The Financial Coach™ - Managing people & their emotions around money » rsa retail bonds

Interest (ing)…

Gregg — Fri, 21 May 2010 09:03:04 +0000

I heard an advert on the radio last night for Nedbank’s new “Park-it Limited Edition Investment account”…seems that if you give them R10000, they will give you up to 6.25%* interest per annum and after the first 14 days you can have access to your funds with 24 hour notice. There are at least 2 problems with this…

“Up to” 6.25% (turns out you need to invest R1million to get this rate – R10000 gets you 5.75% - the small print says that the rate will be tiered according to the balance.
You cant access the funds for the first 14 days.

Now while this may not be a problem to anyone not needing the funds urgenlty, it is certainly a problem to anyone thinking of using this as an emergency fund. To my mind, there are far better options both for emergency fund money and also for those looking for high interest accounts.

For emergency money you are going to struggle to beat a money market unit trust account – no fees to get in or out, instant access (24 hour notice on most), the best interest rates and most importantly of all, safety! The historic yield on a money market unit trust fund is ±7-7.5% but dont expect this going forward – rates have fallen and it is more likely to be ±6.5% for the next 12 months. (Minimum investment amounts are not as high as the banks would have you believe and there is even a money market unit trust that will take a R1000 debit order.)

There is also Capitec Bank which is offering an incredible 7% on daily savings accounts – this is an awesome rate and an excellent alternate to the unit trust but only for the first R10000 (the rate falls after that)!

Longer term investors looking for high interest rates should consider the RSA Retail Bond – this is a government guaranteed bond with 2, 3 or 5 year options. The 2 year option is currently 8.5% and on all of them you are locked in at that rate for at least 1 year – thereafter, if rates have increased you will be able to increase the rate on your bond for the remaining period as well. If rates fall your rate stays fixed! No fees to get in and interest can be paid monthly!

As a rule, my advice is to stay far away from banks when looking for interest bearing investments – they are there to make as much money from you as they can – there are far better options than the traditional banks!

RSA Retail Bonds

Gregg — Mon, 03 May 2010 12:48:55 +0000

Much was made about the RSA Retail Bond when it was launched and about how it would provide a safe and cheap investment with a reasonable returns to the “man-in-the-street”.

Well, I have been trying to buy some of these for a “man-in-the-street” using the RSA Retail Bond website – what a nightmare. There is an application form online but no details where to submit it or how to pay the funds into an account.

So I sent an email to the address on the site – 4 days later and still no reply. So I tried calling the telephone number (which is the number investors are supposed to use if they want values) and it just rings and rings and rings until it goes dead…

I know that you can also buy these at Pick n Pay or via the Post Office but if that is the only way to do it then why have forms on the website? And if no-one is going to reply to emails or answer the phone, why have an email address or telephone number on the site? And if you are not going to reply, how do you expect investors to get information or communicate with you?

This is my first experience of using this investment vehicle for a client and so far, I am not impressed.

I have written to the communications manager at National Treasury – let’s see if we get a reply.

Best interest rate?

Gregg — Fri, 04 Sep 2009 08:43:24 +0000

With interest rates having fallen so far and the possibility of still more cuts on the horizon, anyone looking for interest income is pretty hamstrung at this stage. Money market rates are 7% per annum and many of the banks are offering “exceptional rates” for 1 year fixed deposits. They will even “enhance” this if you are over 55.

For anyone who is prepared to be locked in for a while there is an even better option that has been overlooked while short term interest rates have been high and that is the RSA Retail Savings Bond. It is a 2, 3 or 5 year option that is being offered by the SA Government (National Treasury) directly to the public and the interest rates are far better than anything else out there (and there are no fees to get in). The only “catch” as I can see it is that you are locked in for the period (you can exit after 12 months but there will be an exit penalty). The rates are in the table below but for more information on this go to www.rsaretailbonds.gov.za

CURRENT INTEREST RATES

FIXED RATES

2 Year Fixed Rate	9.25%
3 Year Fixed Rate	9.50%
5 Year Fixed Rate	9.75%

They also have an inflation linked option which is also quite attractive.

That’s all for now

Gregg