Is this a decent arrangement?

Hi all

My wife told me today her sister wants to invest in SPY with her and I really don't know what to think of it. Because my wife's relatively risk averse, her sister has come up with the following arrangement:

• Duration 12 months
• Stop loss at 6% loss or experience >5% loss more than once
• Sister absorbs 65% of any loss
• My wife's return would be 8% or the performance of SPY, whichever is the smallest

There'd be no potential trust issues, as they're extremely close. Purely from an investment standpoint, is this a fair and meaningful arrangement for both of them?

1Y Treasury currently sits at around 5.5%. Would it make sense to risk 35% of loss up to 6% for a 2.5% gain though? I guess a similar argument applies to investing in SPY in general, considering the high treasury yields. Her sister would need an annual gain of 14% to match T-Bills.

Any advice appreciated.