How to use Tax Free Savings Account Dividend ETF in South Africa

Who it’s for:

Beginners who want set‑and‑forget income and strong long‑term compounding.

Startup cost:

Flexible (start small; add monthly).

Time to first rand:

Quarterly or semi‑annual dividends (varies by ETF).

Tools & Accounts

• Local broker/app with TFSA account (Tax‑Free Savings Account).

• Bank account; FICA documents (ID + proof of address).

Step‑by‑Step

1. Open a TFSA with a reputable South African broker/app. Complete FICA and link your bank account.

2. Pick income‑tilted ETFs (e.g., dividend or multi‑asset income funds). Read the factsheets: fees (TER),

distribution frequency, top holdings.

3. Automate contributions (debit order/stop order) for the current annual TFSA limit. (Confirm the

latest annual & lifetime limits before funding.)

4. Buy the ETF(s) monthly on your debit order date to dollar‑cost average (rand‑cost average).

5. In the TFSA set dividends to “reinvest” until your portfolio reaches the target size; later, switch to

“pay out” if you want income.

6. Rebalance annually (e.g., 80% core dividend ETF, 20% bond/money‑market ETF) to smooth income.

7. Track your yield: income ÷ current portfolio value → watch it grow as fees and behaviour are

consistent.

Automation

• Debit orders for contributions.

• Dividend reinvestment toggle.

• Annual portfolio review reminder.

Compliance & Tax (High‑level)

• TFSA growth and withdrawals are tax‑free within limits (verify current limits before contributing).

• Ordinary (non‑TFSA) dividend income is typically subject to 20% dividends withholding tax (DWT).

Risks & Fixes

• Market volatility: Use a diversified ETF; keep a 12‑month view minimum.

• Wrong product choice: Read factsheets and check fees (TER) before buying.

Scale‑Up

• Max TFSA first, then add a normal brokerage account with the same ETFs for overflow.

KPIs

• Contributions per month; 12‑month trailing distributions; TER < 0.6% (guideline); income yield trend.