A new way to bet

When you invest in the stockmarket, you are taking a bet (unless you are willing to invest for the long term). You bet that you can sell the stock at a higher price and make a profit. If you are forced to sell out at a lower price, you make a loss.

Here is a new way to take a bet:

* you are given 4 stocks
* you are given 4 observation dates which are 3 months apart
* if, on the observation date, any of the stocks fall below 88% of the launch price,
you may suffer partial or total loss of your investment.
* if, all of the stocks are above 95% of the launch price, you are "knocked out" and you get back your investment with a return
* you have the potential to earn a return of 20%, if all of the stocks stay between 88% and 95% of the launch price for the year

To learn about how much you can earn or loss in this "investment", you have to apply and read the prospectus.

Why is similar to a bet? You are betting on the outcome of the prices of the 4 stocks. You have the chance of losing part or all of your investments, and the potential of earning a return of 20%.

What is the chance of each possible outcome? What is the risk and the reward? I do not know. But I suspect that the designer of this bet can fix the odds in the favour of the issuer. As the investor, you will probably lose out, and pay high charges as well (to cover the cost of marketing and other fees).

Lesson: Do not take this bet. It is better to invest directly in stocks, bonds or the money market.