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22 Jul 2013

WHERE TO SAVE MONEY

A reader asked me:
"Do you have any advice on where to save money and get good interest?"
It depends on how much money we are talking about and what the money is for. There are a number of facilities and tools in South Africa that help one earn high interest.

  1. I would put a small amount that I might need for an emergency in a Money Market account. I wrote about the money market accounts here... Money market accounts are relatively low interest but it is risk free, you can't lose any of your money. All banks have a money market account about 4-5% interest at the current low interest rates. I promise you, you will struggle to get that in the developed countries.
  2. I would put money I don’t necessarily need for the medium to long term in the Index Fund like satrix. See my demonstration on satrix here... There is some risk as the money is in the stock exchange. So you may lose your money. Its unlikely and has never happened in the medium term. Your money is available when you need it. It depends on the fund you choose but a fund like SatrixIndi has managed more than 30% per year in the past few years and about 40% in growth in some of the years. That is a lot of growth.
  3. I would go riskier and buy into individual companies in the stock exchange if I have a sizeable amount. Remember you can lose the money in the stock exchange. You also need to know what you are doing to invest by yourself. It is possible but takes time and education (reading and listening). So if you are not clued up, get experts or even better stick to an index fund.
  4. If you have a huge sum of money and you are like in your 40s-50s, think about bonds. Interest is not bad but your money is locked for a specific number of years like 3 or 5 years. Why did I mention the age? The bonds are completely safe. I think when you are younger, you can afford a little risk in your life because you have time to recover what you lost. 
 For a balanced portfolio you need a bit of each of the tools listed above, plus other assets like Gold, property, etc. I just cannot give advise on where to save money without knowing your specific situation. Especially not knowing what the money is for. Feel free to ask more questions using the comment form below.

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