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Pieter Koekemoer

Coronation Head of Personal Investments

Living through a global health and economic crisis has taught us not to take anything for granted. Many South Africans have suffered deeply, but one thing that can’t be taken away from us is how we respond in times of crisis. Focusing on doing the best we can with what we have, and planning ahead to secure our futures, is something we can do to regain control of our lives. And investing your hard-earned money tax free is an opportunity to do just that.

The tax year ends on 28 February. So, you still have time to take full advantage of the valuable perk offered by government to encourage us to save – an annual allowance of R36,000 that can be invested tax free.

When you invest tax free, you pay no income, dividend or capital gains tax on your investment gains, which boosts your realised investment return.

In this low interest environment, it’s better to invest tax free than to save tax free

You could choose to save tax free through a bank, but then your money can only ever earn a predictable level of interest. And given how low interest rates are currently, you have a better chance at beating inflation and growing your money over time through investing in a market-linked option, such as a Coronation Tax-Free Investment. Your money will be managed by experts and exposed to assets with a higher expected rate of return, such as shares, bonds and listed property. It gives you the potential to grow your wealth over time through the power of compounding. While returns are not guaranteed, history has shown that long-term investors are better off investing in the stock market than saving in a bank account.


The smart approach is to invest for the long term

You want your money to work as hard as it can for as long as possible and be exposed to the best growth potential over time. But thinking long term is easier said than done, especially during a global crisis. It’s sometimes hard to stay committed to future goals and many investors do not invest for long enough to experience the full benefit of staying the course.

It’s easier to stay committed if you choose a tax-free multi-asset unit trust fund

If you make your own investment decisions, you may find it difficult to make consistently good decisions over time. The key to sticking to your financial goals over time is to take a simple, manageable approach.

A solution is choosing a tax-free multi-asset unit trust fund, such as the Coronation Market Plus Fund or the Coronation Global Managed Fund. They are managed on your behalf by skilled investment professionals who identify the best long-term opportunities available across different asset classes. A multi-asset fund has a broader mandate and more tools at its disposal with which to achieve your desired result.

Unrestricted access to your money

When you invest tax free, you can withdraw your cash whenever you like. But you can’t ‘replace’ the money you withdraw with a new investment. So be mindful that all amounts you invest count towards your annual (R36 000) and lifetime (R500 000) tax-free limits regardless of any withdrawals you make.

So, take control of your future in 2021 and invest tax free

You can start investing via a monthly debit order (from as little as R250 with Coronation) or you can make lump-sum investments from R5 000 to R36 000. If you have an existing tax-free savings account with a bank, you can switch it to a tax-free investment at no cost.

To find a tax-free investment fund that suits your needs, speak to your financial adviser, or click here and follow Coronation’s simple online investment process.

Coronation is an authorised financial services provider.

This post and content is sponsored, written and provided by Coronation Fund Managers.