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Frequently Asked Questions

Everything you need to know about investing

Many people who are new to saving and investing, are curious about the difference between saving in a bank account and investing in funds.

Saving is when you spend less money than you earn, leaving you with extra money in your bank account. It’s useful to have some money saved in this way or set aside in a money market account in case of an emergency. Savings in a bank or money market account normally earn less interest than inflation, so it’s likely that it will not keep up with the cost of living over the long term. So, while it’s fine for the short term, it may not be an ideal long-term strategy to keep the majority of your money saved as cash.

Investing is when you use your money to buy assets that may grow over the long term, beating inflation.

Both saving and investing are necessary, and each has its own place within your financial plan, but if your goal is to grow wealth, you might want to consider investing.

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Retirement is when employees stop working and then go on to live from retirement packages and other savings. Financial freedom, on the other hand, is when you don’t stop working – but you have enough money invested so you are free to do only the work you want to do and on your own terms. You have the freedom to choose how you’ll spend your time. With people now living long beyond the traditional retirement age of 65 and with future living costs being unpredictable, financial freedom has – for many investors – become the new retirement.

If financial freedom is your goal, you’ll need to create an investment plan for yourself, mapping out how you can achieve it. This could include reducing your expenses, increasing your earnings and investing more money each month. Investing in yourself, keeping your mind active and body healthy, and living below your means are key components of reaching financial freedom.

Read more on saving for retirement.

Unit trusts are an accessible, safe and flexible way to invest. Unit trusts are vehicles in which your money is protected by multiple pieces of legislation, and enable you to invest in top performing companies without having to spend a fortune. You and other investors contribute an amount of money every month, or whenever you can. You can also withdraw some or all of your investment at any time without paying a penalty, so your money is not locked in.

Using your contributions, Sanlam’s investment experts buy assets, such as shares, on your behalf to build a well-diversified portfolio. When the underlying assets in the portfolio perform well, so do you. One of the benefits of unit trusts is that they have potential for greater returns than an ordinary bank account over the long term.

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There are typically three types of taxes that unit trust investors could end up paying: income, dividends and capital gains tax.

Your interest and foreign dividends earned in the unit trust is liable for income tax. If you're younger than 65, you won't pay tax on the first R23 800 of local interest (foreign interest is fully taxable) – and if you're older than 65, that figure becomes R34 500. You will need to declare all interest and dividends to SARS in your annual tax return. This tax payment, if applicable, is between you and SARS.

In contrast to interest and foreign dividends tax, we pay local dividends tax over to SARS on your behalf before the net dividend is paid out to you or reinvested in the fund.

Capital gains tax (CGT) could be payable when you withdraw from your investment or switch between funds during the tax year and make a large profit on that sale or switch. You will have to declare the gain to SARS and CGT is levied at your marginal tax rate (your personal income tax bracket).

You don’t need to worry about any of these taxes if you choose to invest tax free. With tax-free investing, you don’t pay any tax while you stay invested or when you withdraw money. You’re able to invest up to R33 000 each tax year, up to a lifetime limit of R500 000. You will, however, pay 40% tax on any contributions above these limits.

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Investing tax free is something long-term investors should really consider. Investing in this way means you don’t pay any tax on interest and dividends earned, nor on capital gains. This means you don’t lose a part of your investment to taxes, allowing you to reach your financial goals more effectively.

You may invest up to R33 000 (into all your tax-free investment accounts combined) per tax year and up to R500 000 over your lifetime. You can choose to do this by contributing monthly, by investing a lump sum or with a combination of the two. It’s important that you don’t exceed the annual or lifetime limit as you will incur a tax penalty of 40%.

It’s possible to take money out of your tax-free investment at any time. Once you’ve taken money out, you can’t add more to your investment if you’ve already contributed to the maximum limit for that tax year. So, it’s a better idea to use tax-free investing for your long-term savings only.

Parents are able to invest tax free on behalf of their children. By doing this, you'll be using part of the child’s annual and lifetime contribution. If you wish to open a tax-free savings account for your child, the child must have a bank account.

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A tax-free unit trust is like any standard unit trust, except that you don’t pay any tax on your interest or dividends earned, and capital gains are tax-free too. This means you don’t pay tax on the growth of your investment, which makes it a far more effective way to reach your goals. This tax benefit only applies to SA tax residents, and is limited to a maximum combined investment amount (across all your tax-free accounts) of R33 000 per tax year or R500 000 over a lifetime. Any contributions over these limits are taxed at 40%, so you would need to monitor your contributions closely.

Standard Unit Trusts

  • No maximum limits on how much you can invest – only minimum investment amounts, which vary from fund to fund.
  • Ideal option once you've exhausted the maximum investment amount limits of your tax-free unit trust.
  • Ideal if you invest in money market/interest yielding products only, and you’re not earning more than R23 800 (or R34 500 if you’re older than 65) of income in interest across all these products (in other words, you’re not paying any tax on your investments in any case) since you are below taxable limits.
  • Your income and capital gains are taxable.

Tax-free Unit Trusts

  • By law you can save R33 000 every year or R500 000 over a lifetime in a tax-free vehicle such as a unit trust.
  • All interest, capital gains and dividends you earn will be completely tax-free (only applicable to SA tax residents).
  • You should not invest more than the maximum of R33 000 per tax year and R500 000 over your lifetime across all your tax-free products combined. If you do, you will pay a tax penalty of 40% of any amount over this limit.
Standard Unit Trusts Tax-free Investments

Before you start investing, it’s important that you first pay off your so-called bad debt, like credit cards and store accounts. This is particularly important for debt that has high interest rates as it will cost you more than an investment is likely to earn. Your home loan doesn’t count as bad debt because it’s funding an asset, which will hopefully grow in value over time.

Once your debt is under control, you need to consider having a rainy day fund or an emergency fund which will assist with any financial emergencies. This could be a safety net in case of retrenchment or if you have an unexpected health expense or an accident. It’s recommended that you save an amount equal to between three and six months of expenses in a money market fund for easy access when you need it.

After you have your emergency fund sorted, it’s time for you to consider investing. You’ll need to be sure of your financial goal and the timeframe in which you’d like to reach that. You’ll also need to know your own risk profile. Then only choose funds that tie up with your risk profile and intended investment period.

It’s important that you consider taking advantage of tax-free options like retirement funds and tax-free savings accounts. A financial adviser can help you choose an appropriate fund and establish whether a tax-free product is right for you.

Read more on how to invest.

The minimum amount differs from fund to fund, but is usually around R500 per month or a minimum lump sum of R10 000. You can find each fund’s minimum required investment amount on its fund factsheet.

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It’s easy to confuse interest rates and investment returns. The bottom line is: we don’t pay interest but carefully choose assets on your behalf so you can receive an inflation-beating return from them over the long term.

Interest rate: paid to lenders for the use of their assets. For example, your bank pays you interest for placing money with them in a money market account or fixed deposit. Effectively you’re lending your money to the bank and they reward you in interest.

Investment return: the money earned on the money you’ve invested with an asset/investment manager, and can include dividends and capital growth.

Investors often want to know what kind of returns they can expect from an investment. Though past performance can give you an idea of what to expect, it’s important to remember that past performance is not necessarily a guarantee of future performance. The value of your investments could go up as well as down depending on the assets in which the fund is invested.

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Each fund charges its own range of fees, which you can find on the fund factsheet on our website. The total investment charges (TIC) figure shows the total percentage that you are paying for the fund per year. On top of this, you will also be paying an advice fee to your financial adviser, which you can negotiate. The performance of the fund shown on the fund factsheet is after the TIC has been deducted. The advice fee will reduce the performance by the percentage you are paying to your adviser every year.

When you invest online via Smart Invest you will not pay any advice or admin/platform fees.

It will take two business days, providing you give the withdrawal instruction or disinvestment form to us before the fund cut-off time. Otherwise, it will take three business days. The cut-off times are:

Fund type Cut-off time
Sanlam Alternative Income funds 11:00
Money Market funds 13:00
All other funds 15:00

If your bank details have changed since you invested, you will need to send us proof of the new bank account.

If you made a recent contribution to the fund, note that lump sum investments and once-off debit orders clear after 15 calendar days, and recurring debit orders after 28 calendar days. If you want to withdraw that contribution before the waiting period is lifted, you must include a confirmation from your bank that the payment will not be reversed. Also keep in mind that for all funds, except money market funds, you could potentially become liable for capital gains tax.

Yes, except for money market funds, all unit trusts can go both up and down in value. It’s therefore possible that you could find – when checking your balance – that you have less money in your investment account than you invested. Losing money over the short term is completely normal, because long-term wealth creation comes with its ups and downs. This is why you need to make sure you won’t need your investment for an emergency; because cashing in right after markets fall is the worst thing you can do.

View our infographic that explains this further.

In the short term, your investment value can move up as well as down. This is why, if you only plan to invest for the short term, we have conservative and moderate funds available for you to choose from, which normally experience smaller price movements, compared to aggressive funds. Aggressive funds are only appropriate if you plan to invest for the longer term (10 years or more).

The market tends to grow with inflation and more over the long term, but this growth comes with plenty of short-term ups and downs. The market does eventually recover after a crash, but it needs time to do so.

View our infographic that explains this further.

It's important to understand your risk profile and how you are likely to react to investment losses or market uncertainty – both normal parts of investing. Knowing this will help you to stay focused and better manage your investments.

In the table below we describe each risk profile and give some fund examples that fit the profile.

Risk profile Description Fund examples
Conservative You need a large amount of security and you accept that your investment might not keep up with inflation, effectively losing money in after-inflation terms.
  • SIM Enhanced Yield Fund
  • SIM Active Income Fund
Cautious Investing makes you a little nervous, but you’re willing to risk some of your capital in the short term to grow your investment at more than inflation over the long term.
  • SIM Inflation Plus Fund
  • Satrix Low Equity Balanced Index Fund
Moderate You’re willing to accept some risk of losing capital in exchange for better returns.
  • SIM Balanced Fund
Moderate Aggressive You’re prepared to take risks with your capital when there’s the possibility of higher returns.
  • Satrix Balanced Index Fund
Aggressive Losing money over the short term doesn't bother you; you want to make as much of a return as possible in the long term.
  • Satrix Momentum Index Fund
  • Satrix Dividend Plus Index Fund
  • SIM Top Choice Equity Fund

There is no right amount of risk that you should take on. Investing is personal so you need to do what you feel comfortable with. Use this calculator to help you find out what your risk profile is.

Index tracking (passive) funds do exactly what the name suggests – they track or replicate a particular index. A tracker will mirror the index with the aim of achieving a return as close as possible to that of the index.

For example, a fund that tracks the FTSE/JSE Top 40 index would hold the same shares of the forty companies, in the same weighting, as the index. If the index or sector does well, so does your tracker fund. If the index drops so will the price of the fund. The fund therefore tracks or replicates the performance of the index. This is the same whether the fund is an ETF or a unit trust.

Read more about index tracking.

An active fund manager aims to beat either the index or its peers by buying only shares or other assets that the team believes will outperform over the long term. The shares in an active fund are researched by a team of analysts who decide what to include and what to exclude.

A fund of funds invest in a collection of other unit trust funds to diversify across different fund managers. They are also called multi-managed funds.

Yes! Our online investing tool, Smart Invest, lets you invest in a unit trust from R500/month. Join over 200 000 other South Africans by investing with Sanlam in a unit trust. We’ll take you through some easy steps to find the right match for you. Online investing via Smart Invest makes investing more profitable for you. Because you are investing directly, you pay no initial or ongoing advice fees that would traditionally go to a financial adviser.

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