Building wealth through fixed income investing

24/10/2018

Building wealth through fixed income investing 

Over the last three years, the returns on cash investments have averaged 7.3%, while the return on the Johannesburg Stock Exchange (‘JSE’) Top 40 index has averaged 6.3%. Gavin Jones, Group Executive for Treasury and Balance Sheet Management at African Bank, believes that a balanced approach, allocating at least a portion of your long term investments into cash products, should continue to hold future appeal for investors.

Although investment into the equity market traditionally does yield a greater return over the long term, it comes with the risk of negative growth including the possible loss of capital over the short to medium term. An investment into cash products can build wealth over the medium to long term and provide a steady and certain return over a fixed term.

Part of our strategy at African Bank, is to grow its savings and investment portfolio. We believe that the bank’s growth over the past year demonstrates the fact that African Bank is paying SA's best interest rates, with zero fees, across all of its saving and investment products, irrespective of the size of the deposit. This is a unique offering, as many banks reserve their premium rates to large deposits, such as those over R100 000.00, for example.

Using our longest dated fixed term deposit of five years, which has an annual equivalent rate of 10.75%, the following examples for investors with different cash flow needs, illustrate this point.

  • Investors, for example Pensioners, seeking monthly interest income on their savings will find the five year fixed investment product attractive. This is because they receive monthly interest income equivalent to 10.25% for their investments.
  • An investor who elects to receive interest annually, benefits from annually compounding of their investment return and would receive a slightly higher return of 10.75%.
  • Investors into the Bank's five year fixed term investment product also include investors with a low risk appetite and a longer term investment horizon. They invest their money for maximum compound growth, earning interest upon interest on a compounding basis. On expiry of the five year investment, these depositors will receive 13.32% simple interest on the original investment for each of the five years of the term of their investment, together with the return of the original capital amount invested.

We believe that investors will continue to see us as an attractive and safe investment destination, ensuring you receive SA’s best interest rates.

Recent Posts

Up Next

Our top 3 tips for saving towards your future
Too much month at the end of your money? If you barely have enough cash to make it through the month, it might seem laughable to think you can actually save some money.

Publish Date: 20/08/2018
Read more
Budgeting is as easy as 50/20/30
While most people know that a budget is necessary, many simply don’t know how to put one together. We’re here to tell you, drawing up a budget isn’t as confusing as you think it is.

Publish Date: 01/12/2017
Read more
Investing in women: An African Bank priority
Many women are now the main breadwinners in their families and form the support structures of their communities.

Publish Date: 01/12/2017
Read more
Three types of credit card fraud – and how to protect yourself
Read this blog post to familiarize yourself with these scams and know how to protect yourself.

Publish Date: 17/04/2018
Read more
Know your rights when applying for a loan
With times being so tough for many consumers, applying for a loan could give you the means to change your circumstances.

Publish Date: 17/04/2018
Read more

About African Bank

Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.