pääomaturva

Pääomaturva, often translated as capital protection or principal protection, is a feature in investment products that aims to safeguard the initial investment amount. This means that at the maturity of the investment, the investor is guaranteed to receive back at least the amount they initially invested, regardless of the performance of the underlying assets.

Investment products with pääomaturva typically combine a zero-coupon bond with an option strategy. The zero-coupon bond is designed to mature at an amount equal to or greater than the initial investment, thus providing the capital protection. The remaining portion of the investment is used to purchase options, which offer the potential for upside participation in the performance of an underlying asset, such as a stock index, currency, or commodity.

The level of capital protection can vary. Some products offer 100% protection, guaranteeing the full return of the principal. Others may offer partial protection, guaranteeing a certain percentage of the initial investment. The trade-off for capital protection is often a reduced potential for high returns compared to unprotected investments. If the underlying asset performs exceptionally well, the investor with pääomaturva may not capture the full extent of those gains due to the cost of the protection. Conversely, if the underlying asset performs poorly, the capital is protected, but returns may be minimal or zero.

Pääomaturva products are often favored by investors who are risk-averse and wish to participate in market upside while ensuring their initial capital is not at risk. They can be found in various forms, including structured notes and certain types of mutual funds. The fees associated with obtaining capital protection can impact the overall return, and investors should carefully consider these costs when evaluating such products.