Investing R10 000 for high interest return | Fin24
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Investing R10 000 for high interest return

May 18 2015 13:49

A Fin24 user wants to know how he can earn the most interest from a small investment. He writes:

Which saving vehicles have more interest? I have R10 000 to start.

A representative of 10X Investments responds:

The first thing that any investor should do is to identify the purpose of his investment for three specific reasons:

Long term

If the purpose of the investment is long term retirement savings, then the actual investment portfolio is restricted in terms of Regulation 28.

This basically means that the investment portfolio has certain limitations such as a maximum equity exposure of 75%. Should this be the case, and the member has a reasonably long period (in excess of seven years) to invest, a high equity portfolio at a low fee will provide the member with the best theoretical outcome. Note that all interest in retirement products are exempt from tax.

Lump sum discretionary

If the purpose of the investment is a lump sum discretionary investment - that is non-retirement related - the member must consider the investment period as well as his or her appetite for investment risk.

The higher the potential growth is, the higher the volatility becomes. Again, if the investment period is a longish type of investment, the member can investigate high equity (non-retirement fund regulated) unit trust investment with low fees. Fees and liquidity (how quick the member wants to get money once he needs it), plays an important role in the decision making process.

Relatively short period

If the investment is for a relatively short period, the member can investigate more conservative unit trusts with low fees or bank deposits (a very short investment period).

In summary:

In order to make the best decision the investor has to identify his or her:

- Purpose for the investment;

- Investment period;

- The volatility he or she is willing to accept;

- The fees the member wants to pay;

- Is the investment a once off investment or is it recurring.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

savings  |  money  |  money clinic


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