IS BUYING TO LET BETTER THAN A UNIT TRUST FUND? I have about R1 million in the Allan Gray Equity Fund. I pay usually R10 000 a month into the fund. This money is primarily for my retirement in 10 years. Would it not be better to buy a property and reinvest the rental income? What will be the tax consequences if I withdraw my money from the fund? Wayne Humble Leon Ferreira, a financial planner at PSG Wealth in Pretoria, responds: I would keep the R1 million in the Allan Gray Equity Fund, but I would invest the monthly R10 000 in the Allan Gray-Orbis Global Equity Feeder Fund to gain exposure to global equity markets. I prefer the unit trust fund to an investment in a residential property for the following reasons: * Over time, the return (capital growth and yield) from equities has been considerably better than that from owning residential property; * The cost of owning property, including rates, taxes and maintenance, increases steadily, which reduces the return; * There are risks to owning one residential unit; * You have the hassle of maintaining the property and finding good tenants; * The acquisition costs of property are higher than for a unit trust; * Property is not as liquid as equities; * Although property may appear to be a more secure investment, because it does not fluctuate in value as much as equities, the volatility risk in equities decreases over the long term; and * Equities can provide geographical diversification and a rand hedge. If you redeem your investment in the Allan Gray fund, you will pay capital gains tax on the accrual in the fund.
Posted on: Mon, 15 Sep 2014 09:14:58 +0000