MONEY
27/03/2018 13:07 SAST | Updated 27/03/2018 13:07 SAST

'The Time To Invest In Unit Trusts Is Now' – Finance Expert

"Cash saved in a bank account or fixed deposit is seldom able to deliver real growth over the long term."

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A likely interest-rate cut by the South African Reserve Bank, owing to the strengthened rand and the non-downgrade by Moody's last week, will offer the perfect opportunity for South Africans currently saving money only in a bank account to consider investing in a unit trust instead.

This is the view of Elize Botha, managing director of Old Mutual Unit Trusts.

"While a reduction in the prime interest rate is good for the economy, it isn't great for South Africans saving money in a bank account. Rate cuts will result in consumers with savings in interest-bearing vehicles earning a lower return on their hard-earned cash," Botha said.

Cash saved in a bank account or fixed deposit is seldom able to deliver real growth over the long term, as opposed to equities, which have proven to outpace inflation'

Research by Old Mutual Investment Group showed that it took 92 years to double the real value of a cash investment, based on historical average return, while equities — shares in companies listed on the stock exchange — needed only nine years to do the same.

Yet according to the 2017 Old Mutual Savings and Investment Monitor, only 2 percent of South Africans are saving and investing their money in an equity-based investment vehicle like unit trusts.

"Cash is good for short-term needs and provides relative stability, but cash saved in a bank account or fixed deposit is seldom able to deliver real growth over the long term, as opposed to equities, which have been proven to outpace inflation," explained Botha.

Another benefit of unit trusts is the financial security they bring. "Unit trusts are ringfenced, meaning that contributions made by investors towards a unit trust remain separate from the unit trust company. Should there be issues with the financial stability of the institution, the investors' money is protected, as it is held by an independent trustee," says Botha.

With a wide variety of collective scheme investment vehicles on the market, there is a unit trust out there that is designed not only to outpace inflation over the long term, but also to meet both your medium- and long-term financial needs'

"And unlike fixed deposits, investors can access money invested in a unit trust without notice," she adds.

"Our financial aspirations, like each of us, are unique. With a wide variety of collective scheme investment vehicles on the market, there is a unit trust out there that is designed not only to outpace inflation over the long term, but also to meet both your medium- and long-term financial needs," concluded Botha.

One can easily invest as little as R500 in unit trust funds through a financial planner or broker, the banks, or an accredited financial-services provider.