When Ntobeko called me a few weeks ago wanting to know if we could help their stokvel to invest their funds rather than keep them in the savings account, I realised that I needed to pay due attention to stokvels and their members. As we spoke about her stokvel, it was clear to me that each member of the stokvel had different financial goals e.g.
- Some just wanted to invest and cash the money in December to have a nice festive season
- Others wanted to invest for a little longer e.g. so they could use the money for school fees
- Yet others were investing for no particular reason so they could actually afford to invest for longer periods thereby be able to even invest in the JSE and offshore
- Some of the members are contributing R1000 and others are contributing R2000 monthly and poor Ntobeko has to work out how much of the little interest they have in their bank account belongs to whom at the end of each year.
One of the biggest challenges that Ntobeko had to figure out is, do they start to invest with ThuthukaSA immediately or do they wait until the end of the year and then start investing with us from 2020.
I told Ntobeko that they could start investing immediately and the benefits of investing with us are as follows;
- Stokvel members can actually start investing from as little as R500 monthly
- We use tax-free investments so that no one has to pay tax, this is particularly important for those who want to invest for longer periods
- The maximum that each person can invest per month is R2 750 or R33 000 per tax year
- We invest in different funds for each stokvel member to suit each person’s needs, as an example;
- If you want to invest and cash your money at the end of the year, we will invest in a money market fund for you – the current rate of interest is about 7%
- If you want to invest for a little longer say for about 2 to 3 years, we might also use a bond fund for you – current yield at about 9%
- For those who want to invest for university fees and other longer term objectives, we could invest in listed property, equities and even offshore investments and some of the funds are returning well in excess of 10%
We must conduct a risk profile analysis for each stokvel member to determine the investment objective of each person, the term of investment and the risk appetite and the results of the analysis would inform the fund we choose. Each stokvel member would have log in details, just like with a bank account, to be able to check their own individual investment portfolio and the treasurer, chairperson and secretary would be able to get a view of the total stokvel investment portfolio.
Why this is a flexible way of investing for stokvels;
- If a person has a n emergency and needs to withdraw money from their funds, they can do so without affecting others. I particularly like this because I would rather stokvel members utilise their own funds in case of an emergency than use expensive personal loans
- The treasurer must send us a monthly schedule with the names of each stokvel member and how much each stokvel member is contributing. So if in one month a person cannot contribute, you simple indicate R0 contribution for that person for that month. If someone got a bonus and they want to contribute more that month, you simply indicate the higher amount for that month
- The investment house we invest your money with is the one that is keeping track of each person’s contribution within the stokvel, through the monthly schedules so the treasurer never has to worry about how much of the money belongs to whom.
Next time, I will be writing about the different investment funds we use for stokvels.
If you want your stokvel to invest with us, email firstname.lastname@example.org
Last week we shared with you Why your stokvel should invest with us, if you missed this article and you want to read it, please click HERE http://www.thuthuka-sa.co.za/why-your-stokvel-should-invest-with-us/