South Africa
Retail notes: An easy investment alternative

Retail notes: An easy investment alternative

Simple to understand and inexpensive to buy, retail deposit notes are an option for income-seeking investors.

Getting into the investment game can grow your personal wealth, but investing in the JSE can be confusing when you’re just starting out.

Retail deposit notes provide you with an easy and inexpensive alternative to start trading on the JSE, without the complexity that goes with purchasing other instruments. Retail notes can also give you stable income.

What are retail deposit notes?

Retail deposit notes are JSE-listed medium-term, fixed interest-bearing securities that offer access to superior interest rates, which were previously only available to corporate and institutional investors.

Who can purchase retail notes?

  • Any legal entity, including trusts
  • Any person 18 years or older

What are the pros-and-cons of retail deposit notes?

The advantages:

  • They offer potentially better returns than bank deposits and most money market unit trusts with the same credit risk as Standard Bank deposits.
  • They are easy to buy and sell on the JSE.
  • They offer an alternative asset class for individual investors looking to maximise their returns over the medium-term, and manage portfolios diversified by asset class.
  • They provide stable interest income paid regularly (quarterly).
  • You can use tax exempt interest allowances.
  • In the event of your death, most retail notes give your estate the ability to return the notes back to the issuer at par value. So, even if the note is worth less than par value when you are deceased, your heirs can still return the notes for par value.

The disadvantages:

  • Retail deposit notes can sometimes provide lower returns than bonds
  • If the retail note is bought back soon after it was issued, before it is fully mature, you will lose out on the interest.

How do you trade with retail notes?

Retail notes can be purchased for a minimum investment requirement of R10 000. Once listed, they can be traded in R100 denominations. They can only be bought and traded through a JSE stockbroker. Standard Bank will act as a market maker broker, providing you with liquidity to buy and sell the retail notes on the JSE.

What is the interest rate on retail deposit notes?

  • The interest payable on the retail notes is a floating rate, which means that the return on the retail notes will be reset every three months on each interest payment date for the next interest period.
  • The benefit of floating rate notes is that it reduces interest rate risk.

It’s never too early to start trading and investing, but it can sometimes be a bit overwhelming when you’re just starting out. You don’t have to go at it alone; your bank will have experts at hand to guide you through your investment journey and help you build your personal wealth.