We tested EasyEquities’ bond investment – with surprising results

Daily Investor tested EasyEquities’ new South African government bond investments. The platform makes it easy to invest in bonds, but there are significant fees users should be aware of.

Bonds are an attractive asset class for investors looking for a stable yield, as they guarantee a return over a set period.

Bonds promise to repay a principal amount at a future date and offer predictable cash flows through predefined coupon payments, typically twice a year.

However, because it is not easy to invest in bonds, market participation was traditionally reserved for the exclusive few.

EasyEquities changed the game by making it easy for retail investors to invest in bonds of various maturities, providing yields between 8.9% and 12.3%.

Investors also don’t have to worry about liquidity. “Our chosen bonds ensure a smooth experience on the EasyEquities platform in your ZAR wallet,” it said.

Daily Investor tested EasyEquities’ new offering, and it was, as promised, very easy to invest in South African government bonds.

We invested R1,000 in the R186 government bond. It pays an annual coupon (interest) of 10.5% on the initial principal investment.

Investors will receive the coupon payments on a semi-annual basis. Assuming the bond is purchased on the coupon date and there is no accrued interest, it will deliver R52.50 every six months.

Purchasing the bonds was very easy and user-friendly. EasyEquities users can follow the usual steps to invest with their ZAR account.

Users will find the investment option under the “Bonds” tab. They can then pick from a selection of 5 government bonds.

To invest R1,000 in the bond, we had to pay R1003.75. The additional R3.75 was due to different trading fees.

The fees included a R2.50 broker commission, R0.49 VAT, R0.01 broker protection levy, and R0.75 settlement and admin.

Therefore, investing R1,000 in the R186 government bond had a total of 0.375% in additional fees for facilitating the trade.

The bond was purchased at an asking (buying) price of R1.09391 per share, and the bid (selling) price of the R186 bond was set at R1.08221 per share.

The bond, therefore, had a 1.07% bid-ask spread. This means that if a bond is bought and sold immediately, an investor would lose 1.07% of their investment.

Immediately after the R1,000 bond investment, the total bond investment showed to be R994.65. This was almost exactly at the bid-ask midpoint.

Therefore, by buying the bond, the investor would pay a total of R9.10, translated to 0.54% of the initial R1003.75.

To determine the total costs due to fees and spreads, Daily Investor sold the bond investment immediately.

The bond was then sold at the bid rate of R1.08221 per share, yielding R989.31 before fees. R3.70 was paid in transaction fees, the same 0.375% total fees as before.

Buying the bond and selling it immediately after that would, therefore, cost the investor R18.14.

EasyEquities delivered a very attractive product to the retail market by opening bond investments to millions of South Africans.

However, users should be aware of the fees, shown in the tables below, when they invest in South African government bonds through EasyEquities.