Learning to invest
Headline: Fees can erode your retirement annuity value
First two paragraphs:
Fees can erode your retirement annuity value
Published February 12, 2014 | By Maya Fisher-French
Many South Africans will look to invest in a retirement annuity (RA) before the end of February, which represents the close of the country's tax year, in order to take advantage of the tax break. However, according to Steven Nathan, Chief Executive Officer of 10X Investments, investors often negate this benefit by paying high investment fees.
Nathan says that the tax benefit is equal to approximately a 1% fee saving, so if you pay 1% more in fees, then you offset the tax benefit. "Therefore, investors only benefit from the tax break if they pay low fees.
He says most investors do not do enough homework when investing and often end up with funds that are not optimal for their investment goals. "Pitfalls include poor fund selection, under-performing fund managers, and high fees. These mistakes can potentially halve your final pension."
Nathan advises investors to apply five common-sense principles to all long-term investments, including RAs, to ensure a better return on investment:?