Personal finance expert Paul Theron (CFP) discusses saving in an “access bond” and why it’s a near no-brainer.
When considering an investment there are five main aspects to consider:
- Risk (the likelihood of losing money)
- Return (how much you’ll earn from the investment)
- Liquidity (the availability of funds)
- Costs (fees, etc.)
- Tax (e.g. capital gains tax)
Why an access bond is a good place to save:
- You effectively get a guaranteed (i.e. risk-free), fee-free return of about 9.75% (currently the prime lending rate).
- Your “investment” is instantly available.
- It’s tax-free.
Kieno Kammies interviewed Paul Roelofse, a Certified Financial Planner.
Whatever you put in extra… becomes accessible… a very useful place to put cash… there aren’t many investments around now with a 10% guarantee…Paul Roelofse, Certified Financial Planner
… Be mindful of paying it back as soon as you can. You don’t want to pay for it over 20 years, because then it becomes expensive…Paul Roelofse, Certified Financial Planner
On a R500 000 loan, if you put just R1000 extra… you can reduce it by eight years!Paul Roelofse, Certified Financial Planner
It’s very difficult to find a clean yield of 10% [on the stock market] after taxes, fees and costs… it’s a very good proposition!Paul Roelofse, Certified Financial Planner
With these levels of uncertainty, risk is all around – where can you get tax-free money at 10% on call, no costs…?Paul Roelofse, Certified Financial Planner