Info

The Fat Wallet Show from Just One Lap

The Fat Wallet Show is a show about questions. It’s about admitting that we don’t know everything, but that we’re willing to learn. Most of all, it’s about understanding as much as we can to make us all better investors. Phrases like, “I’m not sure” or, “Let me look that up and get back to you” or, “I don’t know” don’t exist in the financial services industry. If you ever had a financial question you were too embarrassed to ask, you know what we’re talking about. In this business, appearances matter, and nobody wants to seem like they don’t know how things work or what the outlook is for the buchu industry. It’s easy to excuse that little vanity, except that people in the investment industry are meant to service investors - people like you and me who need to figure out what to do with our money. There’s no such thing as a stupid question in this show. If you have unanswered financial questions, this is your opportunity to have them answered in a way that even I can understand. Pop them to us at ask@justonelap.com. Hosted by Kristia van Heerden and Simon Brown
RSS Feed Subscribe in Apple Podcasts
The Fat Wallet Show from Just One Lap
2021
March
February
January


2020
December
November
October
September
August
July
June
May
April
March
February
January


2019
December
November
October
September
August
July
June
May
April
March
February
January


2018
December
November
October
September
August
July
June
May
April
March
February
January


2017
December
November
October
September
August
July
June
May
April
March
February
January


2016
December
November
October
September
August
July
June
May


All Episodes
Archives
Now displaying: February, 2019
Feb 24, 2019

The longer we do this, the more evidence we find in favour of doing tax-free investments before any other kind of investing. To do that, you need to understand why paying no tax makes a huge difference to how much money you end up with. You also need to understand that there’s a difference between tax-free accounts and ordinary investment accounts. Lastly, you need to know why it’s important to buy an investment product within a tax-free investment account.

This week’s episode of The Fat Wallet Show is audio from our annual tax-free investment presentation. In it, Simon Brown explains everything you need to know about tax-free investments and shares some ideas on choosing the right type of product.

Find our conversation on tax-free investing here.

Feb 17, 2019

This community is all about not leaving money on the table. Buying and selling shares at the right time can have a long-term impact on the performance of your portfolio. This week we discuss two questions relating to timing buying and selling shares and ETFs.


Win of the week: Mukhtaar, for solving the tax on REIT issue.

In the latest podcast there was a question whether listed property distributions are treated as interest income or taxed as normal income.

I can confirm that it is taxed as normal income and the interest exemption does not apply.

You can see that an exemption only applied to interest income. The REIT income was just added to my other income without exemption. There is no deduction for this.

For this reason, I try to keep all my listed property exposure in a TFIA!


Clean swearing bleeped out show is below.

https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_135_20190218_bleeped.mp3


Warren responded to Nadia’s question about learning how to trade Forex from last week:

There’s a great site called Babypips where she can learn everything. Also there’s a company called Oanda based in the UK which I’ve been trading on for 6 years and all is legit. No minimums or admin fees.

Paul also had some feedback.

Best thing I heard this week, "if you want to know if forex trading is for you, withdraw R2000 from an ATM, and burn it. If you can't, then you can't do forex trading either" - courtesy of Simon Pateman Brown.

I wish I heard this phrase a few years ago, when I was also sold the yacht and bubbles lie and 'burned' a couple of thousands trying my hand at forex trading.


Stephen

I'm toying with the idea of moving all of my ETFs across both my normal and tax-free portfolios into a Bond ETF (Newfunds Govi ETF).

The idea would be to leave my investment in a more stable environment and then move them back into my original portfolio when the market is low.

My current portfolio across both my normal and tax-free accounts holds:

  • Ashburton Global 1200 (20% of normal)
  • Coreshares Global Divtrax (20% of normal)
  • Satrix Nasdaq 100 (in both - 20% of normal and 33% of tax-free)
  • Satrix MSCI Emerging Markets (33% of tax-free)
  • Satrix S&P 500 (33% of tax-free)

On my normal accounts, I haven't made enough to warrant Capital Gains - I moved from single shares to ETFs in my normal account after Steinhoff and also not realising I should have sold Dis-Chem in the high 30's!

It was then that I realised that I was like a gambler - talking about the gains but not about the losses! At the moment the only single shares I have are Naspers and Steinhoff (only because I can't bare to accept defeat along with my own single concentration stupidity).

Is this an advisable approach? I want to be fluid for when the recession opportunities arise. Or, should I be looking elsewhere for a stable return during market downturns?


Morné

I decided to convert my portfolio from single company shares to ETFs, mostly to avoid risks and not to have to follow shares religiously for opportunities.

My approach is to slowly sell my single company shares as they move into the green or break even and then use the money to buy ETFs. This is only for my SA account since I already decided to focus on ETFs before I opened my US EE account.

I was delighted to see that the ETFs I thus far chose are also rated highly in your podcasts. As I am selling my single stocks, the cash I have available for ETFs is growing. However, the cash in both my SA and US accounts are earning basically zero interest. This irritates me greatly.

My dilemma now is when to buy an ETF? Do I wait for a price drop or do I buy at any price when I find an ETF that I like, since I am investing for the long term? The same goes for the ETFs that I already own. Should I wait for price drops or keep on adding to them from month to month regardless of the price?


Gerard is also taking control of his finances in a big way.

Four years ago we had a lot of credit card debt, month to month living, always "broke". I discovered MMM and FIRE, took control of my expenses and now have multiple savings and investment accounts and no more debt. It took about tw years to get rid of the most debt (house almost done) - and since then just building investment accounts.

Last year I decided to start adding extra monies to the EasyEquities taxable account, and bought about 40 shares to simulate my own index, based on Coreshares TOP50.

One morning I logged into EE and decided this is just too much admin, for such little long term reward - just pay the TER, buy ETFs and stop stressing about this (Re-balancing and buying 40 shares every month gets annoying quickly) . I then sold everything not really understanding the tax consequences.

Now I'm sitting with my first ever TAX event - +-R300 in realised gains, not big money. Would I be able to put this through as a CGT, as my intent is for this account it to be long term holdings - or is it just better to declare the small profit I made as income?  

I can't yet prove it as long term, other than showing SARS my retirement planning spreadsheet  - so on such a small amount of profit, I just think I'll do it as income declaration.

My one major worry is, is that if I declare this as income this year will SARS always see this account as a trading account, or is it a per tax event thing ?


Our Tax Elf De Wet has decided to give up a cushy corporate to take his Tax Elving more seriously. He’s also significantly downscaling his life. He has some big questions about what to do with his money now that he’s in the wild. He sent a monster email so we’ll be dealing with each topic separately over the next few weeks.

I’m looking to save a percentage of all income per month (both me and my wife) for tax purposes. Anywhere between 25% and 31%. What is the best use of this money during the period I have access to it? This normally sat in my bond / home loan.


André, our new minimalist contributor, had a great insight.

  1. The lower your savings rate is, the higher rate of return you'll need to get.
  2. The lower your savings rate is, the more important time horizon becomes.

Wayne has some legacy active funds and wants to know what to do.

I am invested in The Allan Gray Orbis Global Equity Feeder A with a TER of 2.16% ( I just threw up in my mouth).

I have a large amount going to this monthly.

It was a great idea before ETFs came along that could give me access to world stocks.

I am also now invested in Sygnia MSCI world in my TFSA with a TER of .68%.

Should I be looking to disinvest or stop the monthly payments in Orbis ( they had a shocking year 2018) and put the funds into my EE account and invest in the Satrix or Sygnia world ETFs?

I am struggling to see the difference in investment strategy between the two options, The etf option definitely has a lower TER, and I do not know who to call for advice.


Mary is 42 and discovered the FIRE idea last year.

I started saving for my emergency fund. I was a bit uncertain whether that expense amount should cover the medical aid as well. If so, I should rethink mine because as of now I have about four months of expenses saved up.

She holds:

  1. Satrix 40
  2. The All bond index
  3. The S&P 500 and
  4. The property ETF

My tax-free is in a bank account in cash up to now.

I also have the Allan Gray equity unit trust.

I was thinking of starting a tax free portfolio in ETFs and did not want a lot of extra individual ETFs. Is it better to put 100 % of the tax free allowance in the high equity balanced index fund from Satrix or to spread it around in different ones?


We got a mail for Jorge!

Can you please advise what is the best bond ETF (to reduce risk) to buy in a TFIA which will give the best return. What % of the TFIA should it be as I mainly have equity ETFs in the account at the moment?


Karabo has investment properties for her kids.

I have three properties that I bought in my early 20s as investments for my yet to be born children (I am 30yrs old this year). I bought the properties in my name but would like to move them to a trust. Is it possible to do so? Would it be wise to do so or should I rather register a company that will own the properties on behalf of my children?

I still owe the bank on the properties.


Always Abundant is starting to understand the impact of the exchange rate on their investments.

50% of my portfolio is invested in the Vanguard World ETF (VT) in USD.

The other 50% is Local: Top 40 ETF (Satrix and Sygnia), Satrix indi, Sygnia local property index fund, some local unit trust funds (may include max 25% offshore from time to time), some individual SA shares.

Recently, I realised that the exchange rate plays a bigger role than performance when it comes to the profitability of my offshore investments when converted back to ZAR. This is a scary thought as I have no plans to emigrate and have always needed to sell at an inopportune time (wrt the forex rate)

So, I thought to find a suitable local ETF to counteract that risk. Unfortunately, it seems to me that, apart from mid-caps and local property perhaps, everything is impacted by the ZAR-USD exchange rate.

Is this a logical concern or am I overlooking something at a time when everyone around me is investing offshore? If my concern is logical, what is a good investment for South Africans who do not wish to be exposed to currency risk? I would still like an equity-related return and low cost.

Feb 10, 2019

I’m often curious about the finances of people who want to take on some alternative way of making money in financial markets - be it trading or Bitcoin. More often than not, people who are convinced that a single asset or event will solve all their problems don’t yet have solid a financial foundation. Similarly, people who do have a strong handle on their finances tend to favour simplicity, as this interview with Patrick McKay illustrates.

Just One Lap had its origins as a trading education platform. Even so, trading is not something we encourage most people to do. For one, the amount of money required to start a robust trading account can easily fund a real world small business. Secondly, all the psychological factors that make investing hard are present in trading, but on a daily basis under huge time constraints. Unless you have the time and money to devote your life to it, trading is probably not for you.

A question about a Forex training platform from Nadia inspired a discussion about the realities of trading that most people don’t think about. We mention our Trading Boot Camp series, as well as this series of CFD Conversations.


Clean swearing bleeped out show is below.

https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_134_20190211_bleeped.mp3


Win of the week is Christiaan

I am 17 years old and in Matric now. After listening to so many of your podcasts I have this vision of being financially independent before I am 35.

I am in the process of opening a Tax free saving account at EasyEquities and the plan is to invest my money from the get go.

I will have a good head start when I get to varsity next year as I will receive free tuition at UP and my parents own a house close to the Uni where I will be able to stay. I do odd jobs here and there and save all my money and receive a small amount of money from my parents as pocket money that I have to sustain myself, buy my own food at school and pay for extra murals. This amount is just under the amount I need to pay tax so I am good there.

I worked out that it will take me just a little bit more than 15 years to max out my tax-free savings account if I pay the full R33,000 a year (will be maxed out when I am 33). My problem is, if I do this there will by no more money left for a RA. Is it necessary to open a RA now as I am not even 20 yet and don’t earn a huge amount of money? Or wait until I maxed out my TFSA and then move the budgeted money I used to put there to my RA?


Nadia

I want to please get your opinion on a company called XXX. I've been trying to get proper feedback on them for weeks now but I can't seem to get an answer.

It's a company that trains people to trade Forex. You pay to access a number of training videos, live sessions, tools they use to trade etc. So it really sounds awesome and apparently the education side of it is really great. But then I find the google reviews that say that it is all a scam and that they just take your money... which is why I am confused. There are some people who say that it is a great product because they really go in depth to show you how trading is done etc.

As far as I know, you pay a monthly subscription fee to be able to use the education platform and then also the tools and programs they use to trade. You can cancel at any time and they money you make from your trades belongs to you. The only way this company makes money is from the monthly subscription you pay. It's pretty expensive so i'm not sure if I should just go for it and see what happens or if I should forget about it. So yes... i'm pretty confused.



Our Tax Elf De Wet has decided to give up a cushy corporate to take his Tax Elving more seriously.

I need a strong emergency fund (something which was not as important with my current job).

I’m looking at having 6 to 12 months expenses saved up over time.

Where do I invest this money?

I’m looking to save half myself and keep half in my wife’s, as this makes issues on death easier (joint accounts get frozen and the like). This also potentially spreads the interest exemption.

The plan is to save a percentage of all income on a monthly basis till I reach the threshold / top up as extra income comes in.

Emergency Fund is the main goal in the first year working for myself. I will use some of Sam’s knowledge and save for various items in this fund – car related expenses, emergencies, and other non-fun stuff. We will have a separate fun fund (this will be managed by my wife as she is in charge of fun and I look after life).


Like me, Seilatsatsi is trying to find the perfect balance between RA and bond contributions. They say:

Finding your podcast has so far been the best find of 2019 following the best find of 2018 which was Stealthy's site when I started my FIRE movement.

I don't have a company pension fund.

I currently manage my own with an RA, a TFSA and an EE account.

I pay more than double on my bond.

One of your listeners noted that one can submit their RA contribution to HR and have the rebate on a monthly basis compared to once annually. With this option, I am wondering if I should work it out as below:

Stop the extra bond contribution and redirect that to the RA.

If the monthly rebate works through my employer, I can put the extra monthly tax break back into the bond. I am very disciplined and this would actually be done.


Another Engineer has some questions regarding tax on property and RA emigration.

You mentioned that one can transfer an RA offshore, to another type of pension, and I understood that you meant that you wouldn't have to pay the tax. I've looked it up, and one cannot 'transfer' an RA offshore before retirement; you can have it paid out in cash, take the tax knock, and then take it offshore, IF you have financially emigrated. However, if you have a work pension fund, it seems you can take the cash (minus tax) when you resign, without having to have financially emigrated.

I assume after 55, if you wanted to cash it out, you also have to turn it to cash, take the tax knock (which will be less than before 55), and then take it out.

You mentioned that listed property distributions are taxed as interest. I think it's actually taxed straight as income, not interest? Unless I'm not understanding what you meant. The property distributions are not part of your interest exemption etc, I think it gets added straight to your "gross income", with your salary etc.

Tax Emigration - Part One


Edward is currently living in Australia but planning to move back home soon.

I currently live in Australia but will likely have to return to South Africa a few years from now to look after my parents.

I want to start contributing to a tax free savings account but I don't have a South African address which is required for FICA.

Is there any way to open a tax free savings account while living in another country? Could I maybe use my parents' address? Would EasyEquities be an option for my TFSA?


Phemelo could relate to last week’s episode on starting over.

The podcast "starting over" summarises what I have been trying to do from end of July to now.

I thought I had a formula, the grand idea that was going to save me, namely to Increase my income by a huge margin.

A prospective employer entertained my suggested offer of a huge increase in my annually CTC.

In Dec 2018 I was flown to Cape Town for final interview. The interview went well, but then the phone call came on 18:38 Friday evening, telling me they “will not be advancing the offer". I was distraught and shattered. All my plans went out the window. This one job was supposed to take me to the promised land and now "I am starting over", but I remain positive.


Darryn wants to know what account he should use to save for fun stuff.

I struggle reading financial products at the best of times due to time and also pure laziness, my questions are:

  1. Is there a specific a account or company you use yourself for this? Can I just use a savings account on the 22/7 app? Are they good?
  2. Is there a specific type of account to use?
  3. If saving for a new car and a holiday to Cuba would you put those in separate accounts?

Steve is planning to do some tax harvesting.

I heard about the EasyEquities inter-account transfers function between normal accounts and TFSA, so I sold enough ETFs from my other account to transfer to TFSA. I know ETFs are not sold and converted instantly -  I figured T+2 or T+3. When the money didn’t appear, I logged a ticket. I got a reply that the money would only be cleared on 13 Feb, which would be 8 business days later. Is this normal and if so, why so long?

I am building my kids’ education funds in ETFs,  but am mindful of the CGT I will need to pay when cashing in.  

Considering there is a 40k per year allowance, I was planning on selling and rebasing the funds at times when the CGT liability would be close to the 40k. I am buying 6 ETFs per month for next 15 to 20 years.

How would you suggest managing the CGT liability?

I could keep a spreadsheet of each account and each ETF purchase ( x 3 per child per month etc – for 15 years ) -  or is there an easier way? For instance are the providers required to keep the CGT calculation updated for me?


Always Abundant isn’t so sure about the investment potential of property.

I've compared the listed property index (J253  - since STXPRO does not go as far back) against the Satrix 40 over a 10 year period and found that property has performed half as well as equities. If this is generally the case in the long term, are there any merits to investing in a listed property ETF other than for diversification? The reason i am considering this is the added tax advantage for listed property in a TFSA.


Hannes wants to know why your friend who sold everything in 2008 missed out.

In episode 124 Simon talks about an acquaintance who sold everything in 2008, and asked to re-buy a few months ago. In that episode he states that "she missed everything", but I'm confused about this.

I understand there was a massive market swing over the past 11 years, but long term investing dictates that you should hold, so why would she have missed everything if she would have just held through the swing to end up where the market was X years ago due to recent poor performance? Am I missing something here?


Join our Fat Wallet Community.

Feb 5, 2019

For us money nerds, February is not the month of love, but the Hallowed Month of Tax. What’s the best kind of tax, you wonder? The kind you don’t ever have to pay! In this bonus podcast, Wild and Tax-Free, we get some friends together to chat all things tax-free savings. Joining us in is Njabulo Nsibande, FIRE-man Patrick McKay, aspiring FIRE-man Stealthy Wealth and EasyEquities superstar Carly Barnes.

Remember to join us for our annual tax-free presentation at the JSE here.

Feb 3, 2019

Since talking about money is my day job, it’s easy to assume that I have no financial anxieties. That’s not the case. Money speaks to such a primal part of our humanity. I think everyone is susceptible to a degree of fear around their ability to meet the basic needs of themselves and their families.

Making big lifestyle changes always results in massive financial anxiety for me. Buying a house  - a lifestyle decision whose financial implications I always distrusted - had me on tenterhooks. Instead of throwing myself into the planning, I resorted to a small degree of avoidance during the stressful process of finalising the sale.

When I was finally ready to look the beast in the eye, I was greatly relieved. Forgetting my previous budget and starting from scratch was a way of reminding myself that I was actually in control of the process. I could make decisions to ensure my financial comfort because of good decisions that I made in the past. Good for me!

This episode is for those of you who recently underwent a big change that requires a new approach to your money. We talk about my own process and offer some ways for you to start over. Remember to let us know how it goes!

P.S. Don’t forget to join us for our Power Hour on 21 February at the JSE in Johannesburg. Register here.

Join our Fat Wallet community page here.

Win of the week: Peter, who simply wrote: Love your show and don't miss any new posting. Also Ben, for sending a question and then figuring out the answer himself.


Clean swearing bleeped out show is below.

https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_133_20190204_bleeped.mp3


Lady Kabelo

Can you explain the relationship between world/US ETFs and the rand in village idiot terms.

If I buy the S&P500 and the rand weakens against the dollar, is this good for my investment? And vice versa.

I assume the same would apply to the world, global property and emerging market etfs. Is this correct?

From an investment perspective, when the rand weakens should I be happy or sad?

Because the S&P does its own thing and the rand does its own thing, I can never tell what's going on and why.



Kgosi discovered he was being overcharged for his dread and disability cover. His cover came to almost R3,000 and he’s only 26. That’s too much.


Brendan wanted to add to last week’s episode on getting your tax in order for the new year.

There is also a donation to an s18A public benefit organisation (PBO) that listeners can consider making. Up to 10% of our taxable income is deductible for this purpose. SARS is effectively paying a portion (by reducing our taxable income and therefore the tax we will pay) of a donation we make to a cause that we care about. There is a list of S18A PBO’s on the SARS website.


Hannes, who just turned 30, is feeling some anxiety over his finances.

I quit my shitty-paying, toxic software job in 2015, dipped my hand into business which never took off, after which I settled on international stock trading in the US markets for two years. The reason for US markets? I felt like SA was lacking liquid, affordable stocks for active day trading, and at R50 per trade at Standard Bank at the time I thought I might as well try my hand across the pond. Before this endeavour I've never dealt with the financial markets, local or international, and I had no knowledge, so I put on my big boy pants and started learning and obsessing about the financial industry.

I vastly underestimated the time and capital required to learn to be a consistently successful trader (especially in USD), and my money was slowly drained by education, "school fees", software costs, exchange fees and broker commissions over the two-year period.

I retired from the US markets in late 2017 and subsequently cut all ties to the financial world and returned to my original career path and "stability". At the ripe age of almost-31 I'm in a financial position where I can start building a life, and start realizing my plan for long-term investing.

As it stands now, I have no investments, no property, a small bit of manageable debt (relatively cheap car which is also my hobby), no RA, no TFSA, and R100k tax-free (tax directive) money in my savings account earning around 6%.

On top of that, I realized that I will need to get on top of my parents finances as well. They have always earned a decent income due to my father's business, but they have neglected their retirement completely. They are both in their late 60's. My two older siblings do not work and rely on their husbands to support their families, so ultimately I will be the only one actively contributing to my parents retirement, all while trying to create a life for me and my hopefully-soon-to-be-wife.

I've decided to sketch out a financial plan for myself, my girlfriend and my parents in an attempt to remove them from the grasp of their financial advisor in order to set a clear cut path to some sort of retirement.

I've drafted a plan below, which I think makes financial sense and should start me off with a well balanced portfolio:

  • Max out TFSA with R33k on 1 March 2019. (Leaving me with R66k left in regular savings).
  • Keep R33k of the remaining R66k as the starting point to my emergency fund (which I'd like to grow to about R150k).
  • Use the remaining R33k to invest immediately in ETFs / other "good" financial instruments (I could really use your input on what is considered great first investment financial instruments).
  • Open an RA with 10X (need more research on this) and start contributing to that around R3k per month, unfortunately no contribution from my employer.
  • Don't buy a house. Don't panic. Be patient. Reduce living costs even more (lean already). Try not to panic because I want to get married soon, have a honeymoon and travel. Did I mention don't panic? It's fine.

Because my girlfriend (29) and I (30) are only starting our investment journeys this year, do you have any strategic paths you would recommend as the most efficient way to start ?


is not happy about the Ashburton 1200’s TER. Chris Rheeder wrote in about it too

I have heard you and Simon mention the Ashburton  Global 1200 several times as a solid, diversified, reasonably priced rand hedge ETF. However, while doing research recently I discovered that the TER for the aforementioned fund is now 1.33 percent! (See the latest MDD: https://www.ashburtoninvestments.com/docs/sa/ashburton-exchanged-traded-funds/ashburton-global-1200-tracker-fund/a-class)

I recall that the initial TER was in the region of 0.45-0.55. In other words, the TER went up by more than 100 percent, which is ridiculous and highly annoying as I invested a fairly large sum of money based on the diversification and relatively low TER. I appreciate that prices do at times need to go up but this is just not cool.

I just wanted to alert the community that this is no longer a low-cost option. Satrix, Sygnia and Stanlib offer much cheaper options that are fairly similar.


Brendan is having trouble deciding on a vehicle for his retirement.

When I joined the company I work at, we had a mandatory pension. At the time I said "Okay, cool!" and felt very grown up and responsible.

However my contract of employment will soon expire. That means I will have to move my pension thingy. It's a Momentum product called funds at work.

Upon realizing I have to move the pension thing, I started looking into the various options and I had no clue what is the right option for me.

Retirement funds, plans, annuities, pensions - there seems to be thousands of options and I don't know which one to go for. Could you please provide some clarity on this fuckery?

I was thinking I want to be with a place like 10X and I want to have my own personal contribution going off my account so that I can max out my tax break, but with all the other products out there and the various differences I thought it would make sense to hear what you have to say.

My line of works means I will usually be hired by companies on mid-term contracts +- 5 years at a time and I thought maybe always having a personal retirement annuity would make these transfer periods easier and allow me to keep my money consolidated.


Charmaine wants to sell some of her existing ETFs and buy new ones. She has DBXWD and Satrix40. She made a loss on the one and a profit on the other. She wants to know how to handle the selling off in terms of tax.

1