A good income investment in uncertain times

Investors seeking a secure investment with a high yield, yet unsure about the future direction of interest rates, would be well advised to take a look at participation bonds.

Once the preserve of retired people only, the modern version of the investment appeals to individuals of all ages, trusts, charities, schools and many others.

The Absa Participation Bond Fund currently yields 9,25%, including a bonus of 0,5% which is payable until 31 March 2008. Furthermore, the rate cannot fall below 9,25% until 31 March 2008 at the earliest. Investments of R1 million and more earn an extra 0,5%, or 9,75% at present.

The minimum investment is R10 000 and investors may withdraw all or part of their investment at any time on one calendar months notice. There is no upfront fee for making the investment. Investors pay 2% on withdrawals within 36 months and nothing thereafter. Interest is paid monthly.

"After the four interest rate increases we had in 2006, economists are divided on where we go from here. On the one hand, inflation appears stable and credit demand is cooling off. On the other, there are worries that the oil price might take off and push the inflation rate up again. If youre uncertain about which way interest rates will move, it makes sense to choose an investment on which the rate will change in line with movements in market interest rates", says Kelvin Bell, Product Manager of the Absa Participation Bond Fund,

The Absa Participation Bond Fund appears to fit the bill perfectly. The interest rate is one of the highest available on any interest-bearing investment at this time. The Funds portfolio of first mortgage bonds over commercial properties is spread widely, both geographically and by type of property. Also, the management company is wholly-owned by the Absa Group.

"It's a very safe investment and we are committed to always paying a rate of interest that compares favourably with other investments of comparable quality", says Bell.