Invest in Preference Shares

A consumer asked for my views about a 5 year single premium product that pays a guaranteed yield of 2% p.a. or 10% for 5 years. The investment showed an immediate 10% loss during the first year, a smaller loss during the next two years and will only produce the gain of 10% on maturity at the end of 5 years. I advised the consumer against this type of investment, as it locks up the money for 5 years and only gives a modest return.

I did some research on preference shares and REITS and have posted several articles in this blog. I have also written a FAQ on "investing in preference shares", which is posted in my website, www.tankinlian.com (click on Ask Mr. Tan). The preference shares issued by the local banks give a yield of 4.2% to 5.9% and should be relative safe.

Tan Kin Lian