JOHANNESBURG - When comparing asset class returns over the past few years, one can safely conclude that investing into cash financial products on which investors earn interest has been a relatively sensible decision. 

Over the past three years to September 30, the returns on cash investments have averaged 7.3percent, while the return on the JSE Top 40 index including dividends has averaged 6.3percent. This difference is more pronounced when measured over the first nine months of this year, where the JSE Top 40 index returned 3.3percent.

Gavin Jones, the group executive for Treasury and Balance Sheet Management at African Bank, believes a balanced approach, allocating at least a portion of one’s long-term investments into cash products, should continue to hold future appeal for investors.

Jones believes the growth over the past year demonstrates the fact that African Bank is paying the best interest rates, with zero fees, across all of its saving and investment products, irrespective of the size of the deposit. This is a unique offering, as many banks reserve their premium rates for large deposits more than R100000.

The actual returns received do vary based on the frequency of interest pay-out. Using African Bank’s fixed term deposit of five years, which has an annual equivalent rate of 10.75 percent, the following examples for investors with different cash flow needs, illustrate this point. Investors will find the fixed investment product attractive, as they receive monthly interest equivalent to 10.25 percent. An investor who elects to receive interest annually, benefits from monthly compounding of their investment return and will receive a slightly higher return of 10.75 percent. 

PERSONAL FINANCE