In life we need to be defined and accepted by who we are and not by what we do or achieve. This, is selfacceptance
So the budget speech has come and gone. How do you benefit?
- Tax brackets move again; individuals will pay less income tax.
- Retirement fund tax has been scrapped. The funds in your retirement annuities and pension or provident funds used to be 9% on interest and property income. This is now gone and is a very good thing. It makes all retirement fund vehicles very economical investment tools. (As long as the vehicle is efficient)
- The estate duty abatement has been increased – from 2.5 to 3.5 Million Rand.
- The amount for individuals to make tax-free donation has increased, up from R50 000 to R100 000.
- The amount of tax-free interest or rental income you may receive from your investments has increased yet again.
- Capital Gains Tax annual exclusion amounts have increased slightly.
It is the first one that you will initially feel in real terms.
Investment issues –
Thoughts and lessons about yields and capital growth:
One of Marriott’s Funds, their International Income Growth Fund, currently projects a forward yield of 4.5%. This means that if you have $100 000 in this fund, you will receive a yield, or income, of $4500 for the year. It is paid out bi-annually, so you get about $2250 paid to you, or re-invested, twice a year. Many people would say; “that is a poor performance, only 4.5% per year?”
Here’s the thing: This yield has nothing to do with capital growth. That is a separate function. The yield comes from the dividends and rental and interest incomes of the international companies held by the fund. Over a 4 month period last year from July to end October, this same fund experienced a capital growth of 15%, in US Dollars. Over just these four months! When seeing the growth I phoned the fund manager and asked him if the figures given to me were incorrect. He said no.
Warren Buffet, that ridiculously rich American investor, always said that price will follow yield.
Great funds will pay an income while experiencing capital growth.
Monthly financial advice:
Pay an extra R100, or even R50, into your bond/vehicle finance scheme each and every month. Even an extra R20 pm over another 15 years will make a difference. In order for this to work two things need to happen:
Firstly, it must be easy to do. So if you haven’t yet done it, set up your home internet banking to facilitate these transfers.
Secondly, your bond cannot be a place for withdrawals for anything but emergency expenditure. The extra payments must stay there for the rest of the bond’s life.
Until next time
Please note that all the views expressed in this publication are based on my opinion and no action or advice is implied or intended.