What is the difference between interest and returns?

People often confuse interest and returns as the same thing because they only know about saving in a bank account and earning interest.

The total return of a fund is made up of three components: 1. Capital gains/losses 2. Dividends 3. Interest

Depending on the asset allocation of each fund, the portion of the total return that each return component contributes will differ. For example, the majority of the returns on the High Equity fund come from capital gains/losses whereas the majority of returns on the 10X Defensive fund will come from interest income.

The only 10X fund where 100% of the return comes from interest income is the 10X Money Market Fund.

In this case, if you are looking for income where you can live off the returns earned by your R700k investment, it doesn't necessarily matter if that return comes from interest income, dividends or capital movement. Either Living Annuity or a Unit Trust could offer what you are looking for.

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