DINEO TSAMELA: Tax-free savings can work for you, but don't forget to read the fine print first
While ETFs are considered to be diversified instruments, having a strategy in place is important, writes Dineo Tsamela
Since the launch of tax-free accounts, many people have turned to banks to safeguard their money in a tax-free savings account. While some people may indeed hold these accounts with a long-term view, it's very important to understand what they'll get back. Tax-free savings accounts offered by banks come with fixed interest rates. Given the limits imposed, it's highly unlikely that those putting money into these products will be able to beat inflation. While banks will have different interest rates, it's probably a good idea to compare returns with tax-free investment offerings such as tax-free exchange traded funds. When choosing an ETF or unit trust to invest it, it's important to keep costs at the forefront of your strategy. Unit trusts are similar, but because many are actively managed, their fees tend to be slightly higher. When comparing platforms, look at the total expense ratio. This is the cost of buying the ETF. Some providers charge monthly account fees on top of the TER, ...
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