Within the certificates family, capital-protected products are the most secure form of investment. At the time of issuance, they’re most often equipped with a term of several years and the guarantee that a specified minimum amount will be repaid at maturity (usually 100 percent of the issuance price).
A basic rule of thumb for these products: the lower the safety threshold, the greater the chance for price gains. But an important thing to bear in mind is the fact that the capital guarantee is normally only applicable at maturity. So if you want to sell your capital-protected product prior to the end of its term, the redemption price could actually be below the guaranteed repayment level if the underlying security has not performed favorably.
Capital-protected products are suitable for particularly risk-averse investors who wish to hold the product through to maturity and are not prepared to accept any loss that might exceed the level of the guaranteed repayment.
Capital-protected products with a coupon guarantee (in addition to repayment) that certain interest payments will be made during the term of the certificate. The precise amount of the payment depends either entirely or in part on the price development of the underlying instrument. Frequently, indices or baskets of securities serve as the underlying instrument for these products.