Graham asks: I am a 60-year-old, debt-free retired pensioner with R500 000 disposable cash savings to invest. I would like to invest for three years in a safe, secure, inflation-beating fund.
Maya replies: As a general comment, it is important that at this stage of your life you do sit down with a financial planner to make sure that you are making the correct decisions for your retirement. You will have to fund at least 20 years out of your retirement savings.
What your current retirement savings are today will determine how much risk you will need to take with your lump-sum investment and for how long you will need to invest.
Given your requirements as per your question, a low-risk prudential fund would be a good option.
These would be funds that have a maximum of 25% invested in equities and which focus on capital preservation.
You would be looking at a fund that aims to outperform inflation plus 3%. Anything higher (CPI+5) would be taking more equity risk.
The funds that the independent financial advisers prefer include:
Allan Gray: Optimal fund, Stable Fund
Coronation: Balanced defensive, Capital Plus Fund
Investec: Cautious managed, Opportunity Fund
Prudential: Inflation plus fund
Marriot: Prudential Income Fund
As this is a relatively short investment, upfront costs are very important to manage as you will not have sufficient time to recoup these.
Many of the above mentioned fund managers offer investments directly to the client without upfront fees.
With a large lump sum you may prefer to split between more than one fund manager.
An option to consider is www.InvestOnline.co.za. It is an online investment tool that assesses your risk profile and recommends a portfolio of unit trusts.
There is no upfront fee, which for a three-year investment is important, and the annual fee would be in the range of 1,7% including a management fee, platform fee and the underlying unit trust management fee.
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