A Varsity Today reader with R80,000 and no prior investment experience is looking for ways to securely invest her capital. She explains:
I have R80,000 and would like to know how to securely invest it in order to earn some income or dividends. I don’t know much about investing, but my bank (Absa) has been sending me emails promoting tax-free investment returns. EasyEquities and these SAB Zenzele Kabili shares have also been mentioned a lot.
Hester van der Merwe CFP®, Financial Planner of the Year and financial planner for Ultima Financial Planner, advised her this way
If your goal is to have capital growth on a specific amount over a set length of time, you can look into products that are more focused on returns. It’s crucial to remember that if you include more growth assets (such as stocks), the capital worth of your investment will fluctuate as the market moves, and that you shouldn’t make emotional decisions when the market is down.
If you want to have some cash on hand in case of an emergency, keep the money in a bank account where you have immediate access to it. The availability of cash will thus take precedence over the rate of return on the amount.
A tax-free investment is one in which you will not be taxed on capital gains or growth.
There are a few points to take note of:
- You can only invest a maximum of R36 000 per tax year and R500 000 throughout the course of your life. This implies you can’t put the entire R80 000 into a tax-free investment right now without paying a penalty on the exceeding.
- You should carefully select the underlying assets in your tax-free investment to guarantee that you get the most out of your investment.
- Because you can’t replace a withdrawal, this isn’t a good product for “parking” funds. In practice, this implies that if you withdraw too soon, you will reduce your lifetime contribution of R500 000.
EasyEquities is an online stock market where you can buy and sell stocks. There is no minimum investment amount required, and there are no monthly brokerage costs. The underlying equities that you include in your portfolio are your responsibility to choose. They have a variety of things to choose from.
South African Breweries’ new BEE scheme is called SAB Zenzele Kabili. SAB Zenzele Kabili is open to anybody who qualifies under the Broad-based Black Empowerment Act.
I hope the information above has helped you decide what to do with your R80 000. However, if you’re unsure how to make sure this investment fits into your overall financial strategy, you should seek advice from a Certified Financial Planner.