FNB’s Flexi fixed investments beat inflation, giving people real value for money

The move by Governor Gill Marcus to cut interest rates by 50 basis points yesterday, which saw the repo rate (the rate SARB lends money to financial institutions) decrease from 6.5% to 6.0% has been hailed in some quarters as a reassuring signal to the world that SA is serious about stimulating growth.

However, the latest cut in interest rates has had pensioners who invest in cash and potential savers ask themselves, why they should still be investing in cash, in an environment where interest rates are coming down.

The economic environment with falling interest rates is negative to savings as it means decreased earnings on cash investments, and this phenomenon tends to hit hard those who live out of interest income.

But FNB’s Investment Product House seems to be having some positive news for investors.

“We are well aware that many who live out of interest income from their cash investments view yesterday’s decision in a negative light as it means they will be withdrawing less interest income. But First National Bank has good news for those who save their hard earned cash in our Flexi Fixed investment as the performance of this investment solution beats inflation such, it gives people real value for money under prevailing economic conditions,” says Lezanne Human, CEO for Investments Product House at First National Bank.

Human says FNB’s Flexi Fixed investment, which offers attractive interest rates has over the past 10 years consistently outperformed inflation as the below graph depicts. Since April 2010 there has been an average of 2.0% real return on the Flexi Fixed investment.

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“If people have their money saved in Flexi Fixed investments are less likely to worry about seeing their money eroded by inflation due to the performance of this investment,” says Human.

Cash investments play an important role in nearly everyone's mix of assets in their portfolio with its main benefit being preservation of capital i.e. secure investment.

“Savings help people to accumulate wealth to improve ones life. Economies and governments with a high household savings ratio tend to have high economic growth rates because government can tap into the household savings funds without going to foreign countries to borrow money at high interest rates to build its investment plans,” concludes Human.