Pick an investment portfolio with care

Robert Laing

Robert Laing

It's a bad idea to keep all your savings in shares. It's extremely painful to suddenly find yourself a third poorer as many of us discovered after US subprime mortgages crashed bourses worldwide. Those sensible enough to keep money aside were able to snap shares up at bargain prices.

Investment textbooks are invariably written by Americans who tell you to use bonds as a safe haven. Owning bonds is easy for US investors, but we South Africans face the problem that our equities and bond exchanges are not integrated.

Bonds are not on the menu of our online broking accounts. But there are things which trade on the JSE that behave very much like bonds.

The most popular choice is non-redeemable preference shares. Nedbank pioneered these, introducing the JSE's first perpetual preference shares in 2002. "We had this market to ourselves for about 18 months. Then everybody jumped on the bandwagon," Nedbank joint head of corporate finance Rob Wessels said.

These preference shares behave like bonds in that their value gradually rises as they get "pregnant" with a dividend paid every six months.

Their share price then typically falls back to its base value again after dividend payments.

Wessels said the easiest way to shop for the best deal was to look at the dividend yields of these preference shares .