FNB still sees value in long term investments

The latest Monetary Policy Committee (MPC) announcement, by Governor Gill Marcus, saw the repo rate drop by 50bps to 5.0%, lowering the prime rate to 8.5%.

Marcus stated that “The outlook for the global economy has worsened somewhat since the previous meeting of the MPC”. In this uncertain market, investors are looking for somewhere dependable to invest their cash.

“Banks offer consumers stability. Consumers currently seek to invest their money where their capital is guaranteed, plus an additional guaranteed positive return,” says Lezanne Human, CEO, Investment Products, at FNB.

When investing in cash products, investors have to balance the interest rate they receive, which is typically higher for longer term investments, with the probability that the rate may increase, which they will then not be able to benefit from if their money is fixed for a term.

Based on the Governors future inflation and rate predictions, the good news is that a savvy investor, who is able to fix their money over a term of two to five years, will be able to receive a good real return (i.e. a return higher than inflation). As an example, investing in an Effective Rate Fixed Deposit from FNB over 60 months, could earn the investor around 8% per annum. This rate is fixed for the full duration even if the prime rate had to drop any further giving consumers a real return of 2.5% and there are no fees.

Alternatively, if consumers want to have a guaranteed real return by investing their money at a rate that beats inflation, the FNB Inflation-Linked Deposit will do just that. No fees are charged and the investor is guaranteed no drop in the initial capital invested.

Based on the predictions from the MPC announcement, investors in any of these products will earn greater returns compared to their counterparts who invest their money in short term investment accounts.