investing in preference shares

coxwell

I am thinking about investing in preference shares as seems low risk with good return. Am I just being naive or is it a sensible addition to portfolio. I have had 250 Bristol & West shares and every 6 months I get £10.16. Have tried 2 ifas and got fingers burnt so looking for sensible future income with low risk.
What do you guys think?

no1catman

No, they are no different (if a little more secure) to fixed interest loan stock. The big difference, is that they are undated. Say it is priced at £0.80 - but that is the mid-price, you buy it at £0.82, with a sell price at £0.78. So, unless something happens to make the 'price' go up on a 1,000 share purchase you are already on a £40.00 loss, and that's before the broker's commission.
Whereas, if it is a dated loan stock, the price will go up as the stock gets nearer the date of redemption.
The only - IMO - exception to that is if it is a convertible preference share - at certain time you have the option to convert it into ordinary shares which gives it a reason for the price to rise.

bowlhead99

no1catman wrote: »

No, they are no different (if a little more secure) to fixed interest loan stock.

Dividends on shares (preference or ordinary) can be suspended in the case of insufficient profits and other calls on the company's cash flow. At the end of the day, they rank for payment *after* all day to day creditors and the secured and unsecured debt including senior debt such as bonds and other loan stock.

So it's difficult to say they are *more* secure than bonds. As a preference shareholder they have to pay the bondholders before they pay you. But you are right that they are valued on a similar basis to how a bond with those characteristics would be.

I still have some Lloyds prefs, though I've been selling them down over time having bought most of them cheap when they were prohibited from paying divs; as well as some in niche companies such as Raven Russia which are currently able to cover their cheap sterling dividends quite easily out of dollar income despite the Russian economy getting rocky. I've sold my Nat West ones now, and the Co-op Bank ones I bought when they had their last crisis a few years back were converted into debt in the wider group which I sold a few months ago for a decent overall return.

Malthusian

Did you not get your fingers burnt by your Bristol & West prefs when they lost 70% of their value from 2007 - 2009?

If Bristol & West goes bust you will most likely lose every penny - that doesn't meet my definition of low risk.

coxwell

got my fingers burnt following advice by 2 ifas, that won't happen again!!!! Are there any investments that pay a decent return without risk. I have basically lost money with every thing I've tried. Shares, P2P lending even my peps/isas with virgin and lg have not done well. Perhaps i'm better off betting on the football fixed odds but even that has got a bit naughty with managers putting out reserve teams in some competitions. ~~Back to good old premium bonds!

coxwell

got my fingers burnt following advice by 2 ifas, that won't happen again!!!! Are there any investments that pay a decent return without risk. I have basically lost money with every thing I've tried. Shares, P2P lending even my peps/isas with virgin and lg have not done well. Perhaps i'm better off betting on the football fixed odds but even that has got a bit naughty with managers putting out reserve teams in some competitions. ~~Back to good old premium bonds!

jimjames

coxwell wrote: »

got my fingers burnt following advice by 2 ifas, that won't happen again!!!!

Can you explain what you mean? You bought investments and sold out in panic when they dropped? Or something else? If you held on many markets are at record levels so you certainly wouldn't be losing money

Malthusian

coxwell wrote: »

I have basically lost money with every thing I've tried. Shares, P2P lending even my peps/isas with virgin and lg have not done well.

This brings to mind the old joke about the person who is convinced they've broken every bone in their body. When they poke their arm it hurts, when they poke their ribs it hurts, when they poke their leg it hurts. It turns out they have a broken finger.

[STRIKE]You need to give us more information if you want any real help but when someone says that they've invested in many different types of mainstream investment and lost money on each one, most of us will conclude that the problem is with the common factor, i.e. you.[/STRIKE]

*edit1* I apologise and withdraw this statement, having looked at his posting history the OP has had lost money with dodgy "IFAs" putting his and his family's money in geared property investment schemes via high-charging offshore bonds. So while he is wrong to assume all investments that aren't highly risky preference shares will lose money, his disillusionment is understandable.

Nonetheless I still ask why you weren't bemoaning the performance of your preference shares when they lost 70% of their value from 2007 to 2009? I think you are allowing your past bad experiences to stop you taking an objective view of risk.

*edit2* And having read his posting history, the OP has a history of asking piecemeal and vague questions, then when posters ask him for more information he disappears. (Example) So I don't expect an answer.

coxwell

what an unusual response.
I have a long history of being ripped off as I have travelled through my life and I have learnt the hard way that in life when it comes to people and money there are very few people you can trust to give good impartial advice. They always have an axe to grind.
I have lost money because of incompetent and dishonest ifas, to a system geared against the average bloke in the street.
Even the people policing the system are toothless.
I know its all my own fault and it won't happen gain.
As to B&W, you can't lose money on windfall shares as they cost me nothing.
As to being vague and asking questions I hope that helps to make it clearer, as all I was looking for was some information, sorry that I don't spend all my life following this forum, I do it only when I need to, I have better things to do with my time!

Reaper

We had a discussion on preference shares a few years ago. You might find it of use:
https://forums.moneysavingexpert.com/discussion/3626651

As I said in that thread I bought some which I still have and which have done well for me. As with all fixed income investments beware of inflation.

Malthusian

coxwell wrote: »

Even the people policing the system are toothless.

I thought the Financial Ombudsman Service had upheld your complaint against your IFA(s)?

As to B&W, you can't lose money on windfall shares as they cost me nothing.

Of course you can. At today's price you can lose £321.

I wonder if B&W do go bust tomorrow and you lose your money, whether it will still be free money that you don't care about or whether it will be another example of how the system screws over the little guy.

As to being vague and asking questions I hope that helps to make it clearer, as all I was looking for was some information

You asked if there are any investments that pay a decent return with no risk. The answer is no as no risk = no return and there is no such thing as no risk anyway.

That probably doesn't help you much but I can't see any way of giving a more helpful answer. You don't want to invest in the stockmarket as you've lost money in the past, you don't want to invest in P2P for the same reason, you don't want to take advice from a professional because somehow every single one you've used has been dodgy. Unless you can look at investment options objectively rather than treating everything as another rip off waiting to happen there isn't a lot we can usefully suggest.