BY DESIGN, TAX-FREE INVESTING IS A NO BRAINER

As a VISI reader, you know the value and appeal of exceptional design. One of the best-designed products available to all South Africans is a tax-free investment (TFI). In a TFI, you pay no tax on your investment growth (interest income, dividends and capital gains), which ultimately boosts your investment return over time. Now that’s something to put on your vision board.

MAKING THE MOST OF YOUR TFI

We encourage investors to take full advantage of their annual tax-free allowance every year. The current tax year ends on 28 February 2022. So, you still have time to ensure that you take full advantage this year of the valuable perk offered to us by government to encourage us to save – an annual allowance of R36 000 that can be invested tax free.

We also encourage tax-free investors to build up towards their lifetime limit as early as possible in their investment journey and then to keep that money invested for as long as possible as they build up to a healthy nest egg.

FIRST IN

If you have extra money to invest for yourself or your children, first consider taking advantage of your annual tax-free allowance. By starting to invest tax free early, you give yourself the best opportunity to begin reaping the benefits of compound interest early on your investment journey.

When you invest tax free, you can withdraw your cash whenever you like, but you can’t put it back. All amounts invested count towards your annual (R36 000) and lifetime (R500 000) tax-free limits regardless of any withdrawals you make. In other words, you can’t ‘replace’ the money you withdraw with a new investment. So, we encourage you to start building up to that lifetime limit early to maximise the time it has to benefit from compound interest.

LAST OUT

A TFI is money that you ideally want to leave invested for as long as possible. The longer you leave your money invested tax free, the harder compounding will work for you. So, for example, if you are saving for short-term goals such as a holiday or a deposit on a car, do so separately and let your TFI simmer.

Investing over multiple decades also en-ables your money to withstand the effects of short-term market volatility that is typical of the financial markets. Over the long term, the bumps smooth out and the overall trend is for your money to grow.

GOOD THINGS COME TO THOSE WHO DON'T WAIT TO INVEST