When deciding upon an investment the main aspects to consider are:
1. Risk – the possibility of losing capital
2. Return – the yield of the investment over time. This could be interest from cash deposits or bonds, rental income from property or dividends from shares
3. Liquidity – how freely are the funds accessible
4. Costs – the charges applied to the investment. Mainly the fund manager, the administrator and the advisor
5. Tax – taxes applied to the returns as well as capital gains tax when you sell the investment
The following comparison includes the common investment options available based on general returns and costs and clearly shows that the home access bond is a great place to save your cash in the short term:
The value is found in saving the interest applied to your monthly bond instalment. The bank rules off at the end of each month and applies interest to the average balance in the month. By having a higher balance through your extra savings the interest applied for the month is lower and so the rest of the instalment pays off more of the capital owing. The effective rate saved is the rate of interest that the bank charges you. In the comparison the current prime lending rate is applied.
Where else can you get 9.25% interest, guaranteed, no costs, no tax and immediately available?
Paul Roelofse, Certified Financial Planner® presents 'Financial Fitness' on Radio 702 and Cape Talk on Weekend Breakfast with Africa Melane and Azania Mosaka on Sundays just after 08h00. Visit http://www.investforlife.co.za/ for more.
This article first appeared on 702 : Financial Fitness: your home access bond is still a great deal