What’s in your daily coffee? If you’re a connoisseur, you’ll know all the details, from caffeine to quinic acid. You likely have a favourite origin for your beans and can tell when they were roasted slightly hotter than you prefer. Of course, you may just appreciate your morning hot beverage for a jolt of energy.
Guru or guzzler, there is more in that daily coffee than meets the eye and the palate. In every steaming cup of java lies a financial opportunity. A cappuccino a day might be keeping your kids’ college fund at bay.
Sip by sip, day by day
Here’s an example. Let’s assume you and your partner each enjoy two cappuccinos a day at a price of R40 each. That comes to R160 per day. And R1,120 per week. That gives you a monthly bill of very nearly R5 000.
Life is too short not to enjoy a morning cuppa. But what happens if you and your partner each forego one of those cappuccinos per day and invest that money? Now the key ingredient to your coffee is a monthly saving of R2 400 invested at an achievable annual return of 8%.
Converting coffee to cash, one day at a time
Caffeine and compounding
Now that iconic quote from Albert Einstein comes into stark focus: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
The chart above captures this wonder. For the first few years of saving, you’re doing the bulk of the work. Gradually, the returns on your money begin earning their own returns. And with enough patience, this compound effect takes over, meaning the monthly return exceeds your monthly deposit into the investment. That’s why investors often call compounding the only free lunch in finance.
Getting going
Our exchange-traded funds (ETF) and unit trusts are suited to this strategy of investing relatively small sums of money at regular intervals and harnessing the power of compounding over time. Our products are simple and as cost-effective as possible. They let you buy your share of an index, which could include shares, bonds or even a combination of the two.
For example, our 1nvest Top 40 ETF gives you a bundle of major Johannesburg Stock Exchange (JSE) shares; the 1nvest Global Government Bond Index Feeder Fund packs in bonds from around the world; and the 1nvest High Equity Balanced Fund offers easy access to a pre-packaged index of bonds and equities.
For a variety of products that can help you turn coffee into a college fund, check out our full selection of funds here.
1nvest Fund Managers Pty Ltd is an authorised Financial Services Provider in terms of the FAIS Act.
Collective Investment Schemes (CIS) are generally medium- to long-term investments. The value of participatory interests may go down as well as up. Past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and maximum commissions is available on request from the manager. The manager does not provide any guarantee with respect to the capital or the return of a CIS portfolio. These portfolios are third-party-named incubator portfolios. The manager retains full legal responsibility for these portfolios.
1nvest Fund Managers (Pty) Ltd is an authorised financial services provider (FSP), FSP No. 49955, under the Financial Advisory and Intermediary Services Act (FAIS), Act No. 37 of 2002. The manager of the Schemes is STANLIB Collective Investments (RF) Pty Ltd and registered in terms of CISCA. For the basis and information on awards and rankings, please contact [email protected].
