Is Money Market The Right Place To Be?

In 2008 many investors turned to money market type investments as a safe haven but with interest rates on the decline and reducing after-tax yields one has to question whether staying in a money market fund is still a wise choice as, historically, the after-tax returns from money market funds have not beaten inflation.

Although it is envisaged that 2009 will still be a bumpy ride, if you have a long term investment time horizon it is a good idea to take advantage of the relatively strong long term return prospects of equities. Buying into equities now may seem risky but just keep in mind that there are currently good buying opportunities and you will need to hold equities to protect you from inflation in the future.

Over the past year we have learnt that nothing is guaranteed in life as many renowned banks in the Northern Hemisphere failed. Now it appears that the word ‘guarantee’ has been replaced by 'capital preservation'.

Capital preservation endeavours to produce returns at least equal to inflation. Individuals who are close to or within their retirement years often prefer these portfolio strategies so that they can ensure their life savings are not lost or reduced for any reason other than their own withdrawals, needed for living expenses.

Silke Financial Services continues to do research on behalf of our clients in this category and has established the Silke Stable Fund which seeks to offer investors total returns that are in excess of inflation over the medium term with a high emphasis on capital preservation. The Silke Stable Fund combines funds, which we have identified as having the objective of capital preservation over a period of 12 to 24 months, into one portfolio. What’s more, the Silke Stable Fund invests in a portfolio of funds that have a much lower weighting to cash compared with money market funds. In this way there is about a 50% to 60% saving of income tax.

Capital preservation stands in stark contrast to a capital growth investment strategy invested in equity-based funds. Sometime in the future inflation is going to be a problem and you will need to hold real assets such as equity or property funds. Bear in mind, however, that equity or property investment is only recommended if you have a long term investment time horizon.

Silke Financial Services has the skill and expertise to advise on all investments according to one’s needs and time horizons.

You are welcome to contact Ross Munro and Associates. We have partnered with Ross and his team specifically to extend our service offering to you. Ross and his well qualified team offer accounting, personal and corporate tax services.

Office Number: 021 674-4012
Email: ross@rossmunro.co.za
www.rossmunro.co.za
Fax: 086 669-1121