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Short-term savings options wanted

Feb 03 2015 17:15

A Fin24 user is looking for some short-term savings options. He writes:

I am looking to save money over the short term. I would like to deposit R3 000 per month into some savings or investment account for the following 12 to 18 months.

Given the short time horizon, I am aware the returns won't be incredible - which is fine. I would still, however, like to get the most from my money.

I am considering either a simple savings account with one of the major SA banks or investing in a money market unit trust in an attempt to obtain a slightly higher yield than those of traditional deposits.

I am a bit indecisive at the moment and would like some advice on the pros and cons of these products.

Daryl Ducasse of Merkurius Capital Solutions responds:

I would definitely not put it into a bank, as you will be in negative territory with the rates they pay, the tax deducted and the effects of inflation.

You could look at an exchange traded fund, unit trusts or carefully consider equities which:

- Are trading at below, on par with, or slightly above nav;

- Have a low entry price earnings ratio;

- Have a good forecast dividend yield;

- Have good fundamentals: for instance a history of paying dividends, sustainability of business and income and good management;

Consider on of the more aggressive funds managed by Stanlib, Coronation, Allan Gray or Sanlam.
You must just compare term, minimum lump sum and monthly contributions, fees, and performance.

You could consider Growthpoint, which will pay a dividend in March, I think, or Redefine, which has just bulked up its portfolio with the Leaf acquisition. That income will come into its consolidated financials for the next reporting period.

You must just check the price-earnings ratios for both. If you go this route, you must wait for the trading price of both to come down after the pricing of both units were pushed up late last year through their respective acquisitions.

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.

investments  |  savings  |  money  |  money clinic
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