This is the perfect time for banks to flog us guaranteed products — just after the trough of a bear market (we hope), when fear and greed are present in equal measure. Investors don’t want to miss out on the potential for a sharp rebound, but heavy losses are still fresh in the memory.

Step up the guaranteed equity bond, or Geb. It offers you the chance to benefit from any rally in the stock market, while at the same time guaranteeing your capital in full.

And it’s big business. Barclays alone has a programme to sell £12 billion of such products to even the smallest investors, with the government’s National Savings & Investments busy touting the schemes, too.

However, anyone whose friendly bank manager offers them a Geb should look up a recent study by David McCarthy of the Imperial College Business School for the Department for Work and Pensions.

His paper looked at demand for guaranteed investment products and the results were damning. “The robust conclusions of our analysis appear to be that demand for guaranteed investment products is virtually zero for all individuals examined — males and females of all levels of education and wealth — if the guarantees are priced at fair market values . . .”

In other words, if we all acted rationally, virtually no-one would buy a guaranteed bond. Perhaps someone at the DWP should tell someone at National Savings.

The report looked at the kind of guaranteed bonds typically offered by both high street banks and NS&I. They generally last for five years, after which you get your capital back plus a return based on the FTSE 100 index over that period.

It’s rarely obvious to savers that these products carry a very high cost in the form of the dividends forgone, which can amount to 15% to 20% of the initial capital over five years. “I was surprised by the lack of transparency,” McCarthy said.

Admittedly, McCarthy carried out the research for the DWP to work out whether guaranteed products should form the default option for personal accounts — the pension schemes into which savers will be automatically enrolled from 2012.

He was therefore assessing them over a period of 30 years, and admits demand may be higher if you need your money back in five years’ time.

However, many high-street banks flog these products on a rolling basis, launching a new one just as their last five-year one matures. On that basis, McCarthy couldn’t see much demand for the products either inside or outside a pension. Many investors who took out such products after the last bear market are now finding to their cost that these plans are not a panacea.

Take the Woolwich Premium Protected Growth plan, available at the end of 2003. It offered 100% of any rise in the FTSE 100 over five-and-a-half years, plus your capital back in full. It is due to mature in July, and adviser Bestinvest calculates it is unlikely to provide any return. Woolwich, owned by Barclays, will no doubt argue that this is better than the volatility you would have suffered in the stock market over the same period — but with payouts included, the Footsie is up 21%.

And you would have been even better off in cash. At about the same time as its Premium Protected growth plan, Woolwich was paying 4.98% on a fixed five-year bond — or a total return of 24.9% compared with very little from the structured product.

The results of McCarthy’s research were so clear cut that he implies guaranteed products shouldn’t be allowed anywhere near personal accounts. You’ll be far better off with a balanced portfolio of bonds and equities — and deprive your bank manager of a fat 4% commission in the process.

Kathryn Cooper is editor of the Money section

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained