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A Fin24 reader writes:
I am 63 years old and trying to operate a micro engineering business, which over the past years has got worse and worse due to economic slowdown.
Whatever money I make is invested with the banks. I try to live on the money generated in fixed deposit and money market accounts.
With the interest rates so low at the moment, it does not offer enough of an income.
Any ideas on where to invest in zero risk accounts or insurances to create a monthly income?
Don Richter, an accredited financial planner with PSG Konsult in Houghton, responds:In the financially insecure world we live in, there are many pitfalls for risky assets.
Some investors turn to the big banks as they are perceived to be “zero risk”, yet the recent financial meltdown have taught many foreign investors that this isn’t so. Previously considered “too big to fail” institutions and banks have failed spectacularly.
Who to trust if even the “too big to fail” banks failed?
With all the talk of sovereign debt concerns in Europe, it would appear that not even some governments are to be trusted.
Fortunately South Africa has managed to largely steer clear of these financial troubles and therefore enjoy considerable financial cachet with the rest of the world.
You can therefore rest assured that your investment in the RSA Retail Savings Bonds would be as close to “zero risk” as what is available. The RSA Retail Bonds offer fixed or inflation-linked yields.
The fixed-rate retail bonds are issued over two-, three- or five-year terms.
Investors over the age of 60 may elect to have their interest payments paid to their bank accounts on a monthly basis to help supplement their monthly income. This option is known as the Pensioner’s Bond.
Another option would be to invest in inflation-linked retail savings bonds with a three-, five-or ten-year maturity term. Under this option, interest is payable every six months and based on the government inflation-linked bond yield curve. You can find more about RSA Retail Bonds by going to www.rsaretailbonds.gov.za.