Over 700 finance terms, Shmooped to perfection.
Nothing in life is guaranteed except death and taxes, right? A principal-protected fund can be added to that list - sort of. The investment managers guarantee that the investor will do no worse than get their entire principal back. There are some caveats, however. First, you have to hold the fund for a predetermined minimum period. Second, the protection is achieved through investing in zero-coupon bonds that mature at the end of the protection period. As a result, the overall return on the fund will be lower by design. As a rule, these aren't good investments - in fact, they're like the sucker bets that exist in casinos.