Spoiler alert - Government Retail Bonds
The period was between the years 2012 and 2013 when I landed my first job after graduating. I'd just opened up a cheque account and had turned down the savings and investment products offered to me by the gentleman who has assisted me at the branch. I did not like the idea of walking into a bank do one thing and then leaving having done other things I had not planned for. Besides, I have always had a DIY attitude towards 'stuff'.
I was on the hunt for investments. A lot of investments seemed to require decent capital to initiate. Most required sums from R10 000 and R100 000. Not something I could afford at that point in time.
Then I came across Retail Government Bonds. JACKPOT!!
The investment minimum was R1 000. The interest rates were decent, fluctuating between 7 and 8.5 percent (for a 5 year fixed bond) during the time I was busy researching. What I liked about the retail government bonds was the guaranteed capital, as well as knowing what you will be getting back on your investment amount over the investment period. A good place to put money away. What could go wrong?
I started investing in some retail bonds every month. I invested mainly in fixed bonds, although every now and then I did dabble in inflation-linked bonds. The coupon rates were not enticing enough to when compared to the fixed rate bond returns, even when taking the then current inflation rate into account. It was more of a "let's see how it goes" situation. I used the 'reinvestment' option as it gave the best return on the website calculator tool. there wasn't much use for a semi-annual interest payment of R35 on a R1 000, 7%, 5 year fixed retail bond. No monthly pay-out back then
Redeeming Bonds
Redeeming maturing bonds were straight-forward. I would get an email notification approximately a month before the bond was due, need to indicate if I wanted to reinvest or redeem the bond. A straightforward process.
I had redeemed some bonds to use on finishings when I purchased my first property off-plan. Sometimes I wonder about how far this bond portfolio would be if I had reinvested those bonds multiple time. No regrets, just a thought.
Customer Service
A lot of people have expressed frustration with the customer service and turnaround times received when contacting the national treasury. I share the same. I have learned to deal with it by lowering my expectations and allowing approximately 20 days to receive communication or a resolution. What has helped me cope is the comfort of knowing that I do not pay any management fees or commission on my investments, and that my queries and requests are always resolve.
April 2022 Update!!
Fast forward many years to April 2022, the government retail bonds have become my favourite investment. They have introduced TopUp bonds and added the option of having interest earned paid out monthly to the investor, an option that was previously restricted to retired investors.
This allows me and other investors to use retail bonds as real-life problem solvers. You can now invest smaller amounts monthly, as well as use the interest earned to supplement your income or cash flow requirements. For me, this elevates the retail government bonds above rental income from property, without needing to do any of the work that comes with having rental property. No debt, not breakeven points, no difficult tenants. Just earning from the GO!
These developments have turned me into a Government Retail Bond ambassador. R E N T - F R E E!!, as ama2000 would say.
If you are interested in Retail Government bonds, head over to their home page by clicking here
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