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Standard Bank SharePlus |
21 June 2012. After doing a writeup on the Investec S&P500 Growth ESP, a reader asked me to share my thoughts on the Standard Bank SharePlus product. OK, I wont be investing in this either (note that some of this writeup is based on a conversation with a Standard Bank consultant, who may not have had an intimate knowledge of the product):
You lose out on the dividends, as the ALSI40 excludes dividends. At the moment this is some 3% p.a. (although it'll be different going forward).
I don't place a lot of value on a 2 year capital guarantee, as my investment horizon is some 50 years. Giving up excess returns and the dividends is too high a price for me.
Tax - do returns count as income (interest?) or capital gains? (sounds like it counts as interest for purposes of tax - consultant wasn't clear on it - they'll give you an IT3B).
I'd be taking on an additional layer of credit risk, as I'd now be exposed to credit risk of the ALSI40 companies, as well as to the credit risk of Standard Bank.
I'd earn a miserable call rate of interest for a few days before investment commences and if there's any delay afterwards (minor).
And last but not least, I do my investing in JSE shares myself, and I think there are better counters to be investing in than an ALSI40 bundle.
That's not to say it wont outperform, even products that face structural headwinds can outperform, and of course sometimes it's me getting it wrong.
Standard Bank's website describes SharePlus as being a "24 month investment account that provides returns linked to the growth in the ALSI40, the top 40 shares on the JSE by market capitalisation. The SharePlus guarantees your investment and gives you returns of up to 25%*" (I'm not sure what the asterisk next to the 25% is for).
No early redemption is allowed, you have to ride out the 24 months.
Your investment amount is the amount deposited plus a call rate of interest income from the date of deposit until the investment period begins. Rates on call deposits are quite low, so be certain to check what rate you're earning, unless you're earning an equally low rate of return, it may be in your interests to delay depositing your investment until the shortest possible time before the investment period begins. There's only one closing at the moment, at the 30th June 2012 (investment starts 1 July) - that's the last day you can invest.
At the end of the 2 years you are paid out the minimum of the increase in the ALSI40 and 25%.
The "Entry Level" is the 7-day average of the ALSI40 prior to the investment date. If the ALSI40 is rising, is may be possible to still partially invest.
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