IT Money - The investment maze
To go or not to go into the markets, that is the question
by Snejana Andjelkovic

Where would you invest right now if you had a capital sum at your disposal? This is rather a tough question when you actually look at the markets overall. Over recent months, US equities, for example, have often been described as overvalued. The US economy looks good though: It grew by 4.3 percent in the first quarter of the year and unemployment hit a 30 year low in May. Although some commentators think the market has formed a bubble ready to burst, it has just not happened. To go or not to go into the markets, that is the question. To which you can add the following: if you do, which funds would you choose and in which geographical area? Japan, despite all the doom and gloom you've been hearing, has offered good growth: the Nikkei went from 13,122.66 in January to 17,418 mid-September.

Indexing the indices
If you have the heart and the time to dedicate to it, you might wish to try Standard & Poors' Micropal Guide covering 14,000 offshore funds! Or maybe you would like to consult with your financial adviser, i.e. IT Money, and you might be introduced to a very simple investment: welcome to the world of... indices! Indices have become very popular among the public. Some 50 percent of all funds invested in the US in the first half of this year were directed into index funds, according to the US-based Financial Research Corporation, due to their good performance and simplicity. And with today's rapidly changing world and turbulent markets, it makes some sense to invest in the potential market growth worldwide, starting first with the Nikkei in Japan and then switching to the S&P 500 in the US or the FTSE in the UK, or all at the same time if they show good potential? Indices allow you to follow just such a strategy.

Kleinwort Benson Investment Management, a subsidiary of Dresdner Bank (one of the 20 largest banks in the world with an Aa1 credit rating and responsible for total assets of US$223 billion), are able to offer a magic combination, a sort of "whole world into one" option called the Secure Investment Portfolio. The ingredients are wonderful: you get to invest once a quarter in the index you like with the chosen capital protection level you wish, varying between 95 percent to 100 percent.

Multimarket presence
Would you like to invest into the US, Europe, and Japan through the S&P500, the Nikkei, the FTSE, or the DJ EUROSTOCKXX50--and be able to swap between those markets as the conditions are changing? Well, that's another option. Here's how it works.

You can select from the three following investment structures, and you'll be free to move assets between investment vehicles once per quarter.

1. Protected Deposit Bonus Fund (S&P 500 and the FTSE) With this vehicle, before you actually invest, you will know the potential growth over the quarter and you can choose the potential risk you are willing to take. At the start of each quarter a fixed bonus rate is declared. This bonus depends on the level of capital security you have chosen. In a typical situation, if neither the S&P 500 nor the FSTE have fallen at the end of the quarter (in comparison to their closing level at the beginning of that quarter), a bonus is paid. This structure has been very successful as it has achieved 49.2 percent growth over the most recent two years at a 95 percent protection level on capital.

2. Protected Index Fund (Nikkei, FTSE, EUROSTOXX50, S&P 500) At the start of the each quarter, a fixed profit-rate is declared for each of the above indices. (You might choose just one, or a combination of all.) This rate indicates the extent to which the fund will participate in any market growth and depends on the level of your chosen capital security. At the end of the quarter, the profit rate is applied to any growth in the chosen index to calculate the bonus for that period. In the US market, the profit rate participation is 130 percent, with 85 percent for the Nikkei, 120 percent for the EUROSTOXX50, and 135 percent for the FSTE.

3. Protected Multi-Index Fund (managed by Kleinwort Benson) The US, UK, Japanese, and European markets account for more than 80 percent of the world's stock market value, and with this vehicle you are able to access these markets through the Multi-Index Fund. Dresdner RCM Global Investors Ltd.'s computer model recommends how the value of the fund is allocated between the markets. All you have to choose each quarter is the level of capital protection. The superior performance of the tactical asset allocation model reflects a more active recommendation than passive strategy. Over ten years, the Multi-Index fund has shown an average return of 20.6 percent per annum at the 95 percent capital protection level.

DISCLAIMER
The information provided in this article is for background and educational purposes only. It reflects the views of the author, and is neither endorsed nor guaranteed by Computing Japan Online or its editors. Please consult with a Magellan K.K. or another investment professional before making any decisions.

Magellan K.K.
Viscountess Building 720
1-11-36 Akasaka
Minato-ku, Tokyo 107
Tel: +813-3224-1717
Fax: +813-3224-1724

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