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Where to invest R200k for maximum growth?

Nov 16 2016 01:51
Liziwe Ndalana

A Fin24 user wants to invest R200k for maximum capital growth over a three to five year period.

He writes: "I have R200k to invest, looking for max capital growth over a three to five year window period (can be a bit longer if need be). If applicable, will reinvest all dividends."

Thandi Ngwane, Head of Strategic Markets at Allan Gray answers:

The first thing you need to consider is theproduct that will work best for your needs, which in your case probably means choosing between a unit trust or an endowment. You should only consider using an endowment if your marginal income tax rate is higher than 30% as it offers tax benefits for high income earners.

On the downside there are complex restrictions that limit when you can access your money and how much you can add to your investment.

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A unit trust has none of these restrictions: you can access your money at any time and make changes to your investment whenever you need to. But it does require that you stay disciplined and allow your investments to grow.

You may also consider investing directly in companies, but you need to invest a considerable amount of time to research and analyse stocks – in addition to competing with professional managers who do this every day. A unit trust does all of this for you.

ALSO READ: Passive income: Myth or investment magic?

Once you have chosen a product you'll have to select the underlying investments that will go into that product. For 'max capital growth', and considering your time frame, you may want to look at investing in higher-risk assets. Typically, equities deliver more growth over the long term than bonds, money market instruments and property - but you need to be comfortable with the fluctuations that accompany them.

If you can live with significant stock market movement, the possibility of losing your capital, and you do not need the money for at least five years, equities may be your best bet.

ALSO READ: Investing in uncertain times

As an alternative to equities you can also consider a balanced fund, where an asset manager invests in different asset classes on your behalf. Balanced funds offer long-term growth with moderate fluctuation if you are uncomfortable with the volatility in equities.

* Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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allan gray  |  money  |  money clinic  |  unit trusts  |  investments
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