Hardly a day passes that we don't see the launch of an "innovative new investment opportunity" and it can be difficult for retail investors to see the basic merits of a product behind the marketing gloss.
Occasionally a product will embody an investor's own investment preferences, but there is no single solution to suit all investors.
Merrill Lynch investment bank has issued an interesting series of stock exchange traded investment products tracking the new FTSE Global Sector Indices. The 11 indices, launched last month, are the first tradeable sector indices that track global and liquid blue chips.
FTSE claims that its Global Sector Indices are the first globally-diversified way to invest in a whole sector in one hit. Approximately two-thirds of European fund managers now adopt a sectoral approach to investment.
Best of Global Sectors Certificates, issued by Merrill Lynch, are currently on sale in several European countries. The certificates' price performance is based on the movement of the FTSE Global Sector Indices of 460 blue chip shares from more than 20 countries.
The indices have been grouped into three baskets, reflecting different investment styles. The first is the cyclical basket, comprising the automobiles, basic industries and energy global sector indices. The profits of these sectors are highly dependent on economic trends in the global economy.
Next is the defensive basket comprising the banks, financials, pharmaceuticals and utilities global sector indices. The performance of these sectors is less affected by economic cycles.
The third grouping is the growth basket, comprising the technology, media and telecoms global sector indices. Each Global Sector Certificate has a maturity of seven years and tracks the performance of the 11 new FTSE indices. Every certificate tracks the performance of up to 50 stocks.
The Best of Global Sectors Certificate automatically allocates more of the investor's funds to the basket with the best performance, while it allocates less to the basket with the lowest performance.
If the certificates are held to their maturity in March 2008, investors will receive a return based on weighting 42 per cent of their funds in the best performing basket, 33 per cent to the next best and 25 per cent to the lowest.
This retrospective allocation permits investors to avoid allocating their funds between sectors at the point of investment. Mr Donnacha Fox, portfolio manager with Davy Stockbrokers, said this was an imaginative concept but he warned against buying a product like this just because it was available.
He said there might be a place for these certificates in a client's portfolio if the client wanted it, but he would not recommend it as a stand-alone investment.
