- James is 30 years old with a salary of $75,000, and $50,000 outside super earning 4.5%.
- Working with his adviser, James decides he wants exposure to the US equity market in order to grow his wealth.
- As the investment is geared, James invests $3,675 in order to gain an exposure of $50,000 to the performance of the S&P 500 index. This is funded out of James’s salary.
- During the three-year investment term, James will receive two fixed coupons totalling $4,000 (or 4% of the investment exposure at the end of the first and second year) and may receive a final coupon that is linked to the performance of the S&P 500.
- Assuming an increase of 30% in the reference index during the three year term, the investment would pay a final cash coupon of $11,000.
- Taking into account the Masti finance cost, deposit interest received, as well as the two fixed coupons form the Masti investment, this equates to an increase in wealth from $50,000 to $60,083
- If a worst-case scenario eventuates and the reference index falls or remains flat, Masti S&P 500 will still pay the two fixed coupons, but would not pay a final coupon. In this scenario, James’s losses would be limited to the fees and interest paid, net of the coupons received (in this example, this would total $7,025 over the 3 year term).
- James gains exposure to the medium-term return potential from US equities.
Benefits of this strategy
- The upfront and ongoing payment amounts are relatively low and they can be funded from James’s salary.
- If the equity markets falls or remains flat, his losses are limited to the finance cost paid net any coupons received and the full extent this worst-case outcome is known upfront.
- Although the investment is designed for investors with a three-year investment horizon, James has the opportunity to exit the investment at the end of each year without penalty.
- Masti S&P 500 helps advisors add value to their clients’ by offering a more strategic approach to wealth accumulation while controlling risks and maintaining existing cash holdings.
Purpose of Document: The purpose of this Document is to provide indicative commercial terms only. The Documents commercial results are based on assumptions that may not be realistic. They are indicative only. Markets and market assumptions can change from the time and from the commencement date of the Masti S&P500 investment. Due care and attention has been used in the preparation of this document. However, actual results may vary and any variation may be materially positive or negative.
Document: This Document has been prepared by Instreet Investment Limited ACN 128 813 016 (Instreet), AFSL 434776. Instreet is the Arranger for the Instreet Masti S&P500 DPA (Instreet Masti).
Issuer and PDS: The Instreet Masti product is issued by Instreet Structured Investment Pty Ltd ACN 140 407 558 and the issue is arranged by Instreet Investment Limited. Instreet Masti is offered in a product disclosure statement dated on or around the 1 November 2013 (PDS). The PDS is available from Level 11, 2 Bulletin Place, Sydney, at the website www.instreet.com.au or by phoning 1300 954 678. In deciding whether to acquire or continue to hold and investment investors must obtain the PDS and carefully consider its contents.
General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. Advisers must form their own views on whether the Instreet Masti is appropriate after considering their clients’ objectives, financial situation and needs. We recommend you seek your own legal and taxation advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Website to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.
Actual results will vary and any variation may be materially positive or negative.
No responsibility or liability is accepted by Instreet or any third party who has contributed to this document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.
Past performance: Past performance is not a reliable indicator of future performance.
Note: You should seek advice from your own tax advisor to confirm you will be eligible to claim the finance cost as deductions outlined herein. The examples in this case study do not take into account the investors tax outcomes.