October 31st is the day where children all over the world dress up as monsters or witches and go trick-or-treating at neighbours’f houses, but it's also World Savings Day. For us at Oval, this is obviously an important reason to celebrate our journey by offering new investment options to our users.
As you know, in addition to the thematic ETNs that you see in app, February we also introduced FixedRate, an investment product that guaranteed a 2% return on savings tied for a year, which we then proposed again monthly given its success. This product is a solution for those who do not want to have their savings influenced by market trends and choose to keep their savings protected from the effect of inflation. In fact, keeping money sitting in your bank account makes it decrease in value over time. I am not talking about expenses and fees that your bank can apply, but about the effect of inflation.
What is inflation?
Inflation is a value that indicates how much the cost of a basket of goods and services increases over time and is usually measured as a percentage. For example, an increase of 1% means that in a year the same goods and services that cost 100€ now cost 101€. So, keeping your money in an account means that if you have 100€, in a year it will not be enough to buy the same goods and services you can buy today. In short, inflation decreases their value even if they always remain 100€.
Fixed rate products are designed to protect you from this effect, giving back a fixed annual return to those who leave their money invested until the maturity of the product, without the need to use them for a medium term period of time. For this reason, we decided to launch a new medium-term product with a yearly fixed rate of 3%.
How does Three By Three work?
There are three reasons why our new Three By Three product can be a complement to your investment portfolio.
1.The product returns a fixed 3% interest per year, regardless of the market trends. This allows you to have the peace of mind of a fixed and constant return over the years.
2. The product has a maturity period of 3 years. Each year you will be paid a coupon of 3% interest calculated on the value of your initial investment. For example, if you invested €10,000, at the end of the first year a coupon of €300 will be paid to your Oval account, at the end of the second year another coupon of €300 and finally, at maturity, your initial investment plus the third year coupon, meaning €10,300. This means a return of 9% over three years, for a total of €10,900.
3. If necessary, you can always disinvest at a cost of 5.95% of your initial investment. This means that the product remains flexible, differently from the majority of other fixed rate products available on the market. Given the nature of the product, which pays a coupon at the end of each year, over time the net cost on your initial invested capital if you divest, decreases. As shown in the chart below:
- for an initial investment of 1,000€, if you disinvest before the end of the first year, you will get 940.50€ back (1000-59.50€ commission)
- If you disinvest in advance between the first and second year, your net cost is 29.50€, so you will receive 970.50€ (1,000+30-59.50€) back
- If you disinvest between the second and third year, you will have already been paid two coupons for a total value of €60 and, since you have to pay €59.50 in commissions, the net capital that will come back to you is €1,000.50.
Three By Three is available in app from October 28th and subscriptions will be collected until December 3rd 2020. From December 4th 2020, the product will be invested for three years. The minimum investment is €300 and, as with other fixed rate and protected capital products in Oval, once the investment period has started, it will not be possible to set up recurring investments. During the subscription period you can top up your investment as much as you want with a minimum of 10€.
What are the benefits of financial products with coupons?
We are happy to offer a new product that can meet the needs of our investors. As you know, Oval was born with the idea of creating saving and investment solutions for everyone and helping our users to plan their future financial needs with confidence. From our perspective, Three By Three goes in this direction.
With Three By Three we introduce the first product in app with an annual coupon. Coupon products are usually reserved to groups of investors with high investment availability, but in Oval we always try to offer the most interesting products on the market and bring them to everyone with the possibility of investing small amounts. Coupon products allow you to plan your savings efficiently over the long term. This gives you extra capital that can be used for ongoing expenses or even, for example, covering the costs of mortgages or loans.
Let's take an example. If an investor has raised €10,000 and does not actually need it in the next few years, he can think about investing it in Three By Three. This product, on a hypothetical investment of €10,000, will pay a gross coupon of €300 each year, which can be used to pay an extra installment of the mortgage, a small house improvement, a gym membership, a weekend out of town, and all those extra expenses that were not budgeted. Not only, since the first coupon will come just in time for Christmas 2021, it also allows one to offer something more to their loved ones.
Three By Three is intended for retail investors who:
- Have either some knowledge of the financial instruments in question or moderate experience of financial markets.
- Are looking for an investment opportunity that pays a fixed coupon rate.
- Are able to bear a total loss of the amount invested.
- Have a medium-term investment horizon.
How do you know your capital is safe?
Three By Three is an accessible, simple and transparent product.
- Accessible, because everyone can invest from a minimum of 300€
- Simple, because you can manage everything in app and you always have all the information you need at your fingertips
- Transparent, because Oval's mission is to ensure that everyone learns to invest in a way that is appropriate to their priorities, needs and available means: to do so, we want to explain every technical detail as transparently as possible.
The investment in Three By Three is made through a certificate issued by our partner SmartETN, an issuer based in Ireland. Should the Smart ETN issuer be unable to repay its liabilities, then Cirdan Capital Management Limited (a company regulated by the Financial Conduct Authority) would act as guarantor to meet the payment. The protection offered by the FSCS is an additional protection tool that you can only use if you have invested on the basis of financial advice and you have lost money after acting on the advice received.
Oval is not authorized to provide financial advice, in case of further questions we recommend the advice of an expert. Your capital is at risk and the value of your investments may go up or down and you may receive less than you initially invested: do not invest what you cannot afford to lose.