In 2015 the SA government introduced Tax Free Savings Accounts (TFSA) as a way to encourage South Africans to be better savers. A TFSA offers you the opportunity to save or invest money without paying tax on any interest, capital gains or dividends earned.
We wondered what that might look like, had you invested in some of the top performing Exchange Traded Funds (ETFs) back in 2015, in a TFSA.
Mbulelo Mpofana, who heads up various products at EasyEquities including EasyCredit and EasyProtect, is also a former actuarial analyst and entrepreneur. We asked him to crunch some of the numbers to illustrate the power that a TFSA would have offered an investor who was able to contribute the full annual contribution limit between 2015 and 2024.
Mbulelo used a combination of our EasyCompare site, data we have on which ETFs are the most popular in our community, and Yahoo Finance to put the below infographic together.
“Using the daily price info, dividend data and dates I calculated the return figures reported,” he says. “One of the first things that stood out was how ETFs with an international focus outperformed locally focused ETFs over the last decade, with the US leading the way.”
“It’s actually staggering,” says Carly Esterhuizen, VP of Brand at EasyEquities. “I’ve been using my TFSA since I started investing; it forms the core of my overall portfolio. I’ve always appreciated how powerful it can be but seeing the potential like this makes me even more motivated to try and reach my annual contribution limit every year.”
“Being able to invest tax free is massive in terms of tax efficient wealth creation,” adds Mbulelo.
TFSA take aways:
Time + compounding returns = power!
Disclaimer: Past performance does not guarantee future results, different types of investments involve varying risk. Take time to do your own research on your investments in order to make informed decisions.