Seeking capital growth

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A Fin24 user wants to try and get a better return on his money than the 1% he currently earns. He writes:

I recently moved back to SA having sold my business in the UK.

We live off the proceeds of the sale of our UK home. The proceeds from the business sale are still offshore, on call, earning 1%.

I fear that, besides being a paltry return, the capital needs to be invested for capital growth (I do not require income) so as to avoid the vagaries of inflation.

Greg Stockton, regional manager for the deVere Group, responds:

Firstly, you need to consider whether the offshore investment asset is well-structured and protected from a tax perspective.

Secondly, you will need to decide whether your money will be really working for you.

From a tax perspective, there are a number of structures that could be advantageous for people residing in South Africa - specifically addressing capital gains tax, income tax and estate duty (inheritance tax) issues.

An overseas pension trust could potentially help SA residents with all of these issues.

If you have a sizable offshore asset balance, or looking to take advantage of the new R10 000 000 transfer allowance, you should certainly investigate this further.

In contrast, leaving your money in a bank account at 1% interest means that in real terms you will lose money and reduce your buying power year after year as it is eroded away by inflation.

As Warren Buffet said: “Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”

However, you must be careful not to exchange the relative safety of a bank account for something more risky.

We advise careful and thorough planning with an authorised financial adviser (with the relevant FSB qualifications) who will take the time to ascertain your financial needs, requirements and expectations to create the right balanced strategy of safety and growth.

Always remember that the financial world changes rapidly, so receiving regular updates from your financial adviser is recommended to help you react to any changes that could affect your portfolio negatively or positively.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

 

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