Outperform the stock market in any condition
We’ve uncovered an incredible strategy that elects only the safest, most profit-packed shares on the Johannesburg Stock Exchange (JSE).
In fact, professional investors Walter Schloss, Irving Kahn and William J. Ruane all used it to make a fortune.
And – to this day – it helps South African investors who understand how it works regularly make money. It’s more than doubling the returns of the JSE between 2010 and 2016 with a 41% yearly average over the past six years.
In short, it has the potential to make more money for investors of all stripes – and remains the most profitable way of succeeding in the stock market to this day.
I’m talking about…
I’ve talked about preference shares
in previous Money Morning articles. But basically, a preference share is a mixture of equity and debt. In other words, when you invest in it, you get a mixture of a bond and a share in one.
There are other benefits like you get a ‘guaranteed’ percentage dividend. And you will receive this dividend before ordinary shareholders.
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 provide capital growth, as well.
Below, you’ll see how some preference shares have outperformed an investment like the Satrix Top40 ETF – which tracks the top 40 companies listed on the JSE by market cap – in 2019.
In some cases, preference shares nearly tripled the Top 40’s returns!
The table above show you the returns some of the major preference shares have generated in 2019 so far. As you can see, this investment has easily outperformed the largest stocks on the JSE.
My favourite out of the bunch is the Grindrod Preference Share. In fact, we hold it in the South African Investor portfolio. And it’s been a great income-generator. For instance, it’s returned nearly 50% in dividends alone!
It’s also one of my special income investment secrets in my book, The Little Book of Big Income Secrets.
Because Grindrod offers you the best of both worlds - an optimal balance of high liquidity and a high yield of 10.9%!
In short, preference shares can…
1. Limit your portfolio risk
2. Generate Dividend income
3. Grow your Capital
Bonds and ordinary shares cannot give you all of this combined!
You see, with shares, dividends are never guaranteed. And bonds can only protect your portfolio when interest rates are low, but preference shares can do all three.
So if you want steady and reliable income, then you need to add this income investment to your portfolio.
I‘ve been waiting four years to share this with you...
If you bet on the cricket, you’ll have heard of these two.
One is a record-breaking batsman, and the other the most experienced player in cricket.
To the average punter, these two favourites don’t exactly scream ‘profit machines.’
But here’s the thing...
There’s a small group of unconventional punters out there who are very, VERY excited about them...
Because they’re using a specially designed ‘betting code’.
This code is so powerful; it could see average South African punters land as much as 93% profit by the end of the cricket tournament.
How much should you invest in a preference share?
A good allocation towards preference shares is around 10%-15% of your portfolio. So, if you have a R100,000 portfolio, you would invest between R10,000 and R15,000. That’s means, you could split R5,000 per preference share.
Usually, you should hold preference shares just like you would hold a normal share.
Around 5 years or more. You see, the longer you hold them, the more income you’ll generate from it!
See you next week,
Managing Editor, Real Wealth