Stokvels are as much a part of our South African heritage as Bobotie and Biltong.
It’s estimated that one in every two adult rainbow nationers is a member of at least one of 800 000 stokvels around the country. If you think that is a staggering statistic, consider for a second that South Africans invest approximately R50 billion into stokvels each year. That’s a lot of like-minded people, pooling their money together to achieve a pre-determined savings goal!
Old Mutual launched its own “Stokvel” in 2018. Well, they like to call it an Investment Club rather than a stokvel, and that’s for a very specific reason. We will get to that a little later in the post.
Right now, we are assuming that the term “stokvel” rings a bell? If it doesn’t, this blog post isn’t going to make much sense, so let’s take a minute to explain the concept:
A stokvel is a traditional savings scheme in which members contribute a fixed amount of money to a common pool. These regular contributions can be made weekly, fortnightly or monthly.
Here’s an example:
Let’s wind back the clock 5-years to 2015. Let’s assume for second you and 10 friends had your sights set on the final of the Rugby World Cup in Japan. You’ve worked out what it’s likely to cost the group and divided that into 60 contributions that each investment/touring partner would need to make to reach the savings goal.
You set up a bank account so everyone can pay their monthly contributions into the pot and without even knowing it you’ve set up a Rugby World Cup stokvel.
That’s the concept.
Another example of investing through a Stokvel would be in property. A group will pool money together and purchase property to rent out with significant reductions on bond repayments.
The reasons why people pitch in and save together differs from one stokvel to another.
Some stokvels pool money together the entire year and payout at Christmas bonus to each member. Other stokvels pool money together so when a member (or someone in the member’s family) passes away, monetary proceeds can be paid out to cover the cost of a decent burial.
In fact, a stokvel can be put together for any common savings goal. What the savings goal is, is less important than the mindset of the members.
Stokvels are powerful savings mechanisms because of the collective. The will of a group of people to achieve a specific outcome is much stronger than that of an individual. Savings is no different. Plus, you have the bonus of compounding interest. Your money grows faster as a collective than it would individually.
The only problem with investing in a Stokvel is the limited investment choices.
Earlier in the post we mentioned that almost R50 million Rand is paid into stokvels annually in South Africa. While we don’t have any statistical information to back this up, it’s fair to say that a lot (if not most) of that money is being saved in bank accounts with cash as the underlying investment class.
And cash is King in the short-term! But only in the short-term!
The benefits of investing in a cash investment like a bank account is that your money is liquid (you can get your hands on it whenever you like) and you have a fixed interest rate (no market fluctuations to negotiate).
What type of return will cash give you?
A Money Market account will probably give you 7,6% per annum before tax. So, if you had R100 000 invested for a year that would mean growth of R7 000. The biggest problem is that inflation is eating away at that return consistently. Current inflation rate figures (CPI) are at 4,62% which means your real gain is only going to be around 3%.
Over the long term, cash is unlikely to deliver the returns needed to outpace inflation. That is just a fact!
So, how can you get a better return on your money?
This is a good time to introduce the Old Mutual Investment Club offering.
The mechanics of a traditional stokvel remain. You get like-minded family members or friends together and decide on an investment goal. Everybody works out what they can afford to contribute (either a lump sum or monthly contribution) and you open your Old Mutual Investment Club.
This is the difference and the crux of the matter – Old Mutual Investment Club is going to offer you more investment choices than a stokvel.
Depending on your investment horizon, you might want to look at an investment fund that offers better returns than cash. You want your collective investment to grow as much as possible, during your decided time frame.
The benefits of the Old Mutual Investment Club include:
- No penalties for withdrawing your money
- A range of funds you can pick from, besides cash
- The ability to increase, decrease or stop your contributions at any time
- Up to 50% back in admin charges
- The chance to attend FREE investment workshops and seminars
What we really like is that Old Mutual has kept the minimum contributions very low:
- Start a regular monthly contribution per member from R350 pm
- Contribute a lump sum of R5 000
- Or drop a lump sum of R1 000 in if you are already making a monthly contribution.
Are you interested in finding out more about the Old Mutual Investment Club?
Simply submit your details below & an authorised Old Mutual Consultant will contact you shortly.
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