Retirement alert: A low risk way to boost your investment income…

Fsp Invest, 06 Aug. 2013

Tags: retirement, investment income, low interest rates, inflation, retail bonds, inflation linked retail bonds, where to buy retail bonds, why should i invest in inflation linked retail bonds, low risk

As interest rates remain low, the returns you get from your money market and saving investments are poor. Read on to find out how you can boost your investment income…

With interest rates at four decade lows, any return you make from your money market and saving investments is suffering.

If you depend on your investment income to live off, you might find yourself dipping into your actual investment capital to supplement your income.

The danger is, each time you take out from your investment capital, you have less money invested to generate income.

But you can invest in some products that will get your money working harder, explains Warren Jeffrey, Chairman of The South African Investor.

An ultra-low risk investment guaranteed to beat inflation

The capital you invest in a bond is guaranteed.

If you rely on investment income, your biggest enemy is low interest rates that can’t keep up with inflation.

That’s why your first goal should be to, at the very least, beat inflation. And this is what makes inflation linked retail bonds so attractive.

You see, when you invest in an inflation linked bond, the capital amount you’ve invested is adjusted to inflation every six months.

For example, you invest R100,000 in an inflation linked bond. CPI (the inflation measure used for the bond) is at 6% per annum. And your capital is adjusted every six months.

In this case, to R103,000. (R100,000 x (1 + (6/12 x 6%)).

Now, you’ll also get paid interest on this bond. This is equal to roughly 2.25% annually. This depends on the duration of the bond you take.

This interest rate stays the same, no matter what.

To get the best income returns, you want to buy the ten year inflation linked bond.

You can buy these bonds online at or you can even buy them at your local Pick n’ Pay!

There you have it, a great way to invest your cash and keep up with inflation.

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