Cash Investments as an investment facilitator in South Africa
The last 15 Years of the All Share Index Ending mid 2017
For the last 2 and a half years local equities, shown below by the chart of the All share index, have pretty much done nothing in terms of price movement. Although from a longer term perspective they have done very well. As per the chart most of the time it has been a good move to have your money and investments in local equities.
If you have not been investing for long and have started investing in a local ETF as suggested by so many pundets you will have no doubt felt a bit dispondent about the decision. No growth for 2 and a half years. It would have been nice (with hindsight being 20/20) to have that money in a cash investment with instant access, still earning and not burning (hopefully at a better rate than quoted consumer price inflation)
Instant Access Cash Investment
Why instant access and not a fixed term? A fixed term will give better interest rates.
Correct, but you will be locked into your investment at the fixed rate. So the ability to instantly move all your cash could be more important than the extra (few) percent growth. There may be an opportunity cost to pay by not being able to move your money out quickly when a crash happens.
The Instant Access Cash options in South Africa
Here is a table showing what kind of rates you will get for instant access cash deposits in South Africa (Ordered by value - best first):
|Investment||Nominal Rate||Effective Rate||Min amount||Extra Info|
|Investec Moneyfund Tracker||~7.55%||~7.82%||R100 000||Daily rate changes, no fees|
|ABSA Investor Plus||7.5%||7.76%||R250 000||R75 Monthly, 24 hours notice (Not instant access)|
|FNB Money Maximiser||7.35%||7.6%||R100 000||Applicable Monthly Fee|
|Standard Bank MoneyMarket Call Account||6.4%||6.59%||R20 000 (quoted rate is for > R100 000)||No Fees|
|Capitec Transaction / Savings Account||5.9%||6.06%||R0 (quoted rate is for > R100 000)||One monthly administration fee 5.25|
|FNB Money on call||5.40%||5.54%||R5000 (quoted rate is for > R100 000)||Applicable Monthly Fee|
If you know of any other accounts that would qualify and are > 5% please send info to us
Invetec Money Fund tracker is still the king
I still evaluate the Investec Moneyfund tracker as the best option. The rate does fluctuate a bit, but from experience it always outshines the competitors. It is also for this very reason that they can offer the best rates. Albeit you need R100k but I have normalised it above and you are forced to drop R250k for the Absa account with a monthly fee and a worse interest rate.
Another problem for me is paying a monthly fee so that the bank can use your money for bank lending, buying assets or trading. That is unacceptable and goes against all logical economic thought (unless you are a greedy executive or shareholder in the bank) The costs over time add up and start burning your investment.