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These may be boring but they offer one of the best ways to generate inflation-beating income

by , 06 July 2021
These may be boring but they offer one of the best ways to generate inflation-beating income
According to Fundsdata, it's ranked #1 in the Multi-Asset Income Fund category for returns over the past year.

It's up over 13%.

On the face of it, that doesn't sound like much.

But it's around DOUBLE the returns you would get from most income investments (Money Market, Income & Interest-Bearing Funds) today.

I'm talking about the…

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Preftrax!
 
This is an ETF owned by CoreShares, which tracks 11 listed preference shares from companies like…
 
PSG, Grindrod, Netcare, Investec, Discovery, Invicta and the big four banks.
 
Preference shares are hybrid investments – part bond, part equity. The income you receive from preference shares is guaranteed thanks to the bond aspect.
 
When it comes to a company distributing its profits, preference shareholders are first in line to receive income. That gives it an edge in today’s markets, as some companies have cut their ordinary dividends to combat the fallout of Covid-19.
 
On the other hand, companies who pay preference shares have still maintained their pay-outs!
 
The only thing is, they don’t trade as much as say, a Top40 stock would.
 
However, investors flock to them because they provide safe and steady income. And the more liquid ones can provide a little capital growth, if their prices rise.
 
The reason Preference Shares can continue higher…
 
Interest rates…
 
You see, the income you receive is calculated as a percentage of the prime lending rate. That means, when the prime rate falls, the less income you’ll receive and vice versa.
 
SARB has cut the prime rate to its lowest level since 1980 – to combat the fallout of Covid/lockdown. But they’ve reiterated that rates won’t fall any further.
 
That means, we can expect interest rates to rise in the future. Even more so, as the economy opens fully again and inflation picks up. So you can expect these income pay-outs to only get bigger as interest rates rise!
 
And that should attract income-seeking investors into preference shares (And the PrefTrax).
 
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Pickpocket Trader's AUD/USD trade hit its take profit and closed for a gain of 258.40%!
 
But he still had two trades open and by adjusting his stop losses on them they managed the following gains...
 
EUR/USD trade locked in a gain of 173.12%!
 
While on the USD/ZAR trade managed to lock in a MASSIVE gain of 328.47%!
 
 
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One more attractive reason to own Preference Shares…
 
The yield!
 
The highest yield money-market funds generate is around 3-4% today, while income funds can yield as high as 6%.
 
That’s okay.
 
However, the PrefTrax yield is around 10.5%.
 
That’s at least 4% – 6% higher than 99% of money-market and income funds. The difference in yield alone also beats inflation!
 
Yup, I know, they’re boring investments. But they offer an alternative way to earn inflation-beating income.
 
See you next week.
 
Joshua Benton,
Managing Editor, The South African Investor


These may be boring but they offer one of the best ways to generate inflation-beating income
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