When you’ve gotten your debt and spending under control, it can be comforting to hold on to your free cash for a while. Taking the leap from that safe pile of money to the Big Bad Market is not easy.

However, as we’ve discussed before, cash is not a risk-free investment. The longer you sit on a lump sum of cash, the more risky it becomes. This is because of inflation. The effects of inflation are difficult to internalise because the rand value of your money stays the same.

Let’s say you put R100,000 in a low interest cash account today. The interest you earn is enough to cover the annual cost of the account, but nothing more. At an inflation rate of 5.5%, in 10 years you’d only be able to buy what R58,543 can buy you today. The rand amount is still R100,000 so it seems like you haven’t lost anything, but you can afford half of what R100,000 can buy you today. In 20 years your bank statement would still reflect R100,000, but you’d be able to buy what R34,272 can buy today. As you can see, the inflation risk increases every year.

This week we help three listeners figure out how to put their cash lump sums to use. The checklist we managed to come up with for a cash lump sum is as follows:

• Fund your tax-free investment vehicle:
  • Commonly referred to as tax-free savings accounts or TFSAs, these products should be every South African’s first investment. As an investor you are liable for dividend withholding tax, tax on interest and capital gains tax outside of a tax-free account. As we discuss in this week’s episode, these accounts are not meant for cash savings.
• Don’t speculate unless you can afford to lose the money:
  • While cash makes it easier to capitalise on investment opportunities as they present themselves, cash can also make it easier to hop on a bandwagon that’s not suitable. Don’t invest your cash into a speculative investment (think alternative asset classes, sub-indices or individual companies) unless you can afford to lose that money.
• Lump sum vs average:
  • While the math shows us investing an entire lump sum in one go makes more financial sense in terms of potential future earnings, going into the market one small investment at a time is a legitimate option if you’re scared. If this is your first investment, think of it as a teaching tool initially. Once you feel more confident, you can add the rest.
• Work out the future value:
  • If cash is giving you a feeling of safety, find an online calculator to work out the future value of your lump sum using a 5.5% inflation rate. Now play around with higher or lower inflation rates. Hopefully seeing the value of your investment deplete will be the motivation you need to get going.
• Diversify:
  • If you’re holding on to a large amount of cash, you are not diversified. Make sure to put your money to work.

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Win of the week: Matt:

If I earn a salary from a foreign company and then decide to do the nomad thing and travel around low cost of living countries for, say, a year but remain a tax resident in SA. My understanding is the first R1m earned will be tax exempt- is that the case?

“Tax residents in South Africa will be taxed on their worldwide income. But that is dependent that they’re still SA tax residents. Offshore salary earned is taken into account. R1.25m ito the latest tax amendments will be exempt from tax in SA.”

Harry

This was mainly due to the fact that I did not know what the best option was, and my new employer only offered a provident fund.. I've been maximizing my tax benefit with my new employer provident fund. I'm also sitting on cash in a savings vehicle with my bank, currently returning around 3-3.5% interest.

I'm living rather small (renting only, no debt of any sort) and have quite a bit of money to invest/save every month.

What would you advise I do with my portfolio? The preservation fund? Should I keep maximising my provident fund contribution? What about my cash savings account? Should I consider taking money out of the country? Investing offshore?

Joe

I know we may have missed the boat both with gold and Tesla, would you suggest we go for an ETF with some gold in them? We don’t mind going moderately aggressive.

Steven

I currently have free cash in my TFSA with ABSA Stockbrokers. Besides the fact that its not earning that much in the way of interest, they also charge a 1% service fee annually, which I believe is based on the value of the funds in the account?

I’m reluctant to invest in the market right now as I feel there’s no value and would prefer to wait for a correction, when it eventually comes?

Although I have no previous experience investing in bonds I am thinking this could be a suitable option at this time.

Looking specifically at the Stanlib Global Government Bond (ETFGGB), it seems to be doing very well so far but is this mainly due to the Rand’s weakness over the past few years as opposed to any other factors?

Considering that this is a reasonably low risk product, is it currently a better option than investing in a regular cash instrument which is offering such low yields at the moment?

According to the fact sheet the time frame for this ETF is 3 years so assuming my investment period was 1 year or less, would you say that this is not going to be suitable?

Santosh

Based on FIRE (my FIRE btw is Fuck It, Retire Early) the rule is to have around 250 - 300x monthly income. So Kris, I know your FIRE number is R7M as you've stated this.

so assume you have the R7M already and are still work and assume is sort of split into Cash, Bonds, Stocks and Property.

If this portfolio yields you a modest 6% PA it amounts to your investments paying you R420,000 PA - Gross.

Now this is gonna have a major impact on the tax you'll pay as there's no way that you can "hide" this from SARS and there's no way your PAYE accounts for this.

You're gonna have to pay SARS either way. I know one of the solutions is to dump it all into an RA but then you are not liquid and you'll pay the tax in the future anyway.

I'm sure the other FIRE guys like Patrick, Stealthy face this.

What's the solution ?

Does on just lap it up & pay the tax comforted in the knowledge that they're paying tax cause they've made money

This tax liability is quite substantial as if you're an average earner, it pushes you 2-3 tax brackets higher and if you're a HNWI, even an increase of 0.2% of your taxable income can add R20000-R50000 to your tax bill for that year.

Leon

For the inflation linked option, the capital balance would increase by the cpi calculated rate at payment dates and interest is fixed at 5% of capital.

The website mentions an index ratio calculated by cpi divided by base ratio or value, do you know where this base value(divisor) is obtained from? It only mentions that the cpi (numerator) is obtained from Stats SA.

The fixed rate on the inflation linked 10 year bond is at an all-time high of 5%? Is this an opportunity to lock in a great rate or are the fixed rate bonds still the better option?

It seems like there is more upside potential on the inflation linked bonds as it is unlikely cpi will remain at current lows over the 10 year period. I may be incorrect but it seems both options offer the roll over or restart option so you could capture any improvement on the fixed rates either way.

Ross

There is an awesome book by Andrew Hallam - "Millionaire expat" that details expat investing (He details options for people all around the world) He also has a blog. Another is Bogle heads investing advice and info based on Singaporean expat investing.

Often the fear of making a mistake keeps us from starting our investment journey. It feels like everything is on the line when we make our first investment, but missteps can be corrected fairly easily. Even the mistake of waiting too long and starting too late can be corrected. This week we think through some of the mistakes new investors fear most and how they can be corrected. Hopefully this episode will give you the courage you need to take the plunge.

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Win of the week: Rory

I started learning about the investing world about two months ago and stumbled upon your website within the first week. 

Most of the things you discussed in your podcast just flew over my head, but it did direct me to the things I had to go read up about. Two months later I realized I am able to follow your podcasts without any problems. I want to thank you both for that. If I didn't stumble upon your website it would have taken me much longer to actually understand the investing world.

I have a friend, he is 25 and about to get married. His plan is to move to New Zealand in the next ten years. I told him he should look at starting to put money away in his TFSA, then the question came up about what happens to that money when he emigrates?

I see EasyEquities opened a properties platform, where you can buy shares in buildings and earn your share of the rent. What are your opinions on this? Do you think it would be a good idea to invest some money there and what would the tax implications be?

Travis

I recently made my first attempt to begin investing using my TFSA. I have been listening to the Fat Wallet show whenever I can. 

I decided to invest in the Satrix NASDAQ 100 and the Satrix S&P 500 hoping to acquire some international exposure. I did not realise the NASDAQ has some S&P 500 companies. Now I am wondering whether I have begun on the wrong note, making a mistake and overinvesting or spreading myself too thin in some of these companies in the indices.

Is there any way that way that I can correct this "imbalance" in my TFSA or should I even bother? Have I made a blunder in choosing both the NASDAQ and S&P 500? 

Ash

Like many of my colleagues, I was hopeless with my finances for most of my working life. I had 2 RAs with my insurance broker that were fee- and penalty-laced products that underperformed my cash savings account. Four years ago, I started a tax-free and a discretionary investment with my bank which were both heavy on fees (2-3%) and did not perform as expected (annualized return of <2%).

A year later, I took a two-year private scholarship, which meant leaving my government job after 10 years and my pension fund (GEPF) paying out. The scholarship only paid about 60% of my usual salary & I would have had a hard time keeping up with my bond repayments, instead of moving the pension payout into a preservation fund or my RA, I used it to settle most of my bond and reduce my monthly payments. Needless to say, this 2 year gap left a big dent in my finances overall as I had no other source of income & relied heavily on my savings.

Earlier this year, when I was looking at investment options for my toddler’s education, I started reading up on personal finance & investing, discovered your blog and podcast, and realized all my missteps along the way.

This set off a series of changes in rapid succession:

I switched banks to a bank with a single, lower fee, and better cash investment options. This meant closing my access bond. With my biggest debts paid off, I cut down aggressively on unnecessary expenses, brought my expense:income ratio to about 40% and focused on saving and investing the balance. I started 2 new money market accounts with the new bank - 1 immediate access for my emergency fund (now have 3x monthly expenses covered), and a 90-day notice account with a higher interest rate (between 6.5-7%).

I transferred both my insurance-based RAs (despite the protests and threats of penalties from my broker) to a low-fee new generation RA (10X) and started a new one with Sygnia (Skeleton Balanced 70). I increased my contributions from 5% to 10% of my income, and plan to increase further to 15%.

I repurchased the poorly performing discretionary investment with my bank and reinvested this in an Allan Gray unit trust (High Equity Fund) - lower fees but still in the range of 1.6%. This was just at the start of the current crash so it has nosedived, but I am planning to hold rather than sell low.

I began investing in a range of ETFs in quick succession: 

a) Satrix (50%): initially Top 40 (12.5%) and MSCI World (12.5%) - later added Emerging Markets (6.25%), NASDAQ 100 (6.25%) and most recently, the new SA Bond ETF (12.5%).

b) Sygnia (25%): 4th Global IR ETF (12.5%) and S&P500 (12.5%) (initially also had MSCI USA but stopped the recurring contributions when I realized the huge overlap with the S&P)

c) CoreShares (25%): S&P Global Property (12.5%) & SA Property Income (12.5%).

I switched my tax-free investment from the ‘multi-managed growth fund of funds’ with my bank to the NewFunds MAPPS Growth ETF (using the same platform), and split my maximum contribution between this ETF (50%) & the Sygnia Skeleton International Equity FoFs (50%) (*factsheets attached).

I would like to know your take on my financial moves and if there was anything I could have done better?

My concerns are:

1. Was it a mistake to close my old bank account just to save on fees, since this was my oldest and most diversified line of credit (home loan + first ever credit card)? Will this damage my credit score, especially when I apply for a new home loan?
2. Am I overexposed to global (especially US) markets in my choice of ETFs & is there too much overlap in the holdings of the global ETFs (MSCI World, S&P500, NASDAQ 100 and the Sygnia International Equity FoFs, not to mention the 30% international equity in my RA’s)?
3. My discretionary investments currently outweigh my RA contributions by about 40% & both RAs still only represent 10% of my income. I wanted to gain more equity and global exposure than a Reg28 product would allow (and have access to the funds if needed before age 55), but is this short-sighted and should I rather aim to maximize my tax deductions? 
4. The listed property ETFs are the worst performing products so far & I understand this reflects the poor performance of property markets in general - would reducing my exposure to this sector be wise at this stage since recovery is very likely to be sluggish given the current crisis? 
5. How do you feel about holding the NewFunds MAPPS Growth ETF in a tax-free investment? This is 70% local equity (SWIX) and also holds a significant proportion in SA bonds or cash (30%). Is this kind of ‘balanced’ ETF not ideal for a tax-free investment (TFI) since we are looking at long-term growth and equity-only would give higher returns? After listening to your podcasts, I understand the Ashburton 1200 to be one of the best choices for a diversified equity-only ETF. I am thinking of transferring my TFI to the ASHGEQ via Easy Equities, however this overlaps quite a bit with the Sygnia Skeleton International Equity FoFs (*fund breakdown attached), including emerging market exposure. Would I be better off consolidating my TFI into one ‘global’ ETF or is there any benefit to splitting between the ASHGEQ and the Sygnia International Equity FoFs (*not sure if this is really a ‘passive’ fund since it seeks to ‘outperform’ the MSCI ACWI)? Should I rather split the TFI between the ASHGEQ and a local equity ETF like the CoreShares Top50 since the SA market is not represented in the ASHGEQ?

How do you and Simon feel about the Ashburton World Government Bond ETF (TER 0.51%), particularly as a part of ‘balanced’ ETF portfolio? I see from their factsheet that their returns have exceeded even the ASHGEQ (>20%), but I understand that this may change with interest rates over time, and may not reflect future performance.

Would the combination below in a TFSA wrapper be the best long-term bet?

1. Ashburton Global 1200 Equity ETF (1/3)
2. Ashburton World Government Bond ETF (1/3)
3. CoreShares S&P SA Top 50 ETF (1/3)
4. I have been looking at the RAs offered by EtfSA & their Wealth Enhancer RA seems quite attractive - it includes more commodities (gold in particular), local mid-cap and Africa ex-SA exposure than my current RA holdings. The fees though stand at 1%, similar to 10X. What are your thoughts on this RA & would you recommend adding this to diversify my RA portfolio? 

Matt 

With many companies transitioning to remote work and deciding to stay that way, it's becoming easier to find a location independent job for a foreign company.

If I earn a salary from a foreign company and then decide to do the nomad thing and travel around low cost of living countries for, say, a year but remain a tax resident in SA.

My understanding is the first R1m earned will be tax exempt- is that the cae? Am I missing anything and does this seem like a feasible thing to pull off?

Access the ETF comparison tool Edwin shared here: https://www.etfrc.com/funds/overlap.php

Anne

My employer pays into a Liberty Provident Fund on my behalf. For the first time this month I requested my Provident Fund statement. 

I saw, with disbelief, that Liberty is taking 12% of my contribution each month in fees! Given what I have learned about fees from your website and podcasts I am dumbfounded. 

I queried this with Liberty and they said it’s because their fees are based on 0.02% of ‘payroll’ i.e my salary, rather than my contribution. I checked with our company CFO and she said these fees are in keeping with what is charged by other companies and I can’t go to another provider.   

• What do other reputable SA companies charge to administer Provident Funds?
• Why is it so hard (for me, anyway) to find this out?
• Do you know if my company can compel me to stick with Liberty under SA law? Why can’t I leave the company provident fund to go to another provident fund or RA of my choosing? If not, Liberty can just make up a number (as they seem to have done) and charge me what they like and there is nothing I can do about it except leave my job. 

I’ve been avoiding talking about endowment policies, because what even are they? I haven’t come across one in my own investment life. This week, a question from Sandile sent me down the endowment road. I had fun with it. I got the Tax Elves involved. They had fun with it. Fun was had by all.

Endowments are the love child of insurance and investments. They have a five-year lock-in period, a tax rate of 30%, a life assured and a beneficiary. If you are in a higher tax bracket and looking for a long-term investment vehicle, endowments are worth investigating. They can also play a role in estate planning. It pays out directly to the beneficiary, which is great if you are leaving someone behind who is financially dependent on you. As De Wet de Villiers pointed out, the fact that they pay out tax-free doesn’t mean they’re not taxed in the estate. It simply means the estate is liable for the tax, not the beneficiary. 

In addition to teaching me a thing or two about endowments, Sandile’s question could serve as a template if you’re hoping to add new holdings to your portfolio. His clear reasoning and systematic approach to adding this investment is worthy of emulation.

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Win of the week: Pru

I’ve tried to break up with my advisor for the last year, but it has been difficult! Everytime I say to him, we need to talk and I want to move my investments, he takes me out on a nice date, listens to me and then goes on to scare me into staying with him.

He tells me EasyEquities is not the right platform for me and I should be careful of companies like 10X. It does not help that he also butters me up and tells me how great I am, while also telling me about his life, so I end up feeling I can’t leave him because he confides in me. My people-pleasing self feels bad for wanting to break up with him. It's the perfect emotionally manipulative relationship and I JUST CAN'T LEAVE! 

How does one amicably break up with their financial advisor? More importantly, how do you leave them when you have a fear of managing your money independently? 

I have listened to your podcast, and some episodes more than once. I read Sam Beckbessinger's book and Vicki Robin's book called Your Money or Your Life. I aspire to be a Patrick Mckay and I have a financial strategy to reach FIRE, but my greatest hurdle is letting my financial advisor go and trusting myself that I can manage my investments myself. 

When he is not around I feel as though I can manage my money independently and I do not need him, but after meeting with him, I leave with a great sense of fear about moving my TFSA from Sanlam to Easy and moving my RA from Discovery to TenEx or Outvest.

All the financial aspects that do not involve him I have managed relatively well, like my emergency fund. I know I can manage my money, I just fear that if I move my investments to the "big bad world of ETFs" (which is how he makes it sound), I will lose everything! I know he may be playing Jedi mind tricks on me, but how do I stop myself from being tricked! Also, he is not a bad person, he is a very nice guy, but I think this is part of my problem, I am making this whole relationship too personal! I feel defeated! 

Sandile

I stumbled on this product by Sygnia where you can get direct exposure to Berkshire Hathaway.  

Here is why I’m looking into buying into this fund:

• I believe that Berkshire is going to have ample opportunity to buy really decent businesses at decent prices as Covid continues to decimate some much needed industries. 
• I believe Berkshire is one of those great businesses that one can buy at a decent price, thanks to Covid;
• I bought a few units in late Jan through EasyEquities and the costs to transfer funds and transact in USD was rather hefty, so I think I’ll leave that to a local fund to handle that;
• I have looked at the S&P500 (which I hold) and in my view, the Berkshire allocation there is rather small and I’d like more exposure;

Sygnia offers this fund for “discretionary savings into a 5-year endowment, a retirement annuity or a living annuity”. I would like to avoid setting up an RA with yet another service provider at the moment and I have no need for a living annuity, which leaves me with the endowment fund option.

From the little that I could read up on endowment funds:

• I am fairly comfortable with the idea of leaving the cash invested for at least five years (if not more);
• My marginal income tax rate exceeds 41% so at 30% tax, the fund is saving me some element of tax;
• I have set up an emergency fund (around 6 months’ salary) so I think the risk of cancelling the endowment before 5 years is low;
• TFSA has been maxed for 2021 year of assessment. I contribute far less than the allowed 27.5% into my RA (I am busy assessing contributing into an RA vs increasing my employer-pension fund contributions);
• I am just uncertain if I’m opening myself up to more unknown risks/complications/costs by using this structure.

Kimberley 

I am a shareholder for a company who has moved operations to Mauritius.

If our company is lucky enough to declare dividends, this will now be paid in USD. 

How does this affect my tax?  

Is there a way I can get it in ZAR without losing so much to tax or is it better I keep it offshore ? 

I like the idea of keeping it offshore for emergencies or as a “life insurance” for me when I pass away to leave to my daughter. Is this possible with only holding a SA passport?  

Perhaps I could open an offshore trust and list her as the beneficiary and the dividends get paid into that? 

Could I open a USD trading account on EE and get the dividends paid directly to that? 

Is what I’m wanting to do by not bringing it into SA even legal?    

I feel there are not enough bubbles, chuckles, coffee and chai tea to get me through the questions I have and the changes I need to implement to get my financial ducks in a row.  Right now these ducks have ADHD and when they seem to be in a row, they decide to go off on a fucking tangent.  

Anton 

I inherited a farm in 1994 and sold it in 2019. I have the value of it when I got it and when I sold it. I did not get a valuation in 2001 when CGT started. I would like to know how to work out the CGT on this transaction. 

Download the calculator here.

Moore

I am 27 and have a pension/provident plan with my employer. I would like to have an RA for a top up.

I would also like to invest in shares. I don't know how to go about doing any of those.

I have an EasyEquities account but I don't really know which shares to target, and for which amount every month. I have a R1000 that I can divide for those two financial goals. With that amount of money and my age, I am not even sure if that will be enough to contribute. I’ve only been exposed recently to this saving and investing movement. I was so ignorant. 

Thanks to the Fat wallet Community on Facebook I have managed to put some savings for Emergencies with Tyme bank.

Catherine

I’ve tried the Interactive Brokers demo account and find it a little intimidating. I don't know what options or margins are, and I don't want to enact them by mistake by clicking the wrong button. I also imagine their customer service is not catered for noobs like me. Having said that, the platform is becoming less intimidating the more I play with the demo account.

Another option is to buy the shares through a Standard Bank Webtrader account, which has broker fees of 0.345% and annual account fees of 0.26%, and then transfer the amount across to my EasyEquities USD account to avoid paying ongoing annual fees.

Do you have any thoughts on each of these options, considering that my goal is to pay the lowest fees possible over the next 20 years, but also have a relatively user-friendly experience. 

I don’t have a credit card. The only time this has ever been a problem is when a hotel or car rental company requires a credit card for a booking or deposit. It is pretty frustrating being at an airport and unable to rent a car. And are there any ways to get around this booking/deposit problem without having a credit card? And do you know of any reasons to have a credit card aside from this (assuming I don't need the credit)? Are credit cards generally better than debit cards for general spending while travelling?

Melisha

I have two kids in grade 4 and grade 0. I usually save up the school fee money to pay once off and get a 5% discount in December of the previous year.

I anticipate a 10% increase in school fees. So essentially I need to save R20k a month for both kids' school fees for the 2021 school year.

We usually put the money into a savings account but now the interest rates are so low. At the moment the money is in a Tyme bank account goal save but i was wondering if there was something better out there? Something with low risk, short term and potentially to beat money market type accounts. 

Our friend Walter made a site called Rate Compare https://www.ratecompare.co.za/. 

Tristan

Lately I have been seeing ads on YouTube for a financial service app called Franc.

It has 4 stars on the Google Play Store but I was wondering if you had heard of it, seen it or tried it? Lastly, can we trust Franc?

Ken 

What is all the hype over Mexem Africa about? I have gone to their website but, quite frankly, it looks like a scamsters website (although I thought the same about Easy Equities' website too, before I started using it). 

I don't see any info on tax free accounts, and they mention all sorts of foreign currencies but not much about how you convert your rands to Dollars/Euros/etc... 

The little section on fees is as clear as mud.  As an ETF investor (tax free and discretionary) should I be looking into it in a bit more detail? Would really appreciate a chat between you and Simon on this.

Brian

I've been with etfSA since 2012. I am busy updating my etf portfolio and want to know if I should shift some funds or all to Easy Equities. I've already bought MSCI China through my Easy Equities account that I registered a few weeks ago. What is your suggestion? 

Most of us kick our 20-year-old selves for spending all our money making poor decisions in Melville instead of taking full advantage of compounding. The financial independence, retire early (FIRE) movement has given us valuable tools to reach our financial goals despite those late nights in Melville. I discussed that with FIRE-man Patrick McKay here.

Since regret over lost investment time is something so many investors grapple with, we wondered whether we could quantify exactly how much we missed out on in order to make it up. It’s a simple question, but the solution is hella complicated. I tried to do this for my own situation like this:

1. First I worked out how much money I would have needed today so I could stop contributing to my savings and still reach financial independence in 10 years. I never considered this before, but it’s basically the baby version of financial independence.
   
   To do this, I multiplied my current expenses by 300 to get to my FIRE number. (I always do this, even though I know that number by heart.) Then, using an average growth rate of 8%, I worked out what that amount would be in today’s money. 8% is slightly below the 9.4% annual return the JSE ALSI achieved over the last 10 years. (You can use a future value calculator online to do this.) 
2. Next, I subtracted what I managed to save so far. 
3. I divided the difference by 120 months—10 years—to get to the monthly rand amount.

The bad news is it’s a lot of money. To add that to my current investments to reach my FIRE-goal, I’d have to take on another job. The good news is, I don’t have to stop investing now. Remember, that’s the amount of money I would have needed to stop contributing to my investments today.

I wanted to arrive at a simple rule of thumb to help us think about making up for lost time. It turned out to be far more complicated than that, but hopefully this discussion gives you something to chew over. I’m excited to hear your thoughts.

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Win of the week: Stippled 

I recently listened to your perfect money month podcast. 

I for the last 20, and my wife and I for the last 10  years, have followed a very simple "perfect money month" template. We are both 43 now and have recently become financially independent based upon the 4% rule (we are actually aiming for the 3% rule which will probably take another 3 years to achieve).

The monthly template has been as follows:

• Give 10% of after tax income.
• Save 15% into a Pension, Provident or RA.
• Budget discretionary spend at the beginning of each month. [We use 22seven]
• Initially pay down debt, then Invest, the extra money [after we became debt free 7 years ago redirected to global broad based ETF . .  no individual shares].
• One great dinner out each month . . .  but only one :-)

General rules

• No debt except for housing [This means we still driving "student" cars]
• Automate as much as we possibly can
• Review insurance, cell phone and medical aid annually [In November for us]
• Review wills annually [In June for us]
• Balance investments evenly between each other to maximise tax benefits later on.
• Married out of community of property with accrual

This has really been an unsexy and boring process to follow month in and month out.  However the results have astounded us.  

They are:

• My wife was able to resign from her job when our first child was born seven years ago to be at home with our kids (we now have 2) which was always a dream of hers.
• We are now financially independent and we have made more money from our investments over the last three years than from my full time employment!
• We are able to afford to send our kids to any school of our choice which was always an important goal for us [Not that we automatically chose the most expensive, we just never wanted money to dictate the choice].
• We are able to support friends and family financially if and when the need arises [Never a loan, always a gift]

We also recognise how luck and privilege have played a very large part in our journey.  We both have tertiary education and have never been unemployed unwillingly.  But we have not wasted that good fortune and rather used it to create stability and choices for us and our family.

Just in case I give the impression of all work and no fun . . .  I took a year off work in my mid to late twenties and spent it backpacking from Cape Town to Addis Ababa and climbing mountains in South America.  We take regular holidays locally to the beach and have taken 4 great international holidays in the last 10 years [We were even able to take my mom inlaw to Venice - It was her first trip out of SA].

We can honestly not recommend more strongly the boring "Perfect money month" idea.  It has benefits far in excess of what you can imagine when you start.  Approximately 240 months in, and we can say that without any hesitation. 

Mike 

The TERs of our global index trackers are extremely high compared with for example Vanguard. Is it not better to purchase them directly through the USD Account rather than purchasing a global tracker from one of our local providers at more than 6 times the fees? Eg. Vanguard VOO is 0.03% and the cheapest S&P500 tracker in SA is I think Sygnia @ 0.2%.

I wonder why our RA providers use global trackers from local providers if the fees so much are higher? Maybe it is just easier for them cause they don’t have to move any money offshore but surely it would be worth their while to do it?

Edwin

I have been wondering if you or Simon have some tips or observations regarding the income side. I have been a salaried employee for most of my 15 year career and have spent a total of 6 weeks in my working life unemployed. I am currently employed. 

My question, therefore, is what else can you advise me to do in the area of increasing income, besides simply starting a side gig. I have tried a few side gig ventures before. Some are still going, but could never replace my income. It's a lot of work and I’m wondering if it’s worth giving up on this and just focus on being indispensable to my employer. Should I be job hopping multiple times maybe? Is increasing your income supposed to be this hard? Is it a worthy goal to actively chase?

Hans

If Jared is doing contract work in Kuwait and spends some of the year in SA, he might owe SARS tax on his foreign earnings over R1m. This is a change in the tax code as of March this year.

Satrix has an ALSI Unit trust. Given that Satrix and Easy Equities (same platform) already treat ETFs as Unit trusts, i.e. aggregate buys and execute them in bulk, how would this be any different?

Terence 

Many companies will be taking on that strategy in the future instead of paying bonusses etc. In fact retainer shares, bonus shares & even shares relating to ROCE (return on capital employed), BEE scorecard achievements etc are included in share awards these days.

We are probably going to get to a position in SA where inflationary  increases will be negligible (like Europe as an eg) and there will have to be creative ways to retain good staff. 

If your friend is working for a good company and believes that the potential can be achieved during his tenure, why should he not participate in a share scheme? Many employees are in the pound seats when the company lists on the JSE as they potentially make buckets of cash at vesting. Agree, many don't as well, but you should rather encourage that thorough homework prior to participating and or limiting the amount you purchase. Normally they discounted shares anyway and Management knows the upside on vesting or buyout occurs.

Marielle 

My grandmother was drawing her dividends from Ecsponent on a monthly basis to sustain herself.

She does not have a lot of money. I believe she has around 300k. She is 68 years old and in good health.

What would be the best way forward? Any ideas on where to invest so that she can draw an income and have funds available for a rainy day.

Nico decided to move his RA from Momentum, where he pays 3.2% per year, to OUTvest because he qualifies for the R4,500 fixed fee. Momentum want to charge 15% of this lump sum to move his RA. It’s double the growth he achieved over the past 10 years.

I know you went through this process recently and I really need help.