At Ascent, our investment philosophy is to keep it simple, focus on long term and invest with renowned, trusted and transparent managers who have a proven track record over all financial market conditions. We are however, always looking into different investment opportunities and investigating whether they might have a place in your portfolio. Here are some of the alternative investments we have considered.
Prescient Optimized Income Fund
A “tax free” money market like fund. A low risk income fund that is set up to provide a tax-free income, and aims to achieve slightly higher than money market like returns after tax.
This investment is appropriate for:
- money that you do not have a longer-term strategy for and therefore need something more conservative
- money that you would otherwise have in money market
- you are a high tax payer
larger amounts that would attract taxable interest over the R23,800 (R34,500 if you’re over 65) annual interest exclusion.
Owning other properties, including residential, with the intention of earning rental income and having the property price increase over time. These investments can be a useful part of your investment portfolio, especially if you can take out a loan against the property. However, to make sure that it is tax and cost efficient, there are numerous things to consider:
- What percentage of your overall investments should this be?
- Should you have a bond against the property and for how much?
- How can you limit the tax you pay on rental income?
- What costs are there when you buy and sell the property (these could be up to 10%) and what ongoing costs will there be?
What risks are involved? (location risk? Risk of not getting paid rent? Tenant demands?)
Section 12J investments
Investments made into Section 12J qualifying venture capital companies for at least 5 years can be offset against tax payable, effectively allowing you to lower your tax to zero. While there are a lot of Section 12J companies now available, most do not have quality investments or secure business models. We have identified some that we feel are higher quality and the underlying investments can range from relatively stable income producing assets to high risk but potential high return tech startups. While investing in a Retirement Annuity is still substantially more tax efficient, if you have a large tax bill (possibly due to the sale of an investment that has generated a large capital gain), this type of investment might be worthwhile.
Offshore Property funds
When looking for long term returns offshore, property can be a good alternative to equities. Most of the offshore property funds that we deal with focus on high quality retail and commercial properties situated in the main global developed world capitals. Having a portion of your offshore investments allocated to these assets can be a good blend with existing offshore equities. These investments can take a long time for returns to be unlocked however and some of them do have liquidity constraints.
There are often new and risky investment ideas, such as crypto currencies and stock futures. We however believe that unless you fully understand these investments and are willing to lose your money if the investment doesn’t work out, these seldom have a place in your portfolio. A more steady return over time is often better than making a quick buck.
Please contact your adviser if you have any questions on these alternative investments.