If you thought you didn’t have enough money to start investing, think again. Investing is not limited to the super rich or high salary earners, nor should it be. The dawn of new investment products in the South African market, gives everyone the opportunity to start investing with amounts. To find out what options are available to you, we spoke to Ecsponent financial advisor, David Higgins. David shares his advice about how to invest R 1,000, R 10,000 or R 100,000 for the best returns.


Use a R 1,000 lump sum to save, invest and educate

Traditionally, individuals with a R 1,000 lump sum would put invest this money in a bank’s 32-day notice deposit account. This is a great way to save, earn a little interest and protect your savings from impulsive buying decisions.


You could also invest your R 1,000 lump sum into a Fixed Deposit account. This will allow you to choose a fixed interest rate of between 5% and 6% for a period of up to five years. However, these options deliver mediocre returns at best and investors could incur high costs by using these types of accounts.


According to Higgins, a R 1,000 invested for educational purposes would be more beneficial and earn greater returns. “I’d recommend that investors look at a Fundisa Fund, which basically acts as a government run study fund. Fundisa allows low income investors to earn an annual bonus of up to 25%, capped at R 600 per child.”


The Fundisa Fund is only available to households earning less than R 180,000 a year, and available via any bank. You can invest a lump sum of R 1,000 without any further contributions. You must use this money for education or you will lose out on the incentive bonus.


RSA Retail Savings Bonds are another safe way for investors with a R 1,000 to invest. You basically lend money to the government who guarantees to pay you back after a certain period of time. You can buy Retail Savings Bonds through the National Treasury, at Pick ‘n Pay or any post office.


Another alternative is opting for a unit trust. However, if you don’t have the time or knowledge to manage your investment it is advisable to get a fund manager to do it for you. Additionally, this option may be more costly than the previously mentioned alternatives.


Invest R10 000 in a retirement annuity and reduce your taxable income

If you have a lump sum of R 10,000 to invest, put this into a retirement annuity (RA). It’s a good way to reduce your tax liability. Higgins explains, “If your annual income is R 210,000, you can reduce your taxable income to R 200,000 by investing R 10,000 in a RA.”


Ecsponent will soon be launching a Retirement Annuity Fund that will provide you with a tax-efficient, low cost, flexible retirement savings product. The contributions you make to the fund are tax deductible annually. You are allowed an annual tax deduction of up to 27.5% of your taxable income, subject to a maximum of R 350,000. Best of all, income, capital gains and dividends generated from the underlying investments are exempt from tax.


Another option for investors with a R 10,000 lump sum is Ecsponent’s Class B Preference Shares. You can invest a minimum of R 10,000 for a period of five years and at maturity your investment will be worth R 17,000.


Higgins explains, “Your R 10,000 buys preference shares that we issue at R 100 each. Five years later we buy each share back at R 170 a share. Remember, if your capital gain is less than R 40,000 you won’t pay tax on your investment.”


R 100,000 gives you more options for greater investment returns

Higgins says, “If you have access to a lump sum of R 100,000, this opens up a whole new scope of investment options. Collective investment schemes, unit trusts, a retirement annuity and income producing preference shares.”


The new Ecsponent Endowment underwritten by Prescient Life (RF) Limited is another option Higgins says is suitable to clients looking to invest larger amounts.


“The endowment is an investment-linked policy that assists you in saving towards your long term goals. It supports disciplined investing but at the same time allows you flexibility to change the investment particulars. If you are comfortable with a minimum five-year investment term, want a tax-efficient way to save, and wish to create liquidity in your estate, this option may meet your needs. An additional benefit is that you can also structure your portfolio across multiple policies to give you additional liquidity during the five-year restricted period.”


With larger amounts and more investment options available, it is advisable to get help from a financial advisor. A financial advisor will take various factors into considerations such as your age, your retirement goals and even your day-to-day lifestyle requirements and help you make the best decsion about your money.


Ultimately, you decide on the best investment option that meets your personal investment needs. So, do your research into the costs as well as the pros and cons of each investment vehicle that is available so that you can make an informed decision with your money.