Novice investors

One of my friends is involved with an amateur investment club which involves a couple of ladies getting together, pooling

some funds together, trying to educate themselves about the market and with any luck making a few bucks on the side.

All in all I think this is great but I wanted to maybe post something for novice investors to consider because of something

she said. I asked her how it had been going and she told me that they were down nearly 30% and then said: "Everybody is down

30% because this is how far the JSE has fallen and we just needed to accept this is part of the function of being

invested..."

I pointed out to her that they are using "Shares" as a very broad term and not all instruments on the JSE were down 20 - 30%

in 2008 which piqued her interest in a little.

She got the idea that certain shares were down less than others but didn't understand that there was access to different investment classes on the JSE - some of which had produced a positive return without actively shorting the market.

Preference shares
I'm not going to touch on the mechanics of preference shares too much here but I thought I'd use them as a way to highlight the difference an instrument can make when assessing a particular investment (provided you understand the role they play in YOUR portfolio).

But here was the example I gave her:

Standard Bank ordinary share with a dividend yield of around 4% in 2008 lost around 14% from 1 January 2008 - 31 December
Grindrod ordinary share with a similar dividend yield lost around 30% once you took the dividend yield into account

In comparison
The Standard Bank preference share (dividend included) returned +13.95%
The Grindrod preference share (dividend included) returned roughly a 4% loss

Proves that not everything got wiped out despite popular belief

Property Unit Trusts
I enjoy these as an asset class and if one considers that GrowthPoint returned approximately 5% positive (distribution included) and ApexHi returned about 4.7% positive then it shows that some asset classes did in fact do ok in 2008.

Exchange Traded Funds
Just picked a few here but the X-Tracker (DBXJP) tracking the Japanese market lost around 12% compared to the 26% lost by Satrix 40.

The ZGovi (tracks SA Bond Index returned 12.5%) in the 3 months its been listed (including the turmoil in October) while the NewGold ETF (GLD - which tracks the Gold Price) returned just under 40% - not too shabby Nige...

Even that Carbon Credit note (+5.5%) so far has had a positive return despite the fall in the market...

Conclusion
This isn't a punt to buy any of the above. The point I am trying to make to novice investors is that a lot of people have been scared off by some of the media whores showing how terrible things are in the market, but not focusing on some of the well managed portfolios or products that have in fact held their own despite falling markets.... These are also not instruments you need to watching 24/7 worrying about volatility wiping out your investments.

It all comes down to education and if you can educate yourself you'll quickly learn not to tar the words: "Stock market" and "Investments"... Yeah the market got killed last year but there are asset classes that went up in some cases - the idea is to try and educate yourself to see opportunities and diversify the risk...