Another saving/investing advice thread

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Hi guys

I'm changing jobs and will have roughly R5000.00 a month to save. I want to save this for a deposit on a house towards the end of next year or start of 2013.
I don't want to tie the money up for too long or put it at much risk so I'm looking at advice of where to put it in the meantime.

I want to do something different to the following as I already have them:
* I already have Capitec accounts with money in under the R10 000 threshold to get 6% on all balances
* I have a Satrix40 and an FNB growth fund that I contribute towards each month
* I have a 121 day account at Bidvest

Any ideas of where the money will get good interest rates at low risk. I've heard many people talk about money market accounts etc but when I look at interest rates on FNB's website ut says 1% which is quite confusing.

(PS: I understand the more risk = more profit etc etc I'm just looking for a safe and good inflation beating saving vehicle that I may not be aware of)
 
Well if you want low risk with a short period of about a year-year and a half then money market is your best bet. At the moment you could get about 5-5.5% p.a in returns which maybe won't beat inflation but should keep your capital preserved. If you don't have any other interest income you won't have to pay tax on that investment, however if you do the first R22 300 per year is tax free the rest you will pay tax as per your average rate of tax.

You could invest your money into a modderately-conservative fund or even modderate fund that would give you say CPI+4% but the risk is higher and if you will need the money at a specific moment and time you might lose some money so in that case this won't be a good idea.

With regards to the other investments that you have: FNB charges are high - Annual Management fees 1.43% Fees per deposit 5.13%, every time you deposit money you pay 5.13% and let's say you make 10% return you actually get 3% because of the charges and therefore a money market is better if you compare the two. If you invest through a broker the fees would be lest and he/she will look after you if you get a proper financial planner. Also bear in mind that this fund invests into equity which by the looks of things is not for you because you don't like risk. http://www.equinox.co.za/unittrusts/funds/funddetails.asp?fundid=15762

SATRIX also invests into equity for example Satrix40 is 40 top shares, Satrix FINI is top 15 in financial sector and so on. The money invested there have to be invested for the long term as equity is very volatile but because you are buying your shares every month you buy cheap shares when the markets are down and expensive shares when the market is up but at the end it averages out. Sorry I'm metioning all of that because of the risk involved that you might not be aware of based on what you posted.

Bidvest gives you about 6% on 121 day call account, but the investment is not very liquid and it makes things difficult when you need to react to the market. Another thing is that if you keep money in money market account for a long time you will lose money, so everything should be based on your goals, time period, risk profile.

I'm not really familiar with FNB's products but I don't think 1% is the interest rate. Normally the banks offer you a higher interest rate when you invest more.

Bottom line is as you say: high risk=high returns and low risk=low returns, low risk doesn't really beat inflation.
 
Faetsa said:
first R22 300 per year is tax free the rest you will pay tax as per your average rate of tax.
Click to expand...

Actually the local interest exemption is R22 800.

If you want stability look at Sanlam Liquid Savings Account. If you want the option at growing the capital amount then you are going to either have to lock it down for a period or go for a higher risk (not too high, maybe moderate) portfolio.
 
You're looking for a Money Market Unit Trust, not the money market accounts offered by banks. Returns are currently around 5.5% - 6% and fees are miniscule (I pay 0.2% per deposit, with R2000 going into it each month).

I'm assuming you're already got the maximum number of accounts that Capitec will allow you to have, but can't you open more 121 day accounts at Bidvest? That 6.3% is about the best return you're getting for a risk free investment without tying your money up for too long.

With increase and bonus time this month I'm also looking at alternatives, so I'll be dropping by Capitec and Bidvest soon myself.
 
5.5-6% is a good return on a money market so do that. I just pulled out some fact sheets and the other option you might want to look at is to invest into: Coronation Strategic Income Fund 10% returns in last year with volatility of 1.45%, Prudential Enhanced Income Fund 9.78% returns for the last year with volatility of 1.54%. Through those you should get say 8.5% at the worst according to the data, but you could also make say 11.5% as well.

@Icarium - if you saving the money for longer period there are many ways to get much better returns than money market.
 
Hey guys thanks for the advice, I will look into the money market and other suggested fund, much appreaciated!
 
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