MONEY CLINIC | I have R80 000. What is the best way to invest to ensure growth?

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The most important question you have to ask yourself is: What is the objective with these funds?
The most important question you have to ask yourself is: What is the objective with these funds?
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A Fin24 reader with R80 000 and minimal knowledge on investing seeks to find the best investment option. She writes:

I have R80 000 and would like to know the best way to invest the money and get a bit of interest or dividends from it. I don't know much about investing, but I have been getting emails from my bank (Absa) about tax-free investment returns. I've also heard a lot about EasyEquities and also these SAB Zenzele Kabili shares.

Hester van der Merwe CFP®, Financial Planner of the Year and financial planner for Ultima Financial Planner, responds:

Thank you for your enquiry. The most important question you have to ask yourself is: What is the objective with these funds? 

If your aim is to have some cash available in case of emergency, then you should keep the amount in an account where you have direct access to the money. Availability of the funds will then carry more weight than the returns on the amount.

However, if your objective is to have capital growth on the amount over a certain period, you can look at products that will focus more on the returns. It is important to note that the capital value of your investment will fluctuate as the market moves if you include more growth assets (i.e. shares) and not to make emotional decisions during times when the market is down.

A tax-free investment is a product where you will not pay any tax on growth or capital gains.

There are a few points to take note of:

  1. You are only allowed to contribute a maximum of R36 000 per tax year and a maximum of R500 000 during your lifetime. This means that you cannot invest the entire amount of R80 000 in a tax-free investment now, without incurring a penalty on the excess. 
  2. You should choose the underlying assets in your tax-free investment carefully to ensure that you derive the maximum benefit from your investment.
  3. This is not a suitable product to "park" funds since you are not allowed to replace a withdrawal. In effect, this means that you are reducing your lifetime contribution of R500 000 if you withdraw too soon.

EasyEquities is an online platform where you can buy shares. They do not have a minimum required investment amount and no monthly brokerage fees. You are responsible for the selection of the underlying shares that you include in your portfolio. They offer various products that can be considered.

SAB Zenzele Kabili is the new BEE scheme of South African Breweries. Any qualifying person in terms of the Broad-based Black Empowerment Act can buy shares in SAB Zenzele Kabili.

I trust the above has given you some clarity on what to do with your R80 000. However, if you are uncertain how to ensure that this investment fits in with your comprehensive financial plan you should consider contacting a Certified Financial Planner® to assist you.

Questions may be edited for brevity and clarity.

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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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