Everybody loves a free lunch – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

If you’ve been tuning in to the BizNews Power Hour – if not, you really should be – you will have undoubtedly come across numerous nuggets of wisdom, dropped by the knowledgeable and informed guests.

One such guest was Candice Paine of PR Financial Services. Talking about tax-free savings and investments, Paine unpacked the often overlooked investment vehicle in great detail.

What piqued my interest was the mention of it being the only ‘free lunch’ in investing. With regular investments, the government likes to help itself to some of the fruits of your labour – in the form of capital gains tax.

As a junior or beginner investor, it’s already difficult enough to save and invest without someone fiddling and eating out of your plate.

Tax-free savings accounts and investments allows anyone to save up to R36,000 a year – with a lifetime limit of R500,000 – completely tax free. According to Candice Paine, tax-free savings accounts are open to anyone – regardless of your age or financial status.

While that may sound rather limiting, the free lunch kicks in when it comes to the returns. Speaking to BizNews, Paine said ‘As that money grows, all the returns on that investment are tax-free’.

With other investments, capital gains tax helps itself to the interest income that your investment has gained. Paine says that the key to successful tax-free investing is to ‘stay in the investment as long as you can, have the benefit of the compounding and obviously no tax’.

Aneesa Razack, the CEO of Share Investing at FNB Wealth and Investment seems to agree. ‘A tax-free account can, and should, be one of the cornerstones of any such balanced financial plan’.

Many people utilise tax-free savings to invest – like Candice Paine recommends – for the long-term. Starting a college fund for a young infant now, will see them covered when it comes time to graduate high school. It can also provide a great booster to your retirement fund.

I’ve overlooked this fantastic investment vehicle for quite some time. Not for much longer, though. I’m tired of paying for my lunch.

Last week, I asked you to send me your finance and investment queries. Here, Johan Steyn, CFA* of Stellenbosch University, and Tanita Conradie* of Brenthurst Wealth Management, share their expert advice by providing answers to your questions.

Rae asked,

Do you have any quick advice on the following re the best low-cost (i.e. I don’t need fancy trading features as I plan to buy and hold for the long-term next 5-10 years and don’t want access to research etc.) online trading services to use for:

1. Buying shares in the USA market, and ideally a platform for buying shares in other markets

2. Buying ETFs globally (I want to buy 1-2 cannabis ETFs so are researching those at the moment)

3. Buying penny stocks (mainly USA)

Johan answers,

As a South African based investor, I’d look for the easiest option, in terms of hassle free account set-up and low costs. You can get access to a wide range of US listed shares and ETFs on the EasyEquities platform, which is one of the better low-cost options. It is also relatively easy to transfer rands to the USD account using their facility.

I know on the Sanlam iTrade platform you can get access to 20 global exchanges, but there are minimum broking fees per trade you need to take note of. The Standard Bank global share Webtrader platform gives you access to 31 international exchanges. However, there are a multitude of fees you need to navigate, which may make less worthwhile if you investing smaller amounts.

Marie asked,

With Covid-19 being a reality, how do I ensure my loved ones are looked after if something happens to me?

Tanita answers,

Firstly, you need to make sure that you have a valid will in place. Passing away without a valid will, means your estate will be administered in terms of the Intestate Succession Act. In short, the court will have to decide who will receive the benefits from your estate and this could take months – or even years – to be finalised.

Having a valid will in place gives you the freedom of deciding how your assets will be distributed among your loved ones, and who you would like to be the executor of your estate.  If you have children who are minors, you need to nominate a legal guardian to care for them.

Estate planning is an important process when drafting a will.  This will help to reduce any unnecessary taxes and fees. There are numerous considerations to take into account with estate planning. which can be discussed with your attorney and financial adviser. For example, if you are the primary provider for your dependents or if you have more debt than assets, a life insurance policy can assist with  liquidity in your estate.

Having a valid will in place and with the assistance from qualified professionals, you will have peace of mind that your loved ones are looked after.

If your concern is the risk of prolonged illness and possible loss of income or unexpected medical bills, make sure you have sufficient savings in an emergency fund that can be accessed with ease. You can use different savings or investment products for such and emergency fund but make sure money can be withdrawn at short notice when you need it. 

  • Johan Steyn, CFA is a lecturer in investment management, from the department of business management at Stellenbosch University. He holds a Masters in investment management and has a background in fund management. Tanita Conradie is a financial advisor at Brenthurst Wealth Management.

Have a question about share investing? Write to me at [email protected].

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