Perhaps you’re saving up some money for a holiday.
Or a deposit on a car or house…
Maybe it is just some savings for your ‘rainy day’ or emergency account…
Whatever it is, we all have savings accounts.
Here’s the thing though – if you save correctly you could stand to DOUBLE the
returns on your savings!
Let me explain…
The ETFs that are better than your savings account
When you invest money in a savings account you do so knowing it is save. You will receive all of it back from the bank – plus some interest.
But the thing is, the interest you get isn’t a lot.
A typical 32 day notice account would yield you 4.80% to 5.80% right now.
If you’re lucky – your bank’s top savings account could make you around 7% in interest income right now.
But there are a number of ETFs that offer you similar safety to fixed income – at better interest rates than what banks will offer you.
The three ETFs that could replace your savings account
ETF #1 – Satrix SA Bond Portfolio ETF
This ETF tracks the S&P South Africa Sovereign Bond Index. The Satrix SA Bond ETF provides investors with South Africa Government Bond exposure as an asset class.
The ETF makes quarterly payments to investors. In the past year it has paid out 32.95c, 6.54c, 32.61c and 14.27c totalling 86.37c per ETF unit. The ETF is priced at 793c at present – so you will get a yield of 10.89% on the ETF.
Income from the ETF is dependent on the bond yields of the index – and is therefore tied to what interest rates in SA do to some degree.
The code for this ETF is JSE: STXGOV
ETF#2 – 10X Wealth GOVI Bond ETF
This ETF tracks the FTSE/JSE All Bond Government Index (GOVI), an index of South African government issued bonds.
This ETF also pays out quarterly income payments to investors.
In the past year its quarterly payments have equalled 7.19c, 25.73c, 26.10c and 26.28c totalling 85.3c – with the ETF priced at R10 a unit. That’s a yield of 8.53%.
The ETF is invested in cash, and multiple maturity South African government bonds.
ETF #3 – 1nvest SA Bond ETF
This fund invests in the constituents of the S&P South Africa Sovereign Bond 1+ Year Index and aims to replicate the Index by holding the same weightings of these constituents. The S&P South Africa Sovereign Bond 1+ Year Index seeks to track the performance of local currency denominated sovereign debt publicly issued by the government of South Africa in its domestic market, with maturities of one year or more. The fund is rebalanced monthly and therefore has minimal trading costs.
Income payments for the year are 197.01c, 244.48c, 262.27c, 238.06c – totalling 941.79c compared to a unit price of 9924c. That means the ETF yields investors 9.49% at present. The ETF has also appreciated in value by 43% in the slightly more than four years it has been in existence.
These ETFs make it easy for investors like you and I to take advantage of the higher income yields offered by bonds, without the need for millions in capital to invest on the bond market.
The ETFs are also easier to trade, and more liquid than putting your cash into unit trusts. It might take a moment longer to sell your ETF than to transfer money from a savings account – but there’s no notice period as you’d get with a 32-day notice account or fixed deposit.
Remember though, there are trading costs to buying and selling these ETFs.
Using a platform like Easy Equities with its low costs makes this more cost efficient though.
PS. If you are looking for more income, then Josh Benton’s service, Real Wealth is perfect for you. His focus is on high dividend yielding investments as well as alternative income investments like the ones I’ve described above.
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