan is proving very popular for self-invested personal pensions because the returns are tax-free. Direct investors will be subject to capital gains tax but the £9,200 annual exemption is likely to rise, so this could be an excellent method for diversifying bigger portfolios.

The capital is secured through assets provided by a major investment bank with a high S&P rating. This is one of the few investments available with a secure return and chance of making a lot of money.

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