I have R4m in a family trust currently, in a money market account.
This should grow in monthly increments of around R75k over the next 24 months.
In addition I enjoy a more than adequate income and do not anticipate to draw income from investments over the next five years.
In my personal capacity I have R1.7m invested in unit trusts and ETFs and R1.6m in RAs. My home is fully paid and I am debt free.
I am 59 and have a relatively low risk aversion.
The question is how to invest the funds in the trust, in unit trusts or similar with reference to asset allocation both locally and offshore.
Sanlam Financial planning analyst Vivian Govender responds:
If you view your entire portfolio as the money in the trust, unit trust investments, ETFs and RAs it will bring you to a grand total of R7 300 000.
You have indicated that you are a conservative investor that is debt free with no income need over the next five years. You will reach age 65 after this period and I assume would want to draw an income from your investments.
Based on this the main objective of your portfolio over the next five years would be growth in excess of inflation.
This would be a good time to establish your current total asset allocation and how this compares with your investment profile. It will indicate whether you are currently over invested or under invested in the various sectors of the market and provide the ideal opportunity for you to re-align your entire portfolio to your investment profile.
Given that the investment in the trust will be a large amount, a possible option would be to invest a portion of these funds in a direct equity portfolio through a stock broking firm. This will provide active portfolio management and the fee structure may be more favourable compared with that on a unit trust platform.
This can form a portion of the equity exposure needed in your portfolio. When income becomes a greater need, the equity portfolio can be re-aligned to provide an income (through dividends).
A unit trust platform can be used to invest the balance of the funds to diversify among other asset classes such as bonds and cash. This will also provide access to offshore funds. Ensure that you further diversify your offshore exposure through the various asset classes.
Currently the funds invested in the trust are earning interest, which is fully taxable in the hands of the trust and reduces the real return before inflation has been taken into consideration.
The equity investments may prove to be more tax efficient as tax on dividends are levied at 15% and capital gains tax is only payable at the sale of the investment.
Consult with a reputable investment advisor that will analyse your entire portfolio and structure the investment in the trust in line with your overall investment profile.
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