Don't save yourself into bankruptcy

(Duncan Alfreds, News24)
(Duncan Alfreds, News24)
 A Fin24 user wants to know what the best two year investment option is for R100 000.

Gustav Potgieter, a Certified Financial Planner® at Aurum Trust, responds:

Any investment decision must take the following factors in consideration: the term (the longer the better), risk adversity (are you prepare to take a knock in the market and sit it out), costs (initial and on going fees), inflation (deteriorates your investment return) and liquidity (access to funds in case of an emergency).

Two years is a very short period in terms of investments and thus limits the potential investment instruments that can be used.

Are you prepared to take some risk or do you want no risk?

Unfortunately there is normally costs involved in most investments, even with some of the banks, and it can vary from 0% up to 5.7%.

The costs will have a serious impact on your initial investment, for instance if you pay a 3,42% initial charge, your investment’s first 1.8% in the coming two years will cover the initial fee.

Costs are however not the most important factor, because it can also be linked to good and appropriate advice.

Inflation has a serious impact on the purchasing power of your money.

Your money needs to grow with at least inflation plus 3% to keep it’s purchasing power.

Everybody’s inflation rate is not the same, because of different life styles.
Liquidity depends on circumstances, for instance if you have enough resources to cover minor crises and do not need to use this specific investment. Possible solutions:

Fixed investments:

If you are totally risk adverse and not prepared to take any chances or sit out a down turn in the market, a fixed deposit with one of the major banks is probably the best vehicle.

The biggest  disadvantage of bank deposits is that they normally do not beat real inflation. You are actually saving yourself into bankruptcy!

The investment rates for a two year fixed deposit is about 6.75% and differs from bank to bank.

SA Retail Bonds also offer a two year bond, which currently yield about 6%.


These investments all offer a guaranteed investment return and no or low costs.

Investment rates can decline and then you are locked in at the higher rate.


No or low access to your investment and even penalties can be levied.

Below inflation returns are possible and investment rates can increase and then you are locked in at the lower rate.

Unit trusts:

Apart from money market unit trusts there are also low risk unit trustsm which currently yield about 5.5% and aim to beat inflation or the money market plus 2% to 3%.

The returns are not guaranteed like above, but you have the opportunity to beat inflation with low risk.

Past performance cannot guarantee future performance, but the following funds are good choices: Allan Gray Stable, Nedgroup Stable, Coronation Balanced Defensive and Prudential Inflation Plus.


Liquidity within 5 working days, partially or as a whole.

Your investment will most likely beat inflation plus.

It is a flexible investment – your funds can be altered at any time. The investment can be tailor made to your specific risk profile.


If you are advised by a financial planner, you will be asked fees, that are negotiable. There are no guaranteed returns.

In conclusion, investments are not a one shoe fits all decision and your personal circumstances will always play a roll.

Most of the time it is better to ask for the help of a professional, like a Certified Financial Planner®, to assist you.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

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.

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