JM Pandor writes:
I am 42 years old with my own business and a net income of R500 000. I require as much passive income as possible with tax benefits.
I have numerous shares but have a problem following them regularily due to my business operations. I am certain I miss out on opportunities in the stock market. I feel I may need a reliable broker who can buy and sell as opportunities arise.
Our answer:
It is not very clear why you require an income since you’re still earning from your business. I assume that you actually require growth on your investments rather than income.
We would strongly recommend that you focus on capital growth at this stage of your life. Presumably you’re still some way off retirement and the longer you have to invest for growth, the higher the growth profile you can adopt.
You also mention that you already have a share portfolio. This is excellent, since you’re already familiar with share investments. In our opinion, the best way of building wealth over time is by investing in shares. In addition, the dividend stream from these shares will, over time, become a very good source of tax-free income especially if you focus on companies that are good dividend payers.
If you continue to add to your share portfolio over time, the risk of market fluctuations will also dissipate. We would not recommend you to be too concerned about market fluctuations — these will happen — but if you can just ride them out, your capital will grow pleasingly over time.
If you do not have time to look after your shares due to work pressures, appoint a portfolio manager at your stockbroking company to do this on your behalf. You should be clear about the mandate: what the manager is allowed to do on your portfolio and the fees upfront.
You should have access to this portfolio manager to discuss your portfolio. You don’t mention how much capital you have available to invest. Most portfolio managers require around R500 000 to run such a portfolio.
An alternative to having a managed portfolio, is to utilise the research and alerts on a stockbrokers website. It is possible to set alerts on the trading websites of brokers to let you know of certain events or of price movements on your shares. In addition, you should also be receiving daily ideas and research from your broker.
If you want to follow a more passive approach you can invest in the JSE by buying index traded funds such as Satrix.
These are funds that give you passive exposure to the largest shares on the JSE and if left to grow should reward you handsomely over the long term.
Sunel Veldtman is a director at Barnard Jacobs Mellet Private Client Services
When it comes to investment, many of us have questions but nowhere to turn for answers. Write to M&G Money at [email protected] and we will ask the experts