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After the COVID lockdowns, the SARB pushed up interest rates to fight rising inflation. This made money market rates rise and investors rushed to take advantage. Billions were moved from shares into savings account even though share prices and dividend growth were on the horizon. Many South African investors choose to earn interest through bank savings and fixed deposits but neglect to take taxes into account. Interest earnings are taxed as income, effectively increasing your taxable income. A shock to many when their tax returns are due. SARS does however give you a small annual exemption on interest earnings: Under 65 years of age – The first R23 800 of interest income is exempt. 65 years of age and over – The first R34 500 of interest income is exempt. Here is an example to illustrate the post-tax rate and pay out for three different income tax rates. The conclusion being that high earners should be careful of interest earnings. 

Liquidity Risk in your Investment Portfolio  There is nothing worse than being in a pickle and you have no emergency funds. This is when people get into unnecessary debt with high-interest unsecured debt via credit cards and personal loans. To avoid this, you must plan your investment portfolio around long-term growth as well as liquidity needs. Setting financial goals in the financial planning process is an effective tool in providing a practical framework. But it also gives wealth managers possible investment horizons and importantly, the liquidity needs of a client. There is a tightrope to walk between providing liquidity and enjoying long-term growth and your age and specific needs will determine how far you lean towards each side. Here are some of the liquidity risks that you may face in your investment portfolio: Product Rules: Certain structures allow partial access to funds, and some offer no access to funds within a certain term. Examples: Compulsory investment products like pre- and post-retirement structures. Discretionary investment products like endowments, sinking funds and structured products. Asset Allocation: With short-term volatility in growth assets like equities you may run the risk of selling during a downturn, locking in losses. It’s important to rather consider the use of conservative interest-bearing assets when planning for short-term or emergency liquidity needs. Demand: All assets are not desirable by investors. An example can include private equity shares that may not be well known or desired. This will make it difficult to sell when funds are needed because there might not be a willing buyer. Availability: In certain instances, investor funds are pooled together in order to buy a large underlying asset. Some of these assets can have a maturity date attached leaving no room for buy-backs before maturity. How can you assess the need with asset allocation in mind? High liquidity – Conservative allocation – Low volatility Low liquidity – Aggressive allocation – High volatility *This is not financial advice. Ruvan J Grobler RFP™ (PGDip Financial Planning)

DIE REGERING VAN NASIONALE EENHEID EN JOU BELEGGINGSPORTEFEULJE Die Regering van Nasionale Eenheid (RNE) het ’n positiewe invloed op beleggingsportefeuljes omdat die beleggings in plaaslike aandele en effekte (bonds) se pryse sedert die tot standkoming van die RNE gestyg het. Waarom het hierdie positiewe tendens plaasgevind? Op die kort termyn het ‘n positiewe sentiment ontstaan omdat politieke partye wat ’n groter rol vir die privaat sektor in ekonomiese groei voorstaan, deel van die RNE is. Sedert die RNE ingehuldig is, het die pryse van aandele op die Johannesburg Sock Exchange (JSE) gestyg omdat beleggers verwag dat die verdienste van die maatskappye wat voordeel gaan trek uit regeringsaktiwiteite gaan styg, Dit is veral aandele van plaaslike banke en kleinhandelaars wat gewild is. Die koerse van effekte (bonds ) het gedurende genoemde periode gedaal en gevolglik het die beleggingswaarde van bestaande effekte gestyg. Op die medium termyn word daar verwag dat die plaaslike rentekoerse (moonlik alreeds gedurende September 2024) gaan verlaag en gevolglik sal ’n dalende rentekoers siklus ook ’n positewe invloed op beide die beleggings in die JSE asook effekte uitoefen. Sedert die rentekoerse gedurende 2022 gestyg het, het talle beleggers geld in die geldmarkte by die banke gaan belê. Die inkomste belasting implikasies vir rente draende beleggings is dat belasing vrystelling vir persone jonger as 65 jaar R 23 800 is en vir persone 65 jaar en ouer is die vrystelling R 34 800, waarna die rente onvang as ’n inkomste belas word volgens persoonlike belastingskale. Dit is daarom belangrik dat beleggers in die geldmark moet seker maak wat die na-belaste groeikoers van hul beleggings is. Beleggers in die huidige veranderende beleggingsomgewing moet ’n evaluering van hul bestaande beleggingsportefeuljes doen om seker te maak dat hul bestaande beleggings steeds die beste na-belaste opbrengs, volgens die betrokke persoon se risiko profiel, lewer. Indien daar enige onsekerheid bestaan, word aanbeveel dat van die professionele kundigheid van Bovest se adviseurs gebruik gemaak word.

The Impact of Interest Rates Cuts on your Investments Interest rate cuts have been on our lips since the middle of 2023, but global inflation has been extremely sticky in the current cycle. Now once again it seems that markets are pricing in cuts from September on. These predicted cuts are largely dependant on what inflation does. SA inflation recently cooled down to 5.1% from 5.2% year on year and the overall economy looks to be slowing down. Many are sceptical of the influence that monetary policy has on South Africa. We need intervention that support economic growth, regardless of your opinion on monetary policy. An interest rate cut should promote activity in our economy as capital will once again start moving around searching for opportunities due to lower interest rates. Bonds have an inverse relationship with interest rates while cash has a direct relationship. Listed companies will benefit from lower payments on their own debts while consumer spending picks up. This is positive for shareholders as balance sheets improve and shares become attractive. Especially at this time where valuations show great upside for SA equities. Interest rate cycles often coincide with the economic cycle. Knowing where we are in the economic cycle is essential in identifying opportunities, it gives us a framework on risk and volatility. Just like countless times before, we have made it to the light at the end of the tunnel. “History Doesn't Repeat Itself, but It Often Rhymes” – Mark Twain

Die nuut gestigte Regering van Nasionale Eenheid (RNE) het ’n tydperk van samewerking tussen verskillende politieke partye ingelui. Hierdie samewerking behels dat die betrokke politici deur middel van ’n ooreenkoms gesamentlike verantwoordelikheid neem vir die regering. Hoe raak hierdie verwikkeling jou beleggingsportefeulje? Voor die verkiesing het die destydse ANC regering met inisiatiewe begin om die privatesektor te betrek by ekonomiese ontwikkeling, soos onder andere die verbetering van die elektrise netwerk om sodoende beurtkrag te beëindig. Hierdie inisiatief het die beleggersgemeenskap plaaslik sowel as internasionaal geintriseer vir moontlike toekomstige beleggings. Die vraag was of die nuut verkose regering sou voortgaan om die privaatsektor by ontwikkelingsprojekte te betrek? Die aanvaarding van die RNE as regeringsvorm en die deelname van verskillende politieke partye waaronder die Demokratiese Alliansie (DA) vergroot die moontlikheid dat die privaatsektor betrokke sal bly by ontwikkelingsprojekte. Dit sal daartoe lei dat die Suid-Afrikaanse ekonomie teen ’n hoër ekonomiese groeikoers sal ontwikkel. Hierdie nuus het daartoe gelei dat die JSE-indeks byvoorbeeld op 19 Junie met 3,5% gestyg het, asook dat die Rand se waarde heelwat versterk het sedert die verkiesingsuitslae bekend gemaak is. Die pryse van effekte (bonds) het ook begin verbeter namate die sentiment vir ekonomiese groei verbeter het. Indien daar voortgegaan word om die privaatsektor by regeringsprojekte te betrek, sal die positiewe marksentiment voortduur. Bykomend tot die huidige positiewe politieke nuus oor die ekonomiese groeisentiment in Suid-Afrika, is die moontlikheid dat rentekoerse binne maande kan verlaag. Verlagende rentekoerse sal ook bydra dat pryse van effekte (bonds) en aandele plaaslik sal verhoog.  Riaan Botha