Page 30 - Waterfall City September Issue 2023

Waterfall City News

who understand that time is a critical Shares and exchange traded your family’s nest egg, but I would
factor when building wealth. funds (ETFs) listed on the encourage seeking assistance from
JSE a qualified financial adviser to guide
It is not down to the amount of Investors can enjoy exposure to you along the way.
money being invested alone. This is shares listed on the JSE through
especially relevant when considering a direct equity portfolio, which Personal Share Portfolios
adding securities to your family’s provides exposure to an index or (PSPs)
nest egg, as they have consistently portfolio of stocks (for example, A final option is investing in local and
proven to beat inflation over the ETFs) or a single share (affording offshore shares through a PSP. The
long-term more effectively than any exposure to a particular sector of benefit of a PSP is that it allows you
other single asset class. Most people the economy). Both ETFs and shares to structure your retirement funds
who consistently invest in securities provide passive income in the form of in such a way that you can invest
over the long-term are better placed either distributions paid quarterly (in directly in shares. No capital gains
to enjoy their retirement with far less the case of ETFs) or dividend income tax or income tax is payable within a
negative impact on their lifestyles. paid bi-annually (in the case of locally retirement annuity, so you can have
listed shares). direct exposure to shares without the
How investing in securities tax implications associated with a
contributes towards passive Shares and exchange traded separate direct equity portfolio.
income funds listed on offshore
Investing in securities over the long- exchanges Regulation 28 of the Pension Funds
term generates both capital gains Investors can diversify their exposure Act currently limits equity exposure
and dividend income. Capital gains by not only investing locally (in ‘SA in retirement funds to 75% (whether
are enjoyed when the value of a share Inc.’ shares), but by also investing local or offshore), exposure to local
exceeds the initial cost of purchasing in shares offshore. Individual or international property to 25%,
the share, whilst dividend income is a investors have various means to and foreign investment exposure to
financial return that investors receive invest in offshore shares and ETFs, 30%. There are additional restrictions,
whilst holding securities – in other the most common method being including sub-limits for alternative
words, securities not only provide a investing using their annual single investments and the percentage of a
financial benefit once they are sold (by discretionary allowance (currently portfolio that can be held in offshore
way of capital gains), but also provide R1 million per calendar year), whilst assets.
regular benefits whilst you are invested investors making use of trusts or
in them (by way of dividends). companies to house their offshore Holistic financial advice
investments can also make use of Since retirement planning requires
Receiving dividends every quarter institutional investor facilities. holistic financial advice, it is advisable
or every year is an excellent passive to consult a financial adviser to ensure
income source, and hence, a key Investing in offshore securities that your family’s nest egg is well
asset class to consider as part of can contribute meaningfully to positioned to deliver on your needs.
your nest egg. An added benefit of
earning dividend income whilst you
are contributing towards retirement
is that it provides an opportunity to
reinvest these funds into securities
when they are attractively priced,
in turn increasing your ability to
generate further dividends in the
future. Receiving dividend income
during your retirement also limits the
need for you to sell shares to fund
your expenses (which would trigger
capital gains tax).

Factors to consider when
adding securities to your
portfolio
There are different ways of
incorporating securities into your
family’s nest egg:

28 Waterfall City Issue 9 2023