When interest rates eventually trend up, banks will probably make use of the improved yield to start selling principal-protected and guaranteed instruments, whereby the initial investment sum invested is protected or guaranteed.
The instruments are aimed at conservative investors who want a promise they will get all money invested back. With low risk comes low returns. All things being equal, guaranteed instruments yield below investments where there is risk of capital loss, or not getting all your money back.
To be ready for a call from the bank salesman, investors should start to understand the basics of such investments.
For example, the investor should look at the creditworthiness of the firm issuing the instrument, as he or she will ultimately be relying on that institution to pay back the principal, no matter what happens to markets in the meantime.
Guaranteed instruments often involve structuring and complexity, and often with large embedded fees. They can be very difficult to sell prior to maturity, on the open market.
Investing is all about getting returns on risk. The higher the risk, the bigger the expected return. Clearly, guaranteed instruments are designed to be low risk. But ask yourself this: if the investment forms only a small part of your portfolio, could you plausibly afford to take losses on that investment?