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How can we apply our stokvel to property development?

How can we invest in the short term for high interest returns to achieve this over the next two years?

We are a team of nine members and each is contributing R2 500 per month, we just started this year. So basically in a month, we are able to collect R22 500. For now, we have +/- R100 000 in the bank. Our main aim is to start a property business after 18 to 24 months, but that will not be easy because our money is just sitting in a bank account. How can we invest our money for the short term and also get good interest so that we can be able to start our property business?

Mduduzi Luthuli - Luthuli Capital (Pty) Ltd

I’d love to make some sage recommendations that gives you exactly what you want. But the problem is you’re asking for two things that are diametrically opposed: safety and high returns. Unfortunately, that’s not a combination that exists in the real world. Investments with higher returns always come with more risk, whether it’s loss of principal, having to see the value of your money take frightening periodic dips or some other downside.

It’s a common conversation I have with potential new clients. “Mdu, I’m looking for an investment with zero risk that guarantees my principal and I can cash it out whenever I want with no penalties. Oh yeah, I want it to make between 12% – 15%.”

I sit there waiting for the punch-line, but it never comes. When the financial markets become unsettled, investors naturally look for lower-risk investments. But what you’re looking for only exists in Never Never Land. I say that not to offend or ridicule but rather to highlight a point. That being that there is a direct relationship between risk and return. The less risk you’re willing to take, the lower the return you’re going to earn. Some people may try to give you the impression that there’s a way around this fundamental concept, that there are investments that offer all gain and no pain or higher returns without more risk.

And there’s a long history of people being enticed into all sorts of investments that turned out not to be nearly as secure as they seemed. But any investment that purports to offer higher returns always involves more risk, even if that risk isn’t always apparent.

Looking for Never Never Land

If you’re looking for a risk-free way to earn some interest on your money, a “high” yield savings account might be your answer. What I’m referring to is a fixed-deposit account. With these accounts, you’ll earn a nominal amount of interest just for keeping your money on deposit. Other than opening your account and depositing your money, this strategy requires almost no effort on your part, either.

The best fixed-deposit accounts offer competitive interest rates while charging low fees. When choosing an account, you’ll also want to look for a bank with a good reputation for providing quality customer service, easy access and online account management, and easy deposits.

So, who offers the return?

May I suggest using an independent price comparison website like This site enables savers to compare options online to ensure they get the highest interest, based on their individual requirements. The optimiser service is free and provides options based on a few simple questions.

The algorithm searches 670 different rates at eight deposit taking institutions:

  • Standard Bank
  • Absa
  • Nedbank
  • FNB
  • Investec
  • Capitec
  • Postbank
  • Bidvest

Clients can specify liquidity ranging from one day to five years and amounts from R1 000 to R50 million.

Nominal and effective rates

When comparing different accounts, it is important to understand what rates are being quoted. An interest rate takes two forms: nominal interest rate and effective interest rate.

The nominal interest rate does not consider the compounding period. The effective interest rate does take the compounding period into account and thus is a more accurate measure of interest charges.

A statement that the “interest rate is 10%” means that interest is 10% per year, compounded annually. In this case, the nominal annual interest rate is 10%, and the effective annual interest rate is also 10%. However, if compounding is more frequent than once per year, then the effective interest rate will be greater than 10%. The more often compounding occurs, the higher the effective interest rate.

Do you have any questions you would like answered by registered financial planners?


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