Investment certificates have opened doors for new opportunities for private investors

Vontobel Markets
10/08/2022 | 4 min read

Originally, global stock exchanges were financial marketplaces where companies went to raise money, e.g. for growth or development of a company's operations. As a shareholder, you bought in via a share and became the owner of it, hoping that things would go well for the company, so that your money ideally became worth more over time.

The typical stock investor at the time was rather not a private investor unless one was a wealthy investor or had special experience or know-how of financial markets. In the same way, for a long period of time it was impossible or at least difficult for private investors to buy into new products that were developed for the financial marketplace, simply because the product had to be developped individually by a bank or another institutional market participant before it could be sold. This happened primarily when an investor with a fortune of a certain size was interested in investing a larger sum of money. So in some ways the financial industry, including banks, brokers or asset managers, work in the same way as the retail companies we know and understand, such as Brugsen or Ikea. They produce a product that consumers assess, are interested in and then make it available to a customer.

However, there is the crucial difference that if the chair leg breaks off your armchair at home in the living room, there is a statutory warranty from the store that sold you the chair. When you buy a security, there is no guarantee that your investment will grow - on the contrary, you risk losing all the money you have invested. That way, there are many similarities between investing in different securities and the principles at play, basically because no one can predict the future and thus it cannot be predicted with certainty which direction the market will take tomorrow.

But back in the 1980s, there were not many options for private investors who wanted to try something other than just betting that the shares of a company would continue to rise. It could, for example. be to hedge against losing on investments typically in stocks, by hedging, as it is called in English, through investing in something of value that could develop contrary to what one had already invested in. The whole idea of hedging is to protect yourself from losses by creating diversity in the assets you put money into, so that it all does not lose value at the same time and for the same reasons. This can be done by investing in several assets that have historically been shown to rise and fall in value opposite each other. But the products one had to use as a private investor to protect oneself or hedge were difficult or expensive to get close to.

Nor were there many products on the shelves of banks and other financial companies that could allow private investors to make money when stock markets and the economy were not growing but moving sideways or even falling. A financial product for those who simply wanted to follow or track the results of an entire stock index, such as Germany's Dax index or the Danish OMX C25 index, were also few.

Finally, there was no simple method or product that one as a private investor could easily buy if one would like to invest in gold, silver, oil or other more untraditional values without holding it physically.

For private investors who wanted a little more action than the traditional savings account in the bank or through their pension scheme at work, it was difficult in other words because brokers and banks did not have as many products for that target group.

That situation has changed markedly since the 1980s. The financial markets no longer attract only institutional investors, but now also private investors, who in the financial sector are identified as retail customers. The logical consequence of this interest is that the innovation of instruments and products tailored to small investors has exploded.

But where the well-known shares in large listed companies can be found and traded everywhere, Vontobel's certificates give the private investor the opportunity to try something completely different, both in terms of what you can invest in, i.e. the assets - and the opportunities you have to trade, namely by leveraging and to short, thus speculating in making money in a market that is falling.

The first certificates that even private investors could buy into saw the light of day in Europe in the 1990s with the opportunity to follow the German stock index Dax in Germany.

The financial markets are still characterized by an enormous development of new products, i.e. different types of securities offered to different investors with different needs. But investors have also developed, not least in Denmark, where we do not have too many years back before stocks were not something that interested so-called ordinary people. That has changed markedly. Many Danes have a taste for investment, including because in recent years, private investors have been given the opportunity to invest their own retirement savings and free funds, at home on the couch through a range of online platforms and apps. At the same time, knowledge and networking with blogs, tips and tricks have almost exploded online.

HERE you can find examples of Vontobel's tracking certificates that follow different assets and of Bull & Bear certificates that make it possible to set extra pace on your investment using leverage.

Before investing you should also be aware of the risks:

If you are buying a certificate issued by Vontobel you should be aware of the so-called issuer risk, which means that the money is lost if Vontobel goes bankrupt. Certificates are not subject to any deposit protection. And you should remember that the value of the certificate can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset moves in the opposite direction of your market expectation.

In addition, due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future result.

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Please read this information before continuing, as products and services contained on this website are not accessible to certain persons. Of importance are the respective prospectuses which are attainable from the issuer: Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, DE-60323 Frankfurt am Main, Germany, as well as from this website.