FRANKFURT / LONDON (IT BOLTWISE) – Certificates offer investors the opportunity to participate in the performance of underlying assets without purchasing them directly. These financial instruments are not only interesting for risk-taking investors, but also for security-oriented investors who are looking for alternatives to direct investments.
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Certificates are financial instruments that allow investors to participate in the performance of an underlying asset without purchasing it directly. These underlying assets can be stocks, indices or raw materials. Contrary to popular belief, certificates are not only suitable for risk-taking investors, but also offer interesting opportunities for security-oriented investors.
The collective term “certificates” encompasses various product types that pose different risks depending on the type. While some, such as warrants or turbo certificates, are only suitable for experienced traders, there are also products that are interesting for conservative investors. These include guarantee certificates, express certificates and reverse convertible bonds, which represent an attractive alternative to direct investments in stocks.
A reverse bond allows the investor to participate in the price development of an underlying asset, usually paying a fixed interest rate. The main difference to conventional bonds is that the repayment at the end of the term depends on the price of the underlying asset. If the price rises above a set threshold, the investor receives the full nominal value back. Otherwise, the value is paid out in the form of shares.
Guarantee certificates offer another way to minimize risk. They guarantee the repayment of the nominal value at the end of the term, even if the underlying asset loses value. In the event of price gains, the investor participates in a fixed proportion. Express certificates, on the other hand, offer the chance of early repayment if the underlying value is above a specified level on certain dates.
A key aspect when investing in certificates is the issuer risk. Since certificates are bonds, there is a risk of total loss if the issuer becomes insolvent. The issuer’s creditworthiness is therefore crucial. Despite these risks, certificates offer an interesting opportunity to diversify your portfolio and benefit from various market movements.
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