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The safest investment in South Africa guarantees returns that beat inflation

25 February 2020 10:34 AM

This boring yet brilliant investment is safer than money in the bank and often more lucrative.

"RSA Retail Savings Bonds" is one of the safest investments you can make.

When you deposit money into a bank account, you effectively lend it to them in return for interest.

Bank deposits are very safe, but banks can and do fail from time to time (remember African Bank?).

When you invest in an RSA Retail Savings Bond, you’re lending money to the South African government.

It’s safer than the bank, because Government will, rather than to default, create money out of thin air to pay back its rand-denominated loans.

The returns of an RSA Retail Savings Bonds won't shoot the lights out, but they're usually better than what most banks offer.

If you're investing for the long-term (i.e. seven or 10 years, or longer) you would probably do better buying shares.

However, if you can't stomach volatility or the loss of your capital amount then it would be wise to consider these bonds.

RSA Retail Savings Bonds have no fees.

There are two types of RSA Retail Savings Bonds:

  • Fixed-rate – You decide between two, three or five-year bonds and get a fixed rate of interest over the term.

  • Inflation-linked – your interest rate is linked to inflation (i.e. you cannot lose money in real terms, no matter what inflation does). You can choose between three, five and 10-year bonds.

You can buy RSA Retail Savings bonds online, at any Post Office and from several large retailers.

You may invest a minimum of R1000 and a maximum of R5 million.

Interest rates offered on fixed-term RSA Retail Savings Bonds:

  • Two-year – 6.75%

  • Three-year – 7%

  • Five-year – 8%

Interest rates offered on inflation-linked RSA Retail Savings Bonds:

  • Three-year – inflation plus 3.5%

  • Five-year – inflation plus 3.75%

  • 10-year – inflation plus 3.75%

Click here for more information and answers to the most frequently asked questions regarding government bonds.

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25 February 2020 10:34 AM

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