"Make it your mission to understand & invest wisely. Everyone has the potential to succeed in their search for true wealth & happiness & everyone can be successful in their pursuit of financial freedom." Contrarian Invest

Wednesday, 13 March 2013

How you can pocket R500,000 by saving just R30 a day for 12 months

It’s a fact, R900 doesn’t buy you much these days, not even a trolley full of groceries; perhaps a dinner for two at a moderately upmarket restaurant and a few nights out a month to the movies. 
Finding R900 to save isn’t hard either. Many may disagree with this statement but if you hear me out, I will share how saving just R900 every month (R30 per day) for just one year can snowball into quite a small fortune. All you need is a little time on your side. Time is the friend of a good investment and the enemy of a mediocre one.

Allow me to justify the above statement with a quick scenario. Assume you are a smoker who smokes a pack of cigarettes a day. Assume that you've given your budget the once-over and found that you spend about R30 for a pack of cigarettes a day which is equivalent to R900 per month.
What you don't realise is that you potentially and literally burning up to R10,800 per year on your deadly smoking habit.

Now, if today you were smart and opted to invest your R10,800.00 smoking habit cash once off without ANY further contributions in an investment fund like Satrix ,offering a conservative rate of say 12% you would find that in a span of 5 years you'd have accumulated a 'healthy' sum of R19,033.29! If you're age 30 and were to invest R10,800 with no further contributions for a period of 35 years at a conservative rate of 12% per annum then at age 65 you would end up with a sum of R570,235.89

The better rate you can find for your investment, the better and faster your money will grow. I personally enjoy investing in ETF's like Satrix (www.satrix.co.za). The best-performing ETF over the past few years has been the Satrix Divi Plus, which tracks an index of shares that provide good dividends. The minimum monthly investment in Satrix is about R300 and the fees are minimal.

I also quite often use the rule of 72 to quickly determine how long it would take to double my money.
The rule of 72 is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, you can get a rough estimate of how many years it will take for the initial investment to double itself.

For example, the rule of 72 states that if I invested R1000 at 10% would take 7.2 years (72/10) = 7.2) to turn into R2000.
As with any investment, you want the best returns at as low a risk as possible, and preferably a savings or investment vehicle that is flexible enough to allow you to deposit extra or, in an emergency, withdraw your money at short notice.
You may be immediately attracted to the obvious safe banking options or “solutions” such as a debit order from your current account into a separate savings or notice account. But these generally offer very low rates of return. Looking further afield, you should find ways to earn a better return without necessarily taking on more risk.


  1. Interesting article as usual. You might be interested in www.etfsa.co.za It's a website that consolidates data on SA et funds and let's you buy into them too.

    You've touched on modern portfolio theory with your remarks on risk vs return. You mean like the efficient frontier curve? I am not a fan of that, risk models always assume risk follows a normal (as in statistical) distribution. It seems that it's not the case except in highly traded very competitive markets, but again this harks back to Ben Graham and knowing the difference between "speculation and investing".

    1. Hi Zahir, Thanks for the useful info. I was just highlighting a simplistic model and method of saving for those who find it an impossible means to save money. Even if one ended up with a sum of R570,235.89 in 35 years time and if inflation averaged 7% over that period it would lose half its buying power in just over 10 years.