The most obvious perk of a tax-free investment is that you don’t pay any local tax on your investment returns – both while invested and when your investment pays out. That’s zeroWhile this is a fantastic benefit made available to all South Africans by the government, we believe the real value lies in understanding how to make the most of your tax-free opportunity. Our analysis shows that four key strategies could help you double the returns from the same taxable investment over the long term.
However, for most investors, a less volatile experience may be the preferred route to navigating market ups and downs over multiple decades. As such, choosing a growth-oriented multi-asset fund such asis the most likely option to help you remain invested while achieving returns well in excess of inflation.
Worth noting is that, over this period, despite never being fully invested in equities, the Fund has outperformed the JSE All Share Index’s performance of 13.7%. .A proven track record shows that you should prioritise taking advantage of your annual tax-free investment allowance, which is currently R36 000 per year and R500 000 per taxpayer in total, as early as possible.
Our analysis, based on certain assumptions, shows that if you keep the money in the tax-free investment until your child turns 18, the value of the tax-free investment will be 22% greater than the equivalent taxable unit trust investment. By age 30, this difference widens to 42%, and by age 65, the investment would be more than double the value of the same taxable unit trust investment.
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