The bank has also slashed its charges on transfers to the fund to encourage lower-income earners to invest in the equity market.
First National Bank (FNB) is offering its clients access to the bank's general equity unit trust fund, the FNB Growth Fund, for as little as R40 a month or a R500 lump sum.
Currently, the average minimum monthly investment in a unit trust is R300, although a few funds are still accepting smaller amounts.
But investing smaller amounts can be inefficient because of the bank charges you incur to transfer money from your account to the fund.
So, besides slashing the minimum investment amount for the FNB Growth Fund, FNB has also reduced its charge for transferring money into the fund. And if you commit to regular payments, you won't be penalised if a payment does not go through because you do not have enough money in your account.
Robert Keip, the chief executive of FNB Investment Products, says the current low interest rates have increased the need to make equity investments accessible to lower-income earners. Without access to an equity investment, small investors have to settle for the interest rates that bank savings accounts offer.
By reducing the minimum investment amounts for the Growth Fund and the bank charges, FNB says it hopes to offer greater access to a viable wealth-building opportunity.
Returns from equities have been exceptional over the past two years and particularly over the past year. The average return from general equity funds over the past year to the end of December after costs was 31 percent.
The FNB Growth Fund, which is managed by RMB Asset Management, had a return of 37.23 percent over the year to December 2004. Its return over the past three years to December 2004 was 24.26 percent a year.
Keip says the fund has been a top performer (in the top quarter of all funds in the general equity category) since its launch in 1998.
In order to take advantage of the bank's reduced minimums, you need to have an account at FNB.
Investors who are not accountholders are still free to invest in a mirror fund of the FNB Growth Fund, RMB's Equity Fund, but not at the reduced minimums - they will have to invest R300 a month or a lump sum of R2 000.
Accountholders who make use of the reduced monthly minimum need to set up a scheduled payment - something like a stop order - but this will only cost you R3 per payment rather than R6 to R12 per transaction that is typically charged for stop orders and debit orders.
The charge for dishonoured payments can be as much as R110, but if a scheduled payment into the FNB Growth Fund does not go through because you do not have enough money, you will not pay any penalty.
This means that if one month you are having a bad time financially, you won't have the additional burden of a penalty for your inability to contribute to your savings.
The FNB Growth Fund's initial charges and the asset management fees remain the same. The initial charge on the FNB Growth Fund is 5.13 percent (including VAT) and the annual management fee is 1.43 percent (including VAT).
On a R40 investment in the Growth Fund, you will pay R3 in bank charges for transferring the money into the fund, and R2.05 in initial fees. The total cost of the R40 investment, therefore, is R5.05.
Keip says the reduced minimum investment amount has been set at a level that takes cognisance of the fees and is cost-effective at a conservative level of growth.
Investors can make investments into the FNB Growth Fund at any one of FNB's 644 branches.
Keip says unit trusts are usually sold by financial advisers, but advisers are reluctant to deal with investors who have only small amounts to invest. The banks, therefore, have a major role to play in making unit trust investments accessible to lower-income earners, Keip says.
Mzansi accountholders will not be able to take advantage of FNB's reduced investment minimums, because these accounts do not offer inter-account transfers.
The low-cost Mzansi accounts are available at all the banks and each bank's Mzansi account offers the same features.
If you invest in the FNB Growth Fund, you can withdraw your investment at any time. However, you should stay invested in the fund for three to five years to ensure that you recoup the investment costs and earn a reasonable return on your money.