You will all have noticed the pretty manic time we have been having in the market, which brings with it opportunities as well as the pain. It can also be an opportunity for others to make money out of you.

None more so than guaranteed/protected investments as they are sometimes called. Whilst I have battered them to death for some time, they rear their ugly head typically when they are least needed.

If the market is under pressure and down, do you really need to protect it any further? Unfortunately the marketing companies of the larger institutions know you don’t think like that. And so they hand you sun cream at the end of the summer and brollies at the end of winter. Its called redistributing wealth. This is irresponsible but unfortunately you are held accountable for your own decisions.

You will remember a contract I wrote about at the end of January. This offered a 10% income and 100% capital protection if one of five banks stocks did not fall by over 65%. It was a plan that attracted much attention. Whilst I could see its potential, its risk was high if you didn’t understand it. Two of the stocks, HBOS and RBS had been marketed as being down 48% and 46% respectively. (2) In other words, could they fall further?

Yes indeedy they could. Anything that can get cheap can get cheaper. On February 22nd the price of both stocks was approximately 646p and 378p. (2) Their low point this year has already reached 249p and 165p. (1) This is a fall of near 62%.

And so what appears as a reasonably 'risk less' way to achieve 10% income per year, is actually far from that. The interesting thing about this plan is that it was designed by one of the better companies in the market.

Protected plans are an easy way for some institutions to make money out of you. I split them into two: 'Easy sale' products which are normally distributed by banks and wholesale organisations like this, and complex arrangements that are designed for the intelligent investor.

In twenty years of advising I have yet to see a valuable protected product offered in the high street which would meet our criteria of adding value to a customer.

The problem is that they are indeed very complex to decipher and make a decision on, As a consequence most rely on the brand that is indeed the bank, something you should be aware of.

The more valuable arrangements in terms of adding value are generally designed by boutique organisations and are not for the wholesale market. Companies like Blue sky asset management seek to deliver this but don’t even offer their solutions via every IFA in the market place.

In any event, the market is under pressure now and that normally spells the point when you shouldn’t be protecting your investments. It’s a bit like putting a weight on a hot air balloon when it's on the floor and grounded. Why bother? The time to have extra weight on a balloon is when it's getting too peaky.

Remember that if you are considering into protected contracts you will also miss out on any dividends that the FTSE produces and over six years this can be as much as 30%.

I am still of the view that protected investments are for customers who don’t understand risk and they are provided by advisers who similarly cannot explain it to their customers (boutique arrangements aside).

Today there are plenty of good stocks that have been battered indiscriminately by the market for no apparent reason other than the market has sold across the board. A return to liquidity will mean that quality stocks will attract lots of investment and the result is a beautiful gain. Consider for example that whilst all bank stocks have been hammered with a stick of fresh rhubarb as above, HSBC has risen from 753p to 835p and has been as high as 890p in the middle of May. (1)That along with a dividend of over 5% makes a mockery of any protected plan. So do your homework and ask a specialist investment IFA.

If you would like to ask Peter about your investment portfolio call Peter on 0845 230 9876, e-mail info@wwfp.net or take a look at our websitewww.wwfp.net.