Very rarely does a single investment secure an individual’s financial security, but rather a collective of investments each playing a role as part of an overall financial plan. When used correctly, a tax-free savings account can be a vital cog in that plan.
Importantly, investors must understand the role of the product in their overall financial plan. The benefits are negated if the capital is not left to compound for as long as possible – we are not talking months or years but decades. You don’t have to take my advice, but please lend your ears to legendary investor Charlie Munger, who iterates this by saying “the first rule of compounding is to never interrupt it unnecessarily”.
The goal would be to fully utilise the R500 000 allowance as soon as possible , and then leave the capital to compound for as long as possible. Due to the benefits of a TFSA only being realised if left to compound for the long-term, the product is especially beneficial for younger generations.
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