Dear Valued Client
Over the last week a couple of News Reports made headlines which are of importance to our clients:
1.) ABSA CLOSES ITS MONEY MARKET UNIT TRUST:
https://www.businessinsider.co.za/absa-closes-money-market-fund-2021-4
Those of you who have funds invested in the ABSA money market unit trust would have received a letter from ABSA to inform you that their money market fund will be closing and that you have until 1 July to decide as to where you want to move your funds.
During a recent survey, the bank found that many clients were under the impression that their money market fund offered a guarantee on the capital as well as the interest.
This is however incorrect.
For many years, conservative investors preferred money market funds as it offered consistent inflation beating returns without taking risk.
However, since interest rates were cut to a 50-year low to provide relieve to those affected by the economic impact of covid19, these investors saw their returns effectively decrease from around 5-7% annually to about 3-4%.
Thus, there exists now a bigger risk for investors who draw down an income of 4% and more to start eating into their capital.
So, what is the solution?
Over many years, our practice has identified and recommended investment funds that offer the same (or better) benefits than a money market account, namely, inflation beating returns with minimal volatility.
An Investment that is not solely Interest bearing so to minimize the Tax implication on Interest earned.
One such fund is the Coronation Strategic Income fund.
From the graph below you will see that over the 1-, 3-, 5- & 10-years periods this fund has consistently beaten inflation by 3% +, it is also important to note that this fund is not 100% Interest Bearing so the Tax liability will also be reduced.
| Average Annual Fund Performance for the period ending 15 April 2021 | ||||
| Name & Sector | 1 Year | 3 Year | 5 Year | 10 Year |
| Coronation Strategic Income Fund | 7.4 | 6.6 | 7.5 | 8.2 |
| CPI | 2.9 | 3.8 | 4.3 | 5.0 |
You must also remember that it is important to have growth assets in your Portfolio as well.
The graph below illustrates the returns of some of these growth funds.
It is very important to understand that your investment will still be invested Conservative or Cautious even if we include a small percentage of these growth assets in your Portfolio.
|
Average Annual Fund Performance for the period ending 14 April 2021 |
||||
|
Name & Sector |
1 Year |
3 Year |
5 Year |
10 Year |
|
Coronation Balanced Defensive Fund |
23.1 |
7.9 |
6.6 |
9.1 |
|
Coronation Top 20 Fund |
56.7 |
10.4 |
9.2 |
11.0 |
|
Nedgroup Investments Flexible Income Fund |
10.9 |
8.2 |
8.1 |
8.4 |
|
Old Mutual Global Equity Fund |
29.8 |
18.1 |
12.8 |
20.4 |
If you are one of the ABSA clients who received this notification, feel free to contact us for a free consultation to discuss your options.
THOSE WHO WORK FROM HOME, COULD CLAIM EXPENSES BACK FROM SARS:
Due to lockdown, many employees were forced and continues to work from home during the 2020 tax year. If you meet the criteria mentioned in the above article, you could potentially claim some of your home expenses back from SARS.
Unfortunately, we have not received official details from SARS yet but will keep you posted once we have more information.
For now, we can recommend reading the above article for more info and if you meet the criteria, keep track of the claimable expenses mentioned until tax season opens in July 2021.
PLEASE STAY SAFE & TAKE CARE OF YOURSELVES & YOUR LOVED ONES
Kind Regards
TvZ Financial Planning Team