Opportunity to earn higher returns
Interest rates are currently at an all-time low, and most investors who depend on income in the form of interest returns are currently getting about half as much as they were before the start of the COVID-19 pandemic. For many investors, interest rate income is essential to maintain their standard of living and with interest rates half of what they were, many Namibians are struggling to make ends meet. It also forces many investors to draw on their capital which can have significant negative long-term effects on their investment portfolio. Even if you manage to live only from the interest, inflation will erode the real value of the investment year after year.
To make matters worse, most Namibian investors are very conservative and prefer to invest in safe instruments that generate interest. As an example, more than 80% of all unit trust funds in Namibia are invested in short-term, interest-bearing instruments. So, we can say assuredly that the current low-interest-rate environment directly affects most Namibian investors.
Simply moving these investors to more risky investments in an effort to gain better returns will not work because their circumstances or their risk profile is such that risky investments won't work with them without great difficulty. So the answer lies in an investment that does not necessarily carry much more risk, but that can offer investors a much higher return immediately.
In my opinion, the answer is long-term government bonds that have returns that provide much better income than what is currently available with regular money market products. With our government having to generate around N$ 13 billion for the 2021/2022 financial year to help make up the budget deficit, many Namibian investors have a good opportunity to experience very attractive returns for part of their portfolio. Remember that the return on these investments is currently tax-free for individual Namibian investors, which offers a huge benefit.
To illustrate, an investor who has N$ 1m will earn about N$ 3,300 per month after tax on a good money market investment. If that same investor takes half of the N$ 1m and invests in a long-term bond, the return on that half alone will be N$ 2,000 more than the full amount invested in the money market product. So using only a portion of your portfolio, you can significantly increase the monthly income you earn.
I would appeal to prospective investors to get expert advice on this and they are welcome to contact us directly in Windhoek at 2991950 to learn more about this opportunity.