dear reader,

Thank you very much for writing to us.

If your risk appetite allows you to take the risk, I would definitely say that you should consider long-term, high-cap funds. Sanlam has a risk profile questionnaire that you can use to assess your risk appetite.

You have the opportunity to take risks, as the investment will be held for more than 10 years. Risk capacity is the maximum amount of risk a person can take and risk appetite is the amount of risk a person is willing to take.

You must be able to weather short-term volatility and stay invested during tough times. Investments will be to hesitate Investments will be will decrease in value. Investments will be there are periods when it struggles to outperform even a money market fund.

The most important thing to remember when investing in a long-term fund is to keep investing, never take emotional decisions, never sell when the fund is not performing, and stick to your game plan.

Below I will show you a comparison of short term, medium term and long term funds. This will give you a small idea of ​​what to expect when investing in a long-term fund (volatility, not returns). Short-term funds aim to provide capital protection and some growth to keep pace with inflation, medium-term funds aim to provide CPI+5% and long-term funds aim to provide CPI+6%, even though their benchmarks are usually linked to an average or index .

Below I have compared four different funds from the same fund manager. The red line is a money market fund. The gray line is a balanced fund. The black line is a local equity fund and the teal line is an offshore equity fund. You’ll find that the more aggressive funds have had a good three-year period, but not so much over a five-year period. The real test is over a 10-year period, and as you can see, the offshore equity fund outperformed the other three funds. Local equity funds and balanced funds had similar growth, while the money market came in fourth. The only reason I am showing you this is to illustrate the fact that long-term funds cannot be invested in short-term funds.

Profit for one year

Three-year return

Income for five years

10-year return

Where to invest?

Mutual Fund vs. ETF/Index Fund

Mutual funds are actively managed, while ETFs (exchange-traded funds) are passively managed.

The index tracker will track indices like S&P 500, FTSE 100, World Equity, Emerging Markets and so on.

Each ETF can only track one index. A mutual fund manager can invest in a variety of assets within a single fund, such as stocks, cash, bonds, property and offshore. Both of these investments offer a great way to access the market and start investing, and a combination of the two can be profitable.

I like using ETFs for long-term investing as the costs are kept to a minimum and you get overall diversification between different companies.


Use different ETFs/mutual funds to diversify your portfolio. Look at a variety of geographic, currency and sector funds. Keep it simple and don’t use too many tools. Do not use funds that are correlated with each other. Fund newsletters will show the different companies invested in and you can see if there is a match.

In whose name should I invest?

If the money is in your name and you transfer it to your son’s name, it will be considered a donation. According to Sars, the person making the donation (the donor) is liable for the donation tax of 20%, however, if the donor fails to pay the tax within the payment period, the donor and the recipient are jointly and severally liable (Section 59 Income Tax Act ).

What you can do is put the money in your name and use your donation allowance of 100,000 rand per year to transfer it to your son’s investment every year. There are some other tax considerations, such as interest and capital gains tax, so check with a financial advisor or your accountant about these taxes.

Feel free to contact me if you need more information.

Happy investing!

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