How to boost the returns from your investment
MIXED emotions come up when asking people about their investment decisions last year.
Some made good moves and are now reaping the benefit, while others look at the year regretting some of the things they did or did not do.
But the start of the year offers an opportunity to lay the foundations for a sound investment plan for the year ahead.
Acting now by maximising your contributions towards tax-efficient products for the current tax year will help you take advantage of higher long-term growth rates.
Use the tax year-end. You can still, to maximise your tax savings for 2016-17.
By declaring any extra contributions to tax-deductible savings vehicles (say an extra contribution to your retirement annuity) you will be able to decrease your tax bill.
The deadline to declare these contributions is quite strict, so make sure of the dates your product provider has set to have your paperwork finalised.
Note that there might be a difference in the cut-off times for financial contributions and the forms needed to declare them.
Up your RA contribution One of the easiest ways to win in the long run is to increase the contribution you make to your retirement annuity each month.
Retirement annuities aim to grow your pre-retirement investment so you have a pool of savings available when you retire.
All your investment growth is taxfree, the proceeds at retirement are tax-free up to a certain amount and your investment contributions are tax-deductible up to a given limit.
This means even a little bit extra every month could make a fundamental difference in your life when you decide to retire.
Your product provider should encourage such behaviour by offering easy ways to increase your contributions like an online investment
tool or application forms making it a once-off, hassle-free experience.
Tax-free savings accounts Introduced in South Africa more than a year ago, tax-free savings accounts (TFSAs) are proving popular in South Africa’s middle class.
This flexible investment product is geared for growth and can be tailored to your individual needs and risk tolerance.
TFSAs have changed the way many South Africans save – you can build wealth over the long term by making relatively small contributions while avoiding having your returns diminished by tax.
You can invest up to R30 000 a year and up to R500 000 over the lifetime of your investment.
Options available as underlying investment may vary between service providers, but most offer unit trusts that comply with certain criteria, like simple fee structures.
Individual share purchases are not allowed in TFSAs.
You can withdraw funds at any time, but focusing on the long term will ensure maximum reward.
A TFSA offers the flexibility of a standard discretionary investment without the tax implications.