What ARE OFFSHORE ACCOUNTS?
When You are Young, You want to try to make sure that a good Funds of your investments are global, You know why? because diversification lowers your risk,
so to simply it Offshore is investing your money overseas and it is safer to invest in 10 Companies than one, it is safer to invest in a hundred companies than 10, So you don’t get much more diversified than investing in every single major company in the world
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Investing in a global fund also means that you start to protect yourself against the country risk the possibility that our own country’s economy might go through tight periods, even if you are 100% certain that all of your expenses will always be in Rands, many of the Products that you need to buy ultimately be in Rands, many of Africa if our currency becomes less valuable, that hurts You, having everything else you own is in South Africa, so you want to put as much Offshore as you can balance that risk ,
What is the ROLE of Global Funds?
The is best Because it Funds give you the incredible upside of being able to invest in the most powerful businesses in the world, regardless of where you were born, think about the most innovative companies you know of, and how many of them come from other countries, APPLE, TOYOTA, VW, UNILEVER, AMAZON TESLA and you can buy a piece of all of them,
You can choose between rand dominated investments or an actual Offoshre account, A RAND denominated account is the easiest place to start, try a called website like Fund Smith Equity Fund and read more there, You just open up one of these accounts online at a local investment company and it invests in global equities for You, Ask You Good Personal Financial Advisor for more, Later, looking at an Offshore account is worth it because it could save you a bunch of money in Taxes, But also a Ball Ache and right now you just need to get started and see how they work,
ARE THERE LIMITS ON OFFSHORE ACCOUNT?
Yes, there are limits to how much money you can invest offshore and it is about a million rand a year, just like Tax-free in South Africa, limit its R38 000 rand a year, but once you are at that level, you should be checking your strategy with a Good Personal Financial Advisor
The Taxfree wrapper
Wondering what is a tax-free wrapper? so when you open your first freedom fund investment, there’s a special tax wrapper you probably want to use, The Tax-free savings account, its similar to Retirement Annuity, There are basically a special Tax Wrapper around any Normal Savings or investment account that the government put in place to incentivize people to save, they are also sometimes, called Tax free investments,
So while a retirement annuity is invested with pre-tax savings a TFI IS INVESTED WITH post-tax money, that means it is not going to change your income tax, where you get the tax breaks, is on tax returns, of the investment that you don’t pay capital gain tax or income tax, or dividend tax when your investment grows or pays you dividends
Let do me A quick Example of how does this work
- At The Start of the Year Dr. Lubambo Pandle invests R10 000 in shares in a promising Financial Service Provider company called GPF ADVISORY SERVICES (PTY)LTD
- by December The investment has a grown 30% to be worth R13 000 and he sells his shares,
- in that year the capital gains tax rate happens to be 18% still with me? so he would normally pay 18% of R3 000 or R390, to SARS
- BUT because he invested through a tax-free investment account, he doesn’t have to pay the tax that R390 And can instead spend the money on whey protein supplements cause he’s a fitness guru too LOL
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Hope this explain worked and made you understand the whole thing
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