I have managed to save an amount of R500 000 over the last few years and have been storing it in my access bond.
I am going to sell my flat and, therefore, want to move the money out of the access bond and into an investment.
I am not planning on purchasing another property soon. I am 30 years old and want to invest it for the next 20 to 25 years.
I have looked at Coronation Fund's balance fund portfolio and it shows that R100 000 invested about 17 years ago would be worth around R1.3m now.
All things being equal, can I expect the same sort of return if I choose this investment vehicle, that is R500 000 invested now will accumulate in excess of R6m in 20 years?
Also, what would be the tax implications for the gains on my initial investment be if I choose to take it out when I am 50 (in 20 years time) or 55 (in 25 years time)?
Raul Jorge CFP® of PSG Tyger-Waterfront responds.
It is important to note that the returns mentioned are not guaranteed and past performance is not necessarily an indication of future performance.
Therefore, it cannot be said with certainty that you could expect the same sort of returns.
If you were to invest these funds in a unit trust (which appears to be your intention) and withdraw the funds at a later stage, tax would be levied on the gains made.
As legislation currently stands, capital gains tax for individuals is levied at an inclusion rate of 33.3% and a maximum effective rate of 13.3%.
However, an annual non-cumulative exclusion of R30 000 (R300 000 at death) can be taken into account when calculating your tax liability.
For further details regarding capital gains tax click here.
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