Beware money markets, pensioners told | Fin24
  • New CEO

    After months of speculation and delays, Andre de Ruyter has been named Eskom's new head.

  • Flag Carrier

    The escalating strike at SAA is set to test President Cyril Ramaphosa’s will.

  • The Namibian Link

    Evidence is mounting that VBS Mutual Bank aided another elaborate bank heist.


Beware money markets, pensioners told

Aug 15 2010 14:11
Adri van Zyl
Johannesburg - Money market funds have a place as investment instruments, but are not the appropriate vehicle for accumulating retirement capital or retaining capital after retirement.

The yield on the money market and other fixed-interest unit trusts is insufficient to beat inflation, while an investment that produces above-inflation returns is exactly what one requires to build and conserve wealth.

Leon Campher, chief executive of the Association for Savings and Investment (Asisa), says that investors seem to believe volatile markets are their retirement capital's biggest enemy.

But the biggest threat is the erosive effect of inflation.

Because so many investors fear stock market fluctuations they gravitate towards conservative investments, but by doing so they sacrifice future above-inflation growth for the sake of present peace of mind, says Campher.

Pensioners, in particular, should take note.

Pensioners are using their capital to supplement their income. Once one's capital ceases to grow, inflation erodes the asset that should produce future income.

Campher said pensioners' investment portfolios should include investments in shares as part of a balanced portfolio.

That is the only way to be sure that capital is preserved.  




Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote