QUESTION: I read with much interest your column on preference and ordinary shares. It was very timely because I am thinking about removing an investment I have in repos at a financial institution and using the funds to purchase the preference shares being offered by JMMB. In your column you mentioned that preference shares are for low-risk investors. I am a retiree and want an investment that gives me a secure income stream. I would like to find out if you would recommend that I purchase the preference shares, or should I keep the investment in repos? The interest rate I am getting for the repo is 4 per cent and the rate advertised for the preference shares is 7.35 per cent.
FINANCIAL ADVISERS: Repurchase agreements, or repos, and preference shares are suitable securities for investors whose investment objective is income. Both also, to a great extent, satisfy the ‘security of principal’ objective.