Two winning ways to make your money grow. You don’t need an expensive broker or investment consultant to tell you what to do with your money – just follow these two investment tips and you could save and make a fortune:
1. Get the best tax-free investment on your money available – Park excess funds in your bond account. It beats any other savings scheme hands down. If you invested R10,000 in a 12-month fixed deposit account you would earn around 11.5%pa. On an investment of R100,000 that would amount to R95.83 a month or R1,150 a year. The bad news is that the interest on this income woud be taxable. But if you invested R10,000 in your R100,000 bond account you would save yourself R135 a month or R1,620 a year – tax-free. This means that at the current bond interest rate of 15.5% you would save interest of R108,539.76 on your bond over 20 years. The best time to invest money in your bond is during the first two years of the bond’s life, because this is when you will mostly be paying back interest rather than capital. Any capital repayment then cuts the repayment period of the bond significantly. Use your bond account as a savings account.
2. Retire rich – invest in an offshore pension scheme as a rand hedge.Since 1995 the rand has depreciated at a rate of 15.8 percent a year against the dollar. And last year the rate of depreciation was even worse -38%. In 2003 the rand gained over 10% against the dollar, but it is expected to start depreciating again, based on its long-term trend due to the political risk in the country. This means your offshore pension will enjoy a long, predictable period of sustained growth and will yield excellent returns for your retirement. Bear in mind that pensions are payable anywhere in the world, so even if you retire to the Mediterranean, you will get it. Choose a well respected fund from a reputable company to avoid losing your savings. Start investing as early as possible. Every five years extra that you are a member of a fund, the payout has been known to double. Look at the US and UK – economics that are expected to strengthen over time.