Inflation and Interest Rates
Our very own Carly Barnes gets in tune with EasyResearch and takes on the effects of interest rates and inflation on the investment space, check it out.
Here are some excerpts from the power of investment returns with Carly a.k.a @ShareGalCarly:
Interest rates: There are two situations in which interest rates play a very important role with regard to money. The first is when you borrow money from an institution like a bank and pay a percentage of this amount to the bank. Think of it as the cost of being able to borrow money.
The second one is a bit more important when it comes to how you manage your money, specifically in the decision to either save or invest. This is the interest that you earn from a bank, in a savings account for example. If your money is kept in a bank account, you will get a percentage of the amount you have saved paid to you, usually monthly.
ShareGal also tackles Inflation (CPI), here are some excerpts, ever notice how the things you used to buy a few years ago are now priced much higher than you remember? Everything is more expensive now than it was back then – cars, an iPhone, or an average grocery shop. This is because of inflation, which represents how much the cost of living has increased over time. Each year, your money buys you less than it used to. According to The Consumer Price Index for All Urban Consumers (CPI-U) for the 12-month period ending June 2022, inflation increased by just over 9%.
Think about what that means. If you had left your money in a savings account, only earning 5.6%, you would essentially have found yourself out of pocket. The price of living would have cost you more than the returns you would have gotten from keeping your money in a bank account.
EasyResearch looks at 2 investment vehicles that could assist EasyVSTRs through these times of uncertainty and combat inflation and rising interest rates:
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Exchange Traded Notes (ETNs)
One great instrument to use to hedge against the depreciation of the Rand (ZAR) when times are tough like now is the New Wave USD ETN (NEWUSD) in your EasyZAR wallet. So, in short, if the Rand (ZAR) depreciates the ETN will increase in value if you are invested in it and in doing so diversify some aspect of your portfolio against currency risk. The ABSA NewWave ETN range also gives you NewWave EUR and NewWave GBP currency options to consider.
Unit Trusts
Rising interest rates should boast well for interest-bearing instruments and a great way to get exposure to a basket of assets is through either an ETF or a Unit Trust. The Satrix Money Market unit trust aims to deliver a higher level of income than fixed deposits and call deposits over time. This one is not aimed to shoot the lights out but rather aims to benefit from rising interest rates over the short term. The Money Market fund is extremely liquid and capital preservation is of the highest importance and holds cash, cash equivalent securities, and high credit-rating, debt-based securities with short-term maturity
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Sources – EasyResearch, Carly Barnes
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@BEEF_FINMARKETS
Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.
