How to find the best capital protection certificate
Since capital protection products are standardized to a much lesser extent than other investment products in terms of their underlying assets and their features, only those capital protection certificates that benefit from rising underlying asset prices can be discussed here.
Investors should – apart from their investment motive of capital preservation – develop a differentiated market assessment before buying, because the capital protection certificate can only achieve a positive return in rising markets – the stronger the underlying asset increases, the better.
In order to estimate the potential, a first look at the remaining term and the base price should apply. If you are unsure about the period of your price forecast, you are more likely to choose a capital protection certificate with a longer term – if the price gains of the underlying asset then occur as planned, investors simply sell the certificate back to the issuer before maturity.
The base price should be viewed in relation to the current price of the underlying, because investors only participate in price increases above the base price. With a base price at the level of the current share price, you tap into a higher earnings potential than with a base price that is significantly higher than the current price. In this case, the underlying must first rise sharply before the investor’s participation begins.
As soon as investors acquire a capital protection certificate with a premium or front-end load, i.e. the price is more than 100 percent of the nominal value, it should be borne in mind that the capital protection only relates to the nominal value. If the price of the underlying falls at the end of the term, the premiums and front-end loads paid are lost again.
If you are not sure whether the capital protection certificate will really be held until the end of the term, you should also form an opinion on the future interest rate development – if there are sharp interest rate increases during the term, interim price losses are possible, since the capital protection only applies at the end of the term . Under certain circumstances, the purchase price of the certificate cannot be achieved if the certificate is sold in the meantime.