Minimum investments

Minimum investments

I was recenlty approached by someone who was looking to save a bit of money for his newly born nephew…he wanted to put away R100 pm for the next 21 years or so. Not a problem I assured him – a unit trust is the way to go…

However, it appears that most unit trust companies are no longer interested in the smaller amounts and now insist on a minimum debit order of at least R500 per month. There are still 1 or 2 companies that will take R100 or even R50 per month but for the most part, they are not interested in less than R500pm.

Strangely though, you can invest in Satrix (or any other ETF)  for R300 pm and this raises some very interesting questions. For example:

  1. Why have so many of the unit trust companies all decided that R500 is their minimum investment?
  2. What are investors with less than this supposed to do? (Please stay away from insurance products such as endowments.)
  3. Why dont mancos have 1 fund (e.g. a balanced fund) that will accept lower minimum investment amounts?
  4. ETFs such as SATRIX are a supposed “threat” to the unit trust industry, so why have the unit trust companies put their minimum investment higher than that of SATRIX?

For interest, the lowest debit order amount that any fund will accept is the Stanlib Equity fund at R50pm and the minimum debit order amounts for a few of the “prominent” companies are as follows:

  • R1000 – Foord
  • R500 – Allan Gray, Cadiz (most funds),Coronation, Investec, Nedgroup, Prudential, OM (most funds), Stanlib (most funds).
  • R300 – SATRIX, DBX ETFs, RMB.
  • R250 PSG Alphen, some OM funds and Cadiz (1 fund).
  • R200 – ABSA, Sanlam (most funds)
  • R150 – Metropolitan
  • R100 – ABSA (3 funds)
  • R50 – Stanlib Equity Fund