Tshepang’s father is about to receive R100Â 000 is looking for a fixed deposit where he can get a monthly income of R1Â 000 a month for the next four years. “I checked Capitec and it is not clear if interest can be paid out monthly”.
Maya replies: Your father is unlikely to be able to get R1Â 000 a month as that would be a 12% return which is well above what banks are offering.
Capitec is a good option. If you can invest just over R100Â 000 for 49 months the bank is offering a nominal rate of 10%. Sumarie Brand, marketing manager at Capitec has confirmed that the interest can be paid out monthly. This means your father would receive an income of R830 per month.
(The rates quoted are nominal which means that it is the rate you get if you draw the monthly income. If you left the interest in the account, the effective interest rate would be higher).
Another option is Fedbond, which is a participation bond offered by Fedgroup. They can also pay out the interest monthly and their rate for five years is 9,25%. However their minimum investment amount is far lower at R10Â 000.
It is likely that interest rates will increase over the next four to five years. Considering however that the current interest rate for a one-year fixed deposit is about 7,5%, it’s unlikely that interest rates would rise that much and that rapidly and your father will benefit from a higher rate today by investing in a fixed deposit offering 10%.
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