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A Fin24 reader asks:
I have cash I would like to invest short- and long-term.
What would be a good investment for an amount of R500 000 for a period of two
to three years?
Tracy Gill, an analyst at InvestOnline, responds:
Our recommended personal investment strategy over the next
three years is that of capital preservation.
This is targeting an income yield of 8%-10% per annum. Then
we can buy shares again in 2013-2014, when the shares have retreated
substantially. We believe shares can fall another 30%-40% in the next two
years.
The recommended unit trust investment portfolio for your
current financial position, based on our current views on the global and local
equity and bond markets for the next 36 months, is as follows:
- 20% Allan Gray Stable;
- 20% Coronation Stable;
- 20% Nedgroup Flexible Income Fund;
- 20% Investec Diversified Income; and
- 20% Allan Gray Orbis Optimal Fund.
The diversified portfolio should return 8%-9.50% per annum
after management fees and costs. The average return of the above four funds
over the last three years to date is 8.33% per annum.
We are at the bottom of the interest rate cycle and rates
will rise from here, which can only enhance these returns as they are income
funds.
With the offshore Allan Gray Orbis Global Optimal Fund, you
cannot look at the track record over the last three years due to the currency
effect. The rand has gone from R11.00 to R6.70 against the dollar in the last
three years.
It was undesirable to be in this fund over this time when the rand was strengthening. This fund purchase is all about "timing the exchange rate". We are buying dollars/euros at the R6.70 level now, and expect the rand/dollar to go to R10/R11 over the next three to four years, which will deliver conservatively 14% per annum.
- Fin24
