Yahoo Finance This investment guarantees you lose money for 10 years
The international economy and markets are in a strange state at the moment but nothing demonstrated this better than an investment product that’s guaranteed to lose money.
Investor newsletter Firstlinks posted a screenshot from a Bloomberg terminal that showed the German government offering bonds that you buy for 102.64 Euros now, which will return 100 Euros back to the investor after 10 years.
Yes, you pay more now then receive less in 10 years – guaranteed. What an investment!
Investors buy bonds to lend their money to an organisation for a certain period.
The issuer – as in the borrower – usually promises that at the end of that period the investor will receive that money back plus some interest.
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And the convention is that the longer you lend the money, the better the returns are, as compensation.
But currently many governments around the world have their interest rates at historic lows, including some that are in negative territory.
This German bond is actually guaranteeing an annual "return" of minus 0.26 per cent, so you end up with less than what you invested at the start.
Australian interest rates are also at an all-time low, providing poor returns for those buying government bonds or investing money into a bank account.
But it's still not negative yet.
"And you're worried about term deposit rates of plus 2%," said Firstlinks editor Graham Hand.
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