What sort of returns can I expect?

STF1357
By STF1357 January 6, 2015 14:29

What sort of returns can I expect?

As with any investment, the kind of investments you make largely determines the level of returns you can expect. The general rule of thumb is that low-risk investments bring lower returns and high-risk investments can bring great returns but can also lose some or all of your money.

Low-risk, low-yield investments such as fixed deposits from a bank and earn around 6% a year. High equity unit trusts would likely bring far greater returns, but if the markets underperform, so will your investment.

Generally, the longer you can leave your savings or the further you are from retirement, the more risk you should take. As you approach retirement you don’t want to risk your life savings in the hope of better returns, so you should adapt your existing portfolio accordingly. The same rule should apply to tax-free savings.

Risk means taking a chance that you could lose your capital, but taking that chance is rewarded with a probability of higher returns. The JSE has averaged an after-cost return of 18% over the past 20 years. Assuming that remains the case, if you invest R30 000 at the beginning of each tax year for the next 17 years your account would be worth R2.6m when you reach your R500 000 lifetime limit! Your R500 000 of contributions would have multiplied fivefold.

And remember: each member of your family can open such an account, no matter how old.

STF1357
By STF1357 January 6, 2015 14:29
Researching Capital Markets & Financial Services

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Researching Capital Markets & Financial Services