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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
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Now displaying: Page 6
Oct 14, 2018

I blame the advertising industry for the idea that living a good life is somehow related to money. Much as I make my living thinking and talking about money, money for its own sake is pretty useless. Back in the bad old debt days, I tried to use money to make me happy. That not only landed me in trouble, it also didn’t work.

When a friend sent me the Guardian article I talk about in this week’s episode, I had bad money days flashbacks. As Kay pointed out in the community group, the woman's language usage is very telling. I remember saying things like, “I think it costs”, “I guess it sets me back”.

What bothers me most about this article is how this woman hasn’t made any choices about what she wants her money to do. She’s living someone else’s idea of a great life. I know it’s not an easy balance to strike, but a little thought can go a long way.

Fried recently had a health scare which got him thinking about this balance too.

I had a terminal illness scare recently. During that time, I really thought a lot about finances, about leaving money for loved ones and my daughter's future.

If I died today, I know that my wife and daughter will be financially safe because of my life insurance policy (thank you SANLAM broker-man), the same thing if I don't die but can't work and earn an income anymore.

What stuck in my mind is that if I died today, I haven't yet lived. No one plans to die, yet everyone does, and most, sooner than expected. Like you, I'd also like to live to 130, but we probably won't. It's very important to live during your breathing-time. And to do this while building a small fortune to carry you through retirement? How do you balance this?!



Win of the week: Darryn, who wants to be a good uncle.

My sister lives in the uk. They have three little boys. I don’t want to spend money on toys and amazon gifts and wanted to do a TFSA for them. They are unlikely to move back to SA. Are there any companies or banks that do this overseas (uk specific) and what methods would one go through? Any other advice on these type of matters?


Chris is 24 and needs to choose between an RA and a TFSA.

If I have R2500 to invest should I be maxing out a TFSA or putting money into an RA? And is only contributing to an RA when I'm 30 crazy? Generally more conservative over a 30 year period and generally more expensive than an Ashburton 1200. Iit seems like money in an ETF is the answer.  Is this a dangerous thought to only start putting money into an RA once I’m 30 – if I’m still contributing to a discretionary investment?

Do the tax implications of share incentive schemes leave you in a dangerous cash flow position?

If you earn R600 000 and your employer offers you R500 000 worth of share incentives vesting in 3 years’ time.

You have a long term view on the company and wouldn’t want to cash in for at least a couple years after the vesting period.

Effectively in 3 years’ time you are going to have to cough up extra (roughly) R150 000 in cash to SARS, but you are going not going to have any extra cash to show for your bonus?

That would probably force the majority of people to sell their shares as soon as they vest just to cover this?


Sheila shared an anecdote about bonuses gone wrong on The Fat Wallet Community on Facebook.

In UK in early 1960s, Dad expected his discretionary birthday annual bonus .. the Company had a financial bad year and they cancelled. Guess who cancelled Summer Holidays that year. Still a bitter memory as I had bragged at school that we were going to Spain. I've never banked on a bonus or commission in my life though .. lesson learned.


Frank considers himself reasonably financially literate, but he needs help.

I have been managing my money from a young age using what I have read and learned to guide me.

I got RAs, Preservation funds, Provident funds, share portfolios, tax free savings, paid off house, an emergency fund etc

I have done all the spreadsheets, calculated future value on the growth of my portfolio and what I believe to need to live when I retire.

I'm worried that I will be blindsided later in life, because of a knowledge gap, or not truly understanding tax treatments, error in my calculation which will result in a gap at retirement. I have 25 years to retirement and now seems to be a good time to do a proper evaluation of my position.

When looking for a truly independent advisor that aren't aligned to product providers and will have my best interests at heart, I am battling to find one and don't know where to look, as the internet is failing me.

I am clear what I need from them.

Review my plan and calculations and tell me if I'm on the right track. Need Reassurance

Not sell me a product, if I'm short something tell me and source it.

What is the real tax implication of what I'm doing, so that I'm not surprised at retirement

And start a conversation about options of how would I structure my investments at retirement

Any advice you can give me to find an advisor would be great, better if you could give a set of names of people in Johannesburg that I could approach. Or if there is an alternative that I haven't considered that may help me answer my questions.


Matthew has an excellent question about buy-it-for-life shares.

In the last minute of episode 117 you say that you should hold and never sell.

How do you actually realize or extract the money from the portfolio?

If you never sell, your money is just a figure on paper?

So when do you actually make the money from your investments?


We haven’t heard from Sabatha in a while, and now he’s back with an excellent answer to a question we received a long time ago. We spoke about Greg moving his RA in episode 118.

The explanation for Sanlam's waiting period doesn't make sense.  However, the waiting period may be valid if the investment was by debit order. With most banks, an investor can unilaterally reverse a debit order within 30 days.  Thereafter, you need the cooperation of the receiving entity.

When you decide to move your RA, don't forget to cancel the debit order instruction.  You might think it's a given, but it's not. Sanlam will transfer your RA AND continue with the debit order investment as if nothing has changed!  Buggers.


Anonymous has been appointed the executor of their grandparents’ estate, which is in a trust. They really want to do a good job of it.

After episode 118 on inheritance I was reminded that my uncle and I are the executors of my grandparents’ estate, which is in a trust.

It's not a lot of money and there's a good few people between aunts and uncles and cousins, so no unexpected R3mil coming our way. That said, I'd still like to do it right and I don't know where to begin?


Shane

This Ashburton Global 1200 ETF is the bomb. In my days of TFSA investing, I've never picked a selection of ETFs very successfully, but since your 'One ETF to Rule them all'... show 85 I sold all the 'fluff' ETFs that I knew nothing about, and swapped it for the Global. Since then, it's up almost 20%... INSANE!

I finally see a profit margin on my EasyEquities account, and have a portfolio that's beating inflation.

I’m busy reading Sam's book Manage your Money like a Fucking Grownup - and it's amazing, but I wanted to run something by you to find out what would happen...

If South Africa's economy DID tank (think, Venezuela)... and I had a large portion of my savings in my TFSA... and it was in the Global 1200... because it's a local index, would that be affected by an economic collapse? Or because its invested in global stocks, would it be protected... and what would it do if it was protected (like... would it go up by a bunch)?


José wants to know if there are marijuana shares or ETFs we can invest in from South Africa. He mailed after the concourt ruling that it’s legal to smoke and grow pot at home. But remember it was possible to invest in these shares before it was legal here.


Robyn is in a tight spot with her family.

I listened to your 108th episode and when the supporting family topic came up, I had tears streaming down my face. I come from a single parent family, and I am 31. My 2 siblings are 12 and 14 years older than I am. My mom recently had strokes and can no longer work and my brother has simply turned his back on any responsibility.

My sister earns a pittance and lives with my mom and relied heavily on my mom to feed, clothe and house her. My mom also made the fatal mistake of cashing in her entire provident fund over a decade ago and spent it on clothes, gifts, furniture, etc, so she survives now on her tiny SASSA pension.

All the responsibility falls into my lap. I don't have that many dreams, but because of my poverty-stricken childhood, my main focuses are to have children and raise them in a financially sound household, and to build security and comfort for myself and family (ie: not to feed the cycle of poverty).

Now I am paying for a hospital plan for my mom each month of R1607 and I need to keep cash on hand because they're in a position where disaster is a regular thing. I agreed to put away R1000 per month into a Capitec savings account and if they need it, they have to justify why, etc before I simply hand over the cash (they have always been poor, and are the opposite of me - I tend to never spend anything on myself, whereas they go crazy on luxuries and then can't pay rent).

My husband and I already pay R600 into our access bond each month (which is also serving as our emergency fund, which is still FAR from our goal). I plan to downgrade my medical aid to a hospital plan and pocket the savings of R500 and add that to the access bond (thanks Stealthy Wealth!), and now I am wondering if my family's R1000 pm should also go in there? I figure that if I'm going to be sacrificing this cash in future, I may as well make it work in my favour while I can. Is there such a thing as over-saving in an access bond? Are there real risks to this? Also, can I include saving for my family as part of my spending/saving ratio, or am I fooling myself by doing this?


Liefie has reached retirement age and now wants to take some money offshore.

I am over 55 and I receive capital and interest monthly from the sale of my business and should receive it for the next 3.5 years.  So paying tax on the interest.

I am still saving in case I live to 90 plus.  

I want to do a lump sum payment into an RA for tax efficiency. I want it to be invested 100% offshore so it will have to be a living annuity and I will draw down 2%. (I have transferred my life savings in RAs to S&P 500 through Momentum).

I can’t contribute directly into a living annuity, it has to go to a "normal" RA and then transferred(!). During the previous tax year I almost had my head explode in frustration to get this done.  It was easy to make an RA contribution to 10X, but 10X doesn’t cater for ancients like me to do what I have described above. So I then had to transfer from 10X to Momentum to get into a living annuity invested offshore.  

So far this year I have postponed doing anything about it.  Do you know about a streamlined route to do this? Is it a bad idea?

Oct 7, 2018

It took just over two years to pay back my debt. Debt servicing became such a part of my lifestyle that I was completely unprepared for the last payment. I knew, on some theoretical level, what I wanted to do with my money once the debt was gone. However, a part of me thought it would never happen. I was worried about debt for so many years that I wasn’t prepared for the day I didn’t have any. It was disorienting.

In this episode, we try to prepare you for the next phase of your money that is currently crawling towards you. Keep this episode saved somewhere. It’s a roadmap that will get you to the next step. We do a “what next” for each of the below phases of your money life:

 

  • Debt
  • Recently settled debt
  • Starting out at 0
  • Emergency fund in tact
  • RA in tact
  • ETFs bought


Win of the week: Matome discovered us through Stealthy Wealth.

I’ve only recently discovered your podcasts (well actually a few months back but I have been listening to many of the oldies of both the Fat Wallet & JSE Direct) & just want to give you guys a BIG shout out for all the great stuff you are doing.  I have learnt SO MUCH!!! & now I am taking my finances into my control.

I was actually introduced to Stealthy Wealth from a friend, a real miser, but great guy and through his blog I learnt about you guys. So here I am!

I suppose one of my greatest learnings from you guys is that your retirement planning has nothing to do with your income, but everything to do with your expenses. That’s better than real gold!  It doesn’t take millions make it, but you can make millions by knowing that one little sentence! AWESOME STUFF RIGHT THERE.

This is the first of my many mails I will be sending you guys & I am seriously looking forward to learning more, making bigger & better decisions.

Also Phasane for taking charge of his RA situation.

After listening to a number of your podcasts, I finally gathered enough strength to look at what I signed up for on 13 November 2013. These suckers would be charging me an ongoing commission of 5.7% from year 5.

How did I sign up for this? I'm glad I learned about your fat wallet podcast when I did.


Chris submitted an awesome spreadsheet. He’s wondering about his investment strategy, specifically a growth strategy vs a dividend strategy. What makes this hard is the dividend withholding tax, which he bypassed by focussing on a tax-free environment.

Dividend vs Growth


Justine Burnelli is selling a house and downscaling big time.

We've decided to move to sunny Durban and are selling our house. We bought six years ago in a good area so we've had strong growth.

Any tips on selling a home? We're going with one of those online fixed-fee estate agents.

We're planning on renting a much smaller place in Durbs since we came to the realization that there were rooms in our current house that were basically unused.

That leaves us in a bit of a conundrum: how does one get rid of all this stuff? Have a garage sale? But who wants a slightly used toaster?

movingon.co.za

What does one do with this massive pile of cash once the house gets sold?

I'd just like to park the money someplace until we can figure out where to find a more permanent home for it. Feeling really uncomfortable dealing with 7-digit numbers. I'd like to think I'm financially savvy enough to know what to do, but am still feeling out of my depth.

Small mistakes could result in big sums of money going to fees and taxes. Was thinking along the lines of the TRACI or gov retail bonds. What other short term 3-year cash-like instruments are there, besides these two and fixed term deposits at the bank?

If I do invest the house sale proceeds into the MAPPS Protect ETF, will the market allow such a large transaction? Would the market maker simply, automatically create new shares, or would the price just shoot through the roof until all the shares available have been bought up.

What then happens when i want to sell one day? Is an ETF liquid enough to allow transactions of say 5-10% of its market cap to take place?


Wim is making the most of rewards programmes. 

My wife and I are at Investec and we have decided to use our rewards to re-invest in Financial products on rewards program. We have invested almost R30 000 rand over last 5 years in a global Investec equity feeder.

We get R500 voucher for every 10 000 points. Only snag is you have to buy Investec product and have at least R10 000 rand in product. (Lump sum) Initially used money from extra money in home bond. Our cards are credit card but use it as debit card. All reward point goes directly into investing not spending.


Nicole recently scrutinised her retirement fees. She is 52 and she can move her RA without penalty at 55.

I have learnt a lot from your show. Like everyone else I just wish I had had these insights 10, 20 or 30 years ago. For this reason, I am opening TFSA for my children and for every R100 they deposit, I will deposit R150 and then help them to invest it in an index tracker fund.

I contacted my provider (PPS) for a breakdown of fees and found out that I am paying 2% effective annual cost.

I told my advisor I’ve been sensitized to the importance of fees and I want to stop contributing to it and just let it sit there (I am 52 - I could move it with no penalties I presume at 55 years old).

Despite this being an old generation RA, it has done surprisingly well by my calculations. But still - the 2% fees is concerning for me long term.

Anyway, my financial advisor returned with a counter suggestion to decrease my EAC by moving from PPS to AIMS.

I am feeling frustrated, as this suggestion comes only after I say that I am going to stop contributing to my PPS RA due to high fees.

I received the below comment of my financial advisor:

"Going direct to an asset manager is not necessarily cheaper. By going direct, the asset manager will always place you in a more expensive Class. Class A is more expensive than Class B,C and D for example"


We also got an RA question from Robyn, who is in the unfortunate position of having to take care of grown-up family members.

I’d like to open an RA or TFSA for my sister, as I do not think she will have nearly enough to retire on. She is 45. I also cannot trust her with money, so I would like to make investments in her name, but preferably that I control, since it is my money in there anyway.

Would you suggest an RA or a TFSA?


Nduh is from Durban. He is 30 and started investing three years ago. He’s considering a few moves.

I've been investing R2000/month in TFSA since the first month it was introduced with etfSA. 

They are charging me 1% and I want to run away because its means it’s going to cost R1000 per year once I have R100,000. My TFSA with etfSA is an all equity account d other R750 monthly is in property (local & offshore) with our DARLING EASYEQUITIES.

I want to move this R100K to easyequities. Etfsa invested in a number of ETFs. Should I sell all the ETFs after moving to EasyEquities and create something simply that I will understand or keep them?

I recently bought a brand new second hand car on finance and this thing of paying interest stressed me as a result I cancelled a monthly debit order(R1000) to my RA (sygnia) and diverted it to pay extra on my car. I have provident fund with my employer where i contribute 18.5% since the age of 24. What your take on this move?


Clara wrote us about a year ago about a rental flat in Cape Town. 

We sold our home near Cape Town and have moved to the EU with our kids and cats and dog.

I was very interested to listen to your episode with Patrick McKay because he discussed investing overseas, which is something I need to learn about, having sold our house in SA and not yet being ready to buy in Europe (if we ever do).

  1. How do we go about applying for a tax clearance certificate, and do you think I can do it myself or should I hire a tax elf in SA to do it for me? (I have been filing SA taxes myself, but I don't feel very good at it!)
  2. As far as I can tell, I still have to pay SARS tax on any income earned in SA (interest) even though I'm not a resident. Does that sound right?

Ros noticed a new fee. This can’t be good.

On a recent statement of mine from Absa Stockbrokers, I noticed a line item "ETF Fee" for each of the 4 Sygnia Itrix ETFs that I hold. It was the first time I'd seen such an item. I emailed Absa about it, and they pointed me to Sygnia. Sygnia replied:

"The ETF fee item refers to fund fees accumulated between the last two distributions. This period would have been 6 months for most funds, if not all. The fee accumulates monthly and only gets deducted off the distribution. The ETF fee has always been applied but may be been deducted in the background by your service provider."

Can you shed any light on this?


Farhan is 30 and really wants his money offshore.

I save between 10% and 25% of my salary monthly, which is split between:

  • House: R1.1M with 600k debt (10.25 rate)
  • Allan Gray RA
  • EE account
  • EE TFSA
  • Investec 3 year investment: 100 in, 159 out in 2021
  • 280k debt on a car (cough cough) 10.5 rate - should pay it off in a couple years.

Should I pause all investment and just pay off my car? Or do I make good headway but accept 10.5% cost of debt in exchange for portfolio growth?

I don't have a lot of faith in the rand, so have been moving my liquid investments into ETFs with global exposure. That said, I’m very aware that the vast majority of my investment is tied up in my house. Do you think pushing every bit of my portfolio into foreign exposure ETFs is a bad idea? Or a great one? Why?


Wicus made such a good call to save money. 

I’m doing my articles and decided to move in with my parents next year until I finish it.

I’m going to save R5 000.00 per month because I no longer going to pay any rent. I’m very privileged that I don’t have any debt and all the money I save I can use it to benefit for my future.

I already opened a tax free and balanced fund at Allan Gray but only recently discovered that the transaction fees are going to hurt me in the future.

Do I need to move my tax free because I’m planning to use that money when I am 70 years old so still have 46 years left to build that investment.

How do I save the money I’m going to save staying with my parents. I want to save the money for between 8-10 years and want to use that money for a deposit to buy a house in the future.

 

Sep 30, 2018

Expecting a large amount of money for months on end can only make you crazy. I’ve never been paid a bonus, so I’ve never had to endure months of spending and re-spending the same amount of money. Just thinking about it makes me antsy. Nothing sane can come of it.

This week, we talk about the dangers of spending money before you receive it. If you’re trapped in a debt-to-bonus loop, you want to listen to this episode.



Win of the week: Denzil, who went to work on his financial situation.

Since we last chatted, my RA has been moved. I've opened TFSAs for both my kids and opened a TFSA for the wife. Can I contribute the full R33k per year into my wife’s TFSA on her behalf with no tax Implications? I assume I can as spousal contributions are exempt from tax implications, right?

My wife is a housewife and has no RA. She is 32 and I’d like to get this going for her.

However, I’d like to know if we can use this as a tax benefit on my side, or on her side even though she doesn’t earn an income?

She might start working part-time next year, so she will have some income. If she doesn’t have an income, how can we structure this to get the best tax benefit possible?


Sabrina

I am 32 with no pension fund, so where can I invest?

How much should I invest to retire comfortably?

What fund can give great returns?


WC wants us to discuss bonds.

Can you discuss bonds and bond ETFs? Although I have relatively ok knowledge on shares I am a total novice on bonds.

With the inverse correlation between price and yields, when is a good time to buy an ETF like BND? This is purely for diversifying my investments.


Bosman isn’t sure where his interest goes in the time it takes for transactions to clear.

I have an account with Standard Bank OST and transfer a chunk of my salary from my Capitec account every month.

From the time I make the payment from the Capitec account to the time the money appears in OST, who earns interest on that cash?

Also, if I do an instant payment with Capitec at say 13h00, do I earn interest for a part of the day from Capitec and then the rest of the day from OST?


Jan recently sold a rental property that earned him a nice chunk of rental income every month. He’d like the profits he made to cover his monthly expenses.

I used the money to pay for some monthly expenses. What is the best way to invest the capital to give me an income to pay for the ongoing expenses? And perhaps some growth? I sold the property for R1,5m and I can invest R1.4m. I have monthly expenses of R10,000 to cover.


Douglas wants to know where to grow money for other people.

We’ve been putting aside money for our house managers each month for a few years. We had intended putting the money into Satrix each month, but because of FICA and administrative issues we put the money in a savings account.

We have lump sums of about R7500 and R12500. I want to put these into investments that will pay out on their 60th birthdays - between 6 and 12 years from now. Where could I invest this money that will provide a secure return that won’t eliminate half the capital in commissions?

I’m sure there are parents saving for their kids, or other folk like us, who have the same problem.


Pat wants to know how to invest tax-free.

I hear you guys talking about ETFs, EasyEquities and tax free savings accounts.

I know I need to put R33,000 every year into a tax-free savings account, but I'm stuck on the next step. So I open a TFSA and then what's the next step?

I must open an EasyEquities account? I'm confused on how all that works. Mainly just the next step after opening a TFSA.


Garth wants to know if Simon is financially free.

Simon knows a lot of random things about finance and has been in the game almost as long as I have been alive. I keep on hearing him talk about buying shares when they were tiny, now have grown 300 and more %.


Join the Fat Wallet community group on Facebook.

Sep 23, 2018

Since my first investment in Mach 2014, the market has done nothing. Inflation, on the other hand, has done enough. My time in the market is making me progressively poorer. I don’t care for it.

In this episode, Simon and I discuss what we can do while the market does nothing. It’s awful, but it does provide a bit of breathing room to pad that emergency fund, figure out how different asset classes behave in different market conditions and really delve into sector exposure in a portfolio.

It’s also a great time to accumulate units in the eternal hope that the market will one day find its will to live.

PS. There's a Fat Wallet community page now. You can join here.


Win of the week is Laurentius Wyngaard. He wins, because his name is epic. He also wins because he asked a very important question.

How do I go about investing in the TFSA EFTs? I have a Satrix 40 ETF and had to invest through Satrix, but where do I access the ones you've listed?

I also want to send a shout-out to Gideon, who is 26 and has all his ducks in a row. In his email he said something that struck me:

"Being a CA I am familiar with most of the concepts, your podcasts and Sam's book has just given me a new perspective on how to implement the theory!"


Vincent has great retirement questions.

With life expectancy increasing, could you out-live the 2/3 annuity?

This is where drawdown rates come in. In a living annuity you have control over how much you can draw down.

What happens to that money when you pass away two years after retiring with regard to estate, beneficiaries and tax?

Could you ever invest too much in an RA, should the focus be to first max out tax friendly investments [RA & TFSA] then trade?

Our friend Herman from Pyfin is working on an algorithm that will help us eventually answer this question. There is a tipping point and once he knows the answer I hope it makes him very rich.

He also wants to know our opinion on the rand in 40 years. 

The drawback of the compulsory annuity after retirement is that you will never see the entire 2/3 value being utilized or have full access to it.

Someone is keeping the money you worked very hard/smart for and there could be massive tax deductions with payout to beneficiaries or issues with access in the event of emergencies.

Retirement annuities are there to help people who struggle to save. The tax incentives are there to encourage us. It this is the only saving you do, keep doing it. If you are a more sophisticated investor, you might want to look at a combination of options.


Aiden has a suggestion for the rebalancing of the Listener Love index.

How about on its anniversary we rebalance it by removing only one company and replacing it with another “loved” share. The reason for removal could be based on a hierarchy of what all the companies did over this last year. Something like :

  1. Committed a crime/ fraud and have been caught out
  2. There is a lot of smoke but no fire, yet.
  3. Impending merger / acquisition / delisting
  4. Poor performance / management over the past year
  5. Lost a LOT of money
  6. We’ve fallen out of love

In most cases a company that commits number one will also have committed number 2, 4, 5 and 6 by the time we rebalance.

I vote for Steinhoff to come out, and a vote for Tawana (lithium producers - i mean come on - Batteries hellloooo) to come in.


Tim also has some suggestions. For one, he wants us to change the name to the JOLLI index, which stands for The index of love that is not jolly.

He wants to include Foschini, Aspen and Bidvest and votes to remove Blue Label, Brait, Gemfields, Lewis and Steinhoff.


Petrus in Germany is thinking about breaking into the German property market. 

If it makes you feel any better, a small starter flat in Munich will set you back around 600k Euro!  Oh, and the banks want a 20% deposit!

What vehicle are you using to save up for your deposit and why?

I know you are a government retail bond fan, but what about ETFs?

Apart from the risk of low, no or negative returns, is there any other reason why you would not invest in ETF for something more short term like a deposit for your first property?

 

 


Darryn is a vet who is starting to take a closer look at some of the products he got sold when he was a student.

I’ve been sold a few products such as an endowment, RA (Liberty) and an income protection (by FMI) but I am still in the process of researching all these products. Any advice on these products from liberty and FMI? For now I'm just paying off my debt and plan to have this done but mid next year. Then look forward to investing after that.

I’ve heard PPS have a profit share account and that Discovery has paybacks if you got medical aid with them (Which I do, and happy there). Does it really matter which one I'm on? Do you think it would be better to be on either PPS or Discovery because of those perks, taking into consideration if their monthly premiums all all the same?

When your emergency fund is hefty enough, you can get rid of income protection.


Our friend Charmaine alerted me to something horrifying. When you pay fees on a sliding scale (when they say you pay less for investments over a certain amount) you actually still pay the higher amount on the investments before you reach the threshold. 

It’s also worth noting that the fees you see on your table EXCLUDES the TER and VAT.

On the first R500 000 0.65%

On the amount from R500 001 — R1 000 000 0.50%

On the amount over R1 000 000 0.35%


We got feedback from Dr. Woof on the marriage thing. His situation inspired a series of articles I wrote for our OUTstanding Money feature.

After the podcast, we had a straight talk about the whole wedding thing. We are already living together and are effectively married in terms of financial obligations, cooking and cleaning. We’ve decided to hold off on the wedding for now and save until we can both afford the wedding we want i.e. "Platinum wedding".

I have finished reading Sam Beckbessinger’s book and encouraged her to read it also. So we are starting our #couplegoal wedding.

I am so grateful for your advice that one should be open and honest about money matters with your partner. We are much happier after the serious chat and it is all about managing one another's expectations.

I have also downloaded the OUTvest app because you can request contributions on the app. Instead of Birthday and Christmas gifts, I am going to request contributions for the wedding fund. Instead of wedding gifts, people can contribute to the fund.  We already have most household items, so effectively we just require a wedding.


Anonymous is worried about EasyEquities as part of Purple Group.

Purple Group isn't doing so well because of GT247 and Emperor Asset Management. Emperor has had assets under management halved.

How will the continued losses of GT247 and Emperor be contained so that the losses don't 'spill over' to EasyEquities, which was 'saved' by the investment from Sanlam.

Sep 16, 2018

I liked the idea of doing a podcast on inheriting a large sum of money. I’ve dreamed about that kind of good fortune many times, as I’m sure you have. I hope this episode allows you to daydream about the kind of life you would lead if someone left you a small fortune. (Hopefully someone you’ll miss fondly, but not deeply. It’s hard to be happy about anything with a broken heart.)

I’ve said this before, but the most important question you ever have to answer about your money is, “What do I want my money to do?” If you can’t answer that question, your financial life will always feel somewhat unsatisfying. I’ve written about it here.

It’s especially important to be armed with the answer to that question when you inherit a small fortune. To be safe, perhaps think of the the answer now. You never know what might happen tomorrow. If you’re not sure what you want money for, you’ll likely watch it disappear before you can work out your strategy.

Ken inherited R3m. Here’s his story.

Upon hearing you get an unexpected inheritance you really don't know what to do. Googling to look for podcasts really didn't bring up too many good ideas. Most articles very generically state that you need to pay off any debt, pay of your house, have an emergency fund etc etc etc.

I'm in my early 30s. I'm self-employed. At this stage I'm single, no children so I don't have to take anyone else into consideration. I earn a decent salary, I have no debt. I despise debt and was raised in a house where debt was the sworn enemy. Even buying my house a few years ago I felt sick that I had to borrow money.

My house is paid off.  Obviously there are maintenance costs and levies, but I'd rather do this than pay off a bond.

I have money invested in Satrix. I only started contributing to ETFs and not just my RA about two years ago. Before that I made some lump sum deposits when I could. Due to trying to diversify I now own way too many different ETFs, but I'm now more focused on why I buy certain ETFs.

I have an RA with a life insurer (not 10x at this stage). I have an emergency fund in an interest-bearing 24hr notice account. I'm currently saving for a new car in a multi-deposit fixed term savings account at Capitec with 7.6% interest. I don't intend buying a new car with the inheritance. I drive what you'll call a “sensible car”.

I lead a pretty simple life. Fat Wallet has definitely reminded me that keeping your costs down is the best investment you will ever make. I do have a few vices that money gets spent on but I've been fortunate to do so over the last few years.

I intend for the inheritance to provide me with lasting security. Most of it will be invested and I will continue to rely on my own financial strategy (which is basically ETFs) to build my wealth. I will probably spend about R200,000 of it on a trip of a lifetime - this is ridiculous, but given my circumstances I feel it can be justified.

I'm thinking a lot about offshore investments due to the current conditions and political uncertainty in our country.



Win of the week: Jenny Pigeon, who wrote back in episode 92. She got in touch with her friend and advisor after that episode and managed to renegotiate her fees.

“My advisor subsequently dropped her initial fee and halved her annual fee. So this was a good outcome for me.”

But she wrote us a great email that made my day:

I’ve started a happiness journal and there is a 21 day instruction to send out letters to friends and people that have had a positive effect on your life. It struck me that my happiness levels have really moved up since I have become a regular listener. I think the reason is the sense of empowerment, enthusiasm and curiosity  that this kind of information imparts.

You and Simon turn dry subject matter into something very digestible.

Thank you for making a positive contribution to my happiness.


Gerhard’s wife is about to become an entrepreneur. They are trying to figure out what to do about her pension.

My wife is leaving the comfort of a steady income and starting her own thing.

She has a pension with her current employer. When she leaves her job that pension will be paid out to her; what in your opinion will be the best option?

Here is the list of what we have made while lying in bed awake at three in the morning:

  1.       Pay of our debt and start the new adventure with a clean slate
  2.       Use that money it to fund the start-up
  3.       Open an Easy Equities account for her and save it in RA

Carel wants to know where his fees go when he buys a share.

What are the transaction fees when doing a trade on the JSE? Does all of it go to JSE?

Is JSE Ltd a private company, i.e. would they charge as much as the market would allow, or are there other factors involved?

I personally think that transaction fees are the biggest barrier to entry to the JSE. How much of this is physical labour (infrastructure maintenance) and how much of it is just settlement trust?


Francois wants to know if it’s worth moving an RA for a few percentage point saving.

I am wondering if it’s worth changing my RA provider again?

I’m currently with etfsaRA, paying 1% fees.

Easy Equities RA charge 0.6% exl. Vat. Will it be worth changing to save 0.3% on fees?

Will I pay a penalty if transferred?

A few years ago I section 14 transferred from Sanlam RA to etfsaRA (after listening to Simon). They penalised me, but well worth the saving in fees.

Here's the spreadsheet Hendrik made for us to help you figure it out.


Miles is upset about fee sliding scales.

Why do the likes of Allan Gray, PPS, 10x and most other fund managers charge lower platform fees the more the client invests?

Surely the admin will be the same for a R100,000 client and a R3,000,000 client? So prejudiced IMHO. They have us by the proverbial genitals  and it really makes me the moer in.


Greg has been paying over 4% for his Sanlam RA, so he decided to move it. When he requested the move, they refused to move the last contribution he made.

This week I broke the news to my Sanlam RA "financial advisor" that I want to transfer to 10x. I was given a quote. Surprisingly it said there's only a 0.13% about transfer charge, but my previous monthly contribution of R5000 was also outstanding.

I queried why this R5000 was deducted and they said it had been received, but did not yet reflect on the system due to the general standard 25 days clearance period and that it would not be deducted from my transferable amount.

I could be wrong, but 25 days clearance period just sounds like taking the piss, to me.

So I asked them to then amend the quote to therefore say that this R5000 will not be deducted from my transferable amount. They said they can't do that since the system does not give them that option and "let’s see mid next with a new quotation."


Jaco is earning dollars abroad. He’s got some offshore accounts and local accounts.

I have Isle of Man account and transfer most of money into this account.

I still have monthly obligations in SA and have to transfer some money to SA.

My financial situation is as follows:

I have two paid-off properties from which I earn a monthly income.

I have a TFSA for both me and my wife.

I have dollars invested in the Prescient Global Funds (Integrity) in an offshore account in Ireland through SA Integrity Asset management

I have money invested with Allan Gray in various unit trusts.

I have dollars in Sasfin offshore funds

I have two RAs - OM and Sanlam.

I also have some rands in shares, but feel that I need to get out of it.

The money in Isle of Man account will be invested into the First world hybrid real estate fund through Marriott

The other money I want to invest offshore, but not through a broker in SA. I am interested in investing with Vanguard World - It appears to be a great fund and everyone invests in it.

How do I invest in this fund from Saudi Arabia?

I want to buy Apple shares but don’t know a broker overseas - any advice?

I am not paying income tax at the moment apart from the tax on the rental income. Other income is not taxable at the moment due to me being out of the country.

How do I invest the rest of the income I have in the Isle of man account?

Any other advice on how and where to invest would be appreciated.

This is the Moneyweb article I was referring to in the podcast. 

Ian has made some great changes to his personal portfolio since listening to the show. He’s considering a few more and wants to know if he should have a pension fund and a provident fund or just one or the other.

  • The funds are both administered by the same company, and our group requires us to be on them so I can't move.

Nipun has some ETFs in the US and has questions about the impact on his estate.

I have a Webtrader account with Standard Bank and have purchased USD denominated ETFs listed in the US in this account.

Would estate taxes be paid for this investment in SA or US & the rate of tax? I understand that assets over $60000 are taxed in the US.

Do I require a Will in the US or is my SA Will applicable?

What’s the most tax efficient way to invest offshore, can I continue with Webtrader of find another vehicle for investments?

Sep 9, 2018

It is the job of a salesperson to convince you you can't live without the thing they're selling. This is as much true in personal finance as in consumer products. If engaging with your money scares you too much, your only hope is finding someone whose approach to your money happens to be legitimate, effective and affordable.

If you hope to manage your own money, collecting information on the best thing to do with your money is also tricky. If you ask someone with a vested interest in a product, they are going to try to convince you it's the best product. If you ask someone who recently over-committed to a certain type of investment, they are going to try to convince themselves it's the best decision by trying to convince you it's the best decision.

This week's episode of The Fat Wallet Show is very special for two reasons. First, we recorded it live at the JSE as part of our JSE Power Hour series. Secondly, One Lappers Njabulo Nsibande and De Wet de Villiers joined us as guests. Our hope for this episode is to illustrate that there are many ways to construct an investment portfolio and all of them can be right. De Wet doesn't manage his own investment portfolio and he's happy with that. Njabulo manages three investment portfolios and he's happy with each one. What matters most is that you understand your portfolio, that you have a strategy and that you remember what it is. We're all making it up as we go.



Win of the week: Roxanne.

A year ago I was retrenched, sitting on my couch, wondering how I was going to get through the next month as I was living pay check to pay check.

My husband was earning a gross income of R18,000 a month and things were looking grim. We had medical bills, store accounts and a student loan. A truck had also hit the side of my car - we had reached rock bottom.

I started listening to your podcast all day, every day. My family started to think I had joined a cult!

I started putting a plan in place and started working on my FINANCIAL INDEPENDENCE to not be at the mercy of any employer, bank or creditor again!

Since then I have done the following:

  • Found a new job and career path
  • Started an emergency fund
  • Drew up a budget and started budgeting every single rand!
  • I discovered EasyEquities thanks to your show and started investing
  • I have paid off R40,000 in debt. I still have a student loan of R33,000 left which I am attacking - Balls to the wall on this one!
  • I cut up my credit card and lived without it. I cut up all my store cards and have lived without those. I never thought the day would come for this.
  • I have eaten a lot of peanut butter and 2 min noodles - thanks Shoprite!
  • Used every student discount I can find. Shoprite is good with this

But where to from here!?

I would like to invest in a tax free account but don't know where to start - if I choose the coreshares S&P 500 - how do I work out the fees I would be paying?

The naspers weighting in the Top 40 index makes me weary.

How much insurance is enough insurance?

Life cover, dread disease cover, home contents insurance, retrenchment cover, car insurance, gap cover, cellphone insurance, pet insurance - why are there so many products!!

Sep 2, 2018

A friend recently discovered a financially dependent parent had a huge amount of credit card debt. This revelation turned the dinner table conversation to the financial health of our parents. Of the seven of us, only two weren’t worried about their parents’ financial future. Naturally we proceeded to drink heavily. 

I find it much harder to speak to family members about money than to anyone else. Our parents managed to raise functional, financially secure members of society. After that significant achievement it can’t be easy to admit that you need help from the sprouts you raised.

I hope this week’s episode will provide a glimmer of hope if you happen to find yourself in a similar situation with your parents. Nothing can be done about the late hour, we admit, but if you can find a way to speak to your parent about their situation (I haven’t yet worked this out), you might just be able to find a creative solution.

Ruben asked:

My father is turning 60 next year with no pension/investments or even a house. I estimate he could work for another 5-10 years at his own business. How can I invest to help him with income for retirement?

Twitter Daniele asked:

I pay my mom rent. Should I put it in a TFSA for her instead? She has a company pension fund so this would supplement it. I am having a hard time convincing her that it is still a good idea to invest in a TFSA even though she is nearing retirement. 

She works for a bank’s investment arm. Would they allow her to open up an account with another provider like EasyEquitites? The TFSA and UT fund options (no ETFs) for her bank are pathetic (fees).


Get Down Adam 

I am 32, I graduated as a doctor two years ago. Financial people with various levels of qualification and pizazz came to sell us their products. The bottom line was that you had to have started investing at 24 (which was the age of my peers). I was already 6 years behind so I went into panic mode. 

Two years into the real working world again, I’ve paid off my student loan of R110,000. I only have about R60,000 left on my car loan. I have sadly given up on buying coffees, and I’m back to that instant coffee shit. I limit my spending as far as possible. 22seven is my most used app. 

Because I didn’t understand what was happening when I started my investment journey, I signed up for a Liberty RA investing in Liberty Medium Equity (C) as well as a Stanlib Tax Free Global Equities Feeder (A).

I recently bought the Coronation Market Plus Fund simply because they had a promotional sign up bonus of 10% which I thought couldn’t hurt. 

I own a flat with my sister (which our parents bought for us). We rent it out and receive about R6,000 income a month from that. Recently we have been putting R500 a month into Easy Equities and playing around with ETFs.

I have tiny amounts in:

I also have fuck you money shares/FSR in:

  • Netcare (what a disaster)
  • Montauk Energy
  • Capitec

We also have some cash stashed in an ABSA fixed deposit to cover maintenance etc. 

My own emergency funds are modest for now, but I’m building in a 32 day fixed deposit in FNB. 

Am I playing with too many variables? Are there too many ETFs? 

How do I know if I have saved enough

What’s the difference between building a portfolio and just sommer buying shit and hoping you’re right?

Please fix me, or at the very least tell me I can drink decent coffee again.


Frank shared a great graph he found of a married couple’s shared finances. I’ll include a link in the show notes. There’s a line item in the graph called “blackmagicfuckery” which is how they account for money that fell through the cracks. 


Jorge wants to know if he can withdraw profits from his tax-free account without affecting his lifetime limit.


Jon-Luke is a freelancer in his 40s. He has no debt except for a house he’d like to renovate. He works in TV when there is work, but the industry has been going through a dry spell. He had money saved for renovations on his house, but he’s had to use all of that last year when work dried up. He aims for an emergency fund of 8% of his portfolio, but he’s currently sitting at just over 2.5%. 

In the next few years I can envision a bumpy ride in my chosen profession. 

The probability is high that I may need to draw my emergency fund down again it won’t last as long as I need it to. 

Should I do what I would have done in the past and go into my overdraft and credit cards or should I draw out of my Share Portfolio?

Keep in mind that this would be for short term periods of 3 to 9 months. My instinct would be to leave my shares alone and give them the chance to grow.

I am also on a strict plan to downscale my spending and to save more…

My goal is to be saving 25% of my earnings by the end of next year, but getting there is a bit of a delicate process especially considering the current conditions in the Film Industry. 

Also I am loathe to sell my current house until I’ve had a chance to do the renovations I planned. There’s some money to be made here for sure!


G-Boi has taken his expensive RA by the horns.

I’ve moved my RA from Sanlam to EE and opened a TFSA with EE.

Should I max out my TFSA, then contribute to my RA? Or equally contribute to both my RA and TFSA. You and Simon made me feel so shit about the RA trap, at least I made the move to EE so that I can control it and don’t have to pay 4% Ter every year.


Luvuyo wants to know if we think rewards programmes are worthwhile. 

Do you think certain rewards points is to your benefit financially?

I have an Investec Account which gives decent rewards points (obviously not as great as ebucks that everyone tells me about), a Dischem, Clicks, Woolies & a The Entertainer account and I only buy clothing through a family member that works at a clothing store at a massive discount. 

Do you think that using discount and reward offerings can materially affect keeping lifestyle costs low so that you free up funds to invest or am I just a cheapskate that gets slightly marginal benefits from the above?


Johannes wants to know if I’ll do a spreadsheet on all the costs involved in purchasing a home. I’d be happy to do this if the purchase goes through. So far I’ve spent R453 on sectional title and title deed reports. If the home loan gets approved, I’ll spend a further  R2,875 on an inspection. That brings me to R3,300 before anything has actually happened.

Aug 26, 2018

It’s finally done. I’ve submitted the offer, the owner accepted it. Pending the approval of my home loan, I’ve bought a house. The process has been dreadful and not one I’d like to repeat. I’m very sensitive to where my money goes and what I’d like it to do in the future. Making a decision involving hundreds of thousands of rands was never going to be easy. 

The worst part was not knowing whether I could trust the information I was getting. It’s a negotiation between a buyer and a seller, mediated by a third party who has a vested interest. I only have a superficial idea of what I actually signed on for. 

If you are about to embark on this journey, I recommend visiting the Estate Agency Affairs Board website and downloading the Code of Conduct. This document inadvertently tells you all the fast ones agents like to pull. It also gives you a sense of what you are entitled to as a buyer (and seller). I wish I read this before I started.

I made liberal use of the South African Property Transfer Guide reports. I bought four, in total. I knew exactly who the seller was, how much he paid for the unit, what the other units in the complex were going for and how much churn the complex had seen recently. It also helped me figure out the agent showing me a different unit was being duplicitous; think Photoshopped pictures and unregistered agents.

Lastly, I want to point you to the tool I found an hour too late, submitted by Adam. This company does a comprehensive inspection of the home you’re about to sink your fortune into. If you are seriously considering buying a place, pay a company like this before you commit. 

My house hunting stirred some ideas and questions for you too. In this podcast we share some tips and tricks and help a few listeners figure out how best to buy or sell.


Sally has a question about a second property. She didn’t buy it as an investment property initially, but then her circumstances changed. At first she wasn’t sure if she should keep it or sell it, but in the time it took us to get to her question, she’s had some closure.

I’ve always been of the mind that an investment in property is a good thing and never really looked into it any deeper (in terms of returns etc). 

I was mostly covering costs currently and figured I’ll have extra income once the property has been paid off. 

First, I did the Stealthy spreadsheet, with all the actual money that went in and out of this property over the years. 

The returns are sitting around 8-10%, which is not great. 

I’ve actually been extremely lucky with tenants, and had no vacancies with this place, but who knows how long that luck will last! 

Then I looked at retirement numbers. 

My cost of living with the income is lower, thus the number I need to reach is lower,  and could potentially reach it in 15 years. 

Without the income,  my retirement number is a bit higher, but without the property I would have more disposable income. If I’m disciplined, I could actually reach the higher number in just under 14 years. 

Due to the amount of money in and out of the bond, the amount of cash from the sale will not be huge, but on the plus side, I won’t have a bond to pay off.

I am thinking I may now put it on the market and buy some nice passive property etfs. I’m in no rush to sell, so that’s in my favour. I understand it may take time to sell, which isn’t an issue either. 

What do you think? Have I missed anything critical,  or do you have further arguments for keeping versus selling?


Christiaan shared a bond calculator. It shows:

  • How your monthly contribution would change if the interest rate changes.
  • How many times you’ll be paying the property if you just paid the bond amount.
    • 2.36 times in my case, which means if I paid cash I could buy two of those places for the price of a bond
  • How additional payments would affect your payment term. For example, my planned additional payment would shave 14 years off my bond repayment.

Antoine says:

The emotional temptation of owning your own property is that it gives you control to fix broken things. However it’s not easy to deal with contractors. Although I can do a lot of these things myself, I don’t have time and it doesn’t make financial sense to spend time on these things. So in a sense I have to rely and deal with the quality of someone else’s work.

Before you buy, reframe the problem and think about all the choices you have if you want to move to a different location or province at the drop of a hat. This might help elevate the emotional anxiety. Then decide to buy a house because it makes rational financial sense or decide to just rent a different apartment. If you have a lot of time on your hands to fix things at the house yourself (and you actually enjoy doing stuff like this.) Buying and renovating might be reframed as a “second” job.


@chi_gunda and I had a conversation about what a bond does to our overall net worth. Both of us will have more liabilities than assets due to our home loans.

I listened to the Fat wallet podcast this week, couldn’t believe you were even considering liquidating your tax free account,  I kept screaming ‘nooooooooo, Kristia, don’t do it’ to myself.


Rudabager Lassie von Tigerbalm figured out a great way to consider the financial impact of buying.

I’m on a bit of a present-value mission right now. One calculation you owe yourself is to consider what the extra monthly costs of a house are worth by retirement, when adding in compound growth. That’s the real cost. At least if you buy it you know beforehand, rather than screaming into the night later.


Cliff has his financial situation completely under control and wants to know what percentage of his portfolio should go towards buying a home.

I am invested in and contribute monthly to ETFs, equities both domestic and abroad, tax free savings, an RA.

I’ve even dabbled in some cryptos. I also have about 25% in cash which I have in a money market acc that I can draw from if I see a good buying opportunity that I like.

When the day comes where I want to buy an apartment/house, what % of my portfolio should I contribute towards buying a house? 

I wouldn’t want to sell any of my equity holdings and I would prefer to buy in full with cash. 

But that would also not be a wise decision because I would be putting all my eggs in one basket. 

When it comes to buying would you recommend contributing 50% of my portfolio towards the purchase of the house and mortgaging the other 50% or putting down the minimum 10%, pay a larger monthly mortgage and have less disposable income to invest in the market every month? 

I live in cape town where the price of a two-bedroom apartment is around ~R2m. I’m also considering what Simon said last week where cash is king when buying property.

Stealthy Wealth once wrote an article about the cost of living in Cape Town. http://www.stealthywealth.co.za/2017/06/living-in-cape-town-definition-of.html


Get Down Adam, who is a doctor and apparently a late bloomer, wants to know about buy-to-let. I just want to remind Adam that people live much longer, so finding your career later in life is probably a good thing.

I come from a family where money wasn’t discussed and property is king. 

From what you say on the podcast, property is a less smart investment these days and I get that but I also HATE paying rent, even if the maths makes sense. I’m having trouble shaking the emotional connection to property. 

I have my eye on a piece of land that could potentially fit three small townhouses. 

No one else has built there because there is an issue with access, but the land borders my parents’ property and they would sell me access. The issue is the land is over-valued for something you can’t use. The seller doesn’t know that I could potentially use it so I could get a deal. I could theoretically build three, let two and live in one. 

Is this a dangerous game? I know property itself is a nightmare, but there’s a big part of me telling me this is a sneaky opportunity. 


The not-get-down Adam also wrote us about inspecting a home before you buy it. Unfortunately I got it an hour after signing an offer to purchase. 

You mention checking cracks, mould, damp etc. before buying a place. My personal experience has been to enlist the professionals here such as Inspect-a-home.

I’ve used these guys twice for both my places and I actually had their investigation as part of the “subject to” criteria before purchasing.

They do a full inspection and will identify faulty wiring, mold, cracks etc. with a neat little report that really helps.

Aug 19, 2018

Lesegisha once again showed us the error of our ways. In a last-minute attempt, he managed to save the Listener Love Index from pure obliteration. Here’s his argument:

It may seem like a trivial point but here’s the magic in it.

The law of probability and averages says that the method we used will underperform over half the time and then overperform the other half, giving us an average return over the market cycle.
I concede there’s no telling where in the cycle we entered, so it could get worse before it gets better or it really could just go bad. Equally so it can shoot the lights out.


The most important variable then becomes time. The Love Index shows that by our nature we are impatient with our stock investments if we can ditch them after a year (arguably most of us had given up months ago lol), while we can put up with a bad pension fund or retirement annuity to retirement.

"I think we measured a long-distance run using a 100m stopwatch. I would’ve loved to see how the index performs over a longer period (minimum 5-7 years) and I probably will be tracking it on the side. I’m almost certain the dogs in the portfolio won’t recover but a lot of the good-ish companies will outperform the market, especially if dividends are factored."

Shortly after recording, Rudabager also made a plea in favour of our unloved index, “I think the love index was perfect. It was made up of votes from motivated investors who might imagine they have some insights. It was still a mess. That's a much more valuable lesson than it crushing the STX40 and a bunch of people deciding to put all their money on it.”

As a result we now have two competing indices. It’s been a year since we made the Love Index, so it’s due a rebalance. If we get 17 votes to remove a company, it goes. 17 votes for a new company gets it in.

The Zack One Lap Index

In this episode, Zack Bezuidenhoudt compiles an index of beauty. I use the opportunity to ask almost every index question I've had for a year. It's a wonderful time.

Aug 12, 2018

 


The question that inspired this week’s show is one of my favourites: what exactly happens to the money when you buy a share? Who gets it? How do companies deal with shares in their books?

We talk about the mechanics of buying a share. We discuss the differences between the primary and secondary markets for shares, where the concept of share buying came from and how shares get from person to person. It’s fascinating!

Thanks very much for all the great iTunes reviews and messages of support we get every week. It’s wonderful to be reminded that our work has a real impact.


Cindy van Heerden wins for being a Van Heerden and for writing us a lovely upbeat email.

Flip, you guys. Jissie. So much love!

I have been binge listening to the Fat Wallet Show the past two weeks! Some episodes I listen to twice because they are just soooo good.

Firstly, I am so impressed with the quality of your podcast. I listen to a lot of podcasts, which are mostly American. The quality of sound, content and lekker hosts are important and boy oh boy does your show deliver. I feel happy and a little bit proud that such a top notch show is South African.

I am still so clueless about a lot financial topics, but I am slowly learning. So I don't have any questions yet (you are a show about questions after all). I just wanted to say thank you for encouraging us to do the smart thing. I am paying off my crap-credit-card debt and am putting away a R100 each month for my emergency fund until I pay off my debt and can put away more. Also, I just got an increase and instead of buying more shit - I am using it to pay off my debt faster! Yay for finances. It is all I think about since I started listening.

I think every and all South Africans should listen to your podcast. I think this is just what South Africa needs - proper education that will help our youth become money-smart.

Thank you. Thank you. Thank you!

PS - Kristia, I love your surname ;) Yours too Simon! Brown like chuckles.

PPS - I am a Graphic Designer. Don't know if you've had any of those yet.


Wim wins for taking charge of his finances in a very serious way. He already started the process of moving his RA to a cheaper provider, but he’s still struggling with that process.

Your advice on finding more places to save money has led me to stop my AA contribution of R1,300 for me and my wife. I have adequate cover on my short term insurance. My wife also has car under warranty which includes roadside assistance. That money is going into EE EFT.

Thanks Simon, upon checking my car insurance, I realized my premium of R550 on my Toyota bakkie could only pay out R75,000 if stolen - it’s an old 2006 model. Even increasing my co-payment to R10,000 only reduced my premium by R100. I decided to take only fire, theft and third-party insurance, saving R250 per month.

He made an investment in a cow through Livestock Wealth.

I always wanted to be farmer, but wasn’t born into farming, so took a fat chance. The CEO was explaining their model at Allan Gray’s investment summit. Your explanation is correct, but it also seems there is a monthly maintenance fee of R315. Times 24 (18-24 months to mature to 500kg) adds another R7,560, totalling around R16,000. IF you get selling price of  R18,500 you get around R2500 over 2 years gives you 15%.

You can actually visit your cow and get picture- im opting out on that one, keeping it strictly business. I will send you a picture of my cow, not naming it though.


Dale inspired our topic this week.

Could The Fat Wallet explain what happens, exactly, when you buy a share or a portion thereof? Where does that money actually go?

If I buy R1,000 of STX40 through EasyEquities, after fees and costs, what happens to that R1,000?

Do all 40 companies physically get paid a portion relative to their weighting?

Would EasyEquities literally transfer R240 to Naspers, for example?

If they do – how and where does Naspers account for that “income”?

Is there an item “income from sale of shares” on a financial statement somewhere? I don’t actually read financial statements (which is why I buy ETFs in the 1st place, because I don’t care to), so maybe it is there, and this is a really obvious question?

And what happens the opposite way around, i.e. if I sell R1,000 of STX40?


Home buying feedback

Deen says I should ask for a drone shot of the unit I’d like to buy to get an idea of freeway access and the surrounding areas.


Debt Lady is in a financial pickle and wonders if she should sell her house.

I owe in total of R134,000 credit cards, overdraft and loans.

I take home R26,700 per month and I am drowning.

I'm thinking of starting afresh by selling my house and take the profits and clear my debts. Would you ever advise a person to do that? After I paid everything I am left with R1,200 which should carry me through the month. It doesn’t and I still have to pay rates and buy food.

It dawns on me when you talk about property that I didn’t properly plan buying this house. It’s inside an estate where I’m paying R2,600 for two levies. I was excited about the increase I got in a new company. I bought a new car and got a new house and now it’s taking its toll on me. I keep on applying for loans to pay my debt.

Where do I start as I know I need freedom from this debt?


Hamster says buying a home can be a good financial decision, not just a lifestyle decision. He re-shared the Rolling Alpha buy vs rent calculator.  

It can be a great financial decision to buy rather than rent, as long as you apply (and stick to) a few rules, like staying in it for at least 8 years to counter the negative financial effect of having to have paid all the transfer-, financing- and lawyer fees, pay it off ahead of schedule.

Some time in the future, you'll have paid off your bond and will be living very cheaply. By that time rent will have increased (at least with inflation) to enormous amounts. Having a long-term view on property-ownership is a lot like having a long-term view on your investments.

Lastly, the freedom one has when owning a property is amazing. The day before we moved into our house, I had the garage doors automated, installed an automated sprinkler system in the garden and had a plumber come out to install a "retrofit" solar panel on our roof to assist the geyser with heating the water (our electricity bill for a family of 3 is only R500 per month).

I also installed thermal insulation in the ceiling myself and we're next going to convert the stove hob from electricity to gas. You can't do these alterations (most of them we did to bring down our long-term cost of living and energy-footprint) when you're renting. The same goes for painting the rooms the colours you like, putting up (or taking down) shelving where you want, etc.

I love the point about doing alterations to reduce costs in the future, as opposed to cosmetic alterations.

He explains the eight-year breakeven point as follows:

When you purchase a house, the general rule is that you want to be sure you’ll be in the same home for at least eight years.  Otherwise, you’re going to take a hit financially.  Why?

The first hit is your closing costs. Every time you go through closing — buying and selling — money hits the table. This can easily add up to thousands. Limiting how often you have to pay that kind of money is always a good idea.

So extrapolating the cost of closing’s impact on your return on investment, you’ll need around eight years to make up for the money you had to spend now, so that you break even with someone who rented instead. As rent goes up over time, a tenant will eventually pay more than a home owner, the break-even point typically lies about eight years into the future (assuming buying and renting the exact same property).

You take a second hit when you look at your bond statement to see exactly where your monthly payments are going. The way bonds are structured, you pay much more interest in the first few years you own a house. Usually, it isn’t until you’re about seven or so years into paying down your bond that you’ve made enough progress on the principal to make it a better deal than paying rent each month.

Note: When you take out a bond, you are paying an interest rate on what you owe. So, in the first year, when the principal is highest, the interest you need to pay is also the highest.  However, since the monthly payment is the same throughout the term of the loan (at least with a fixed rate bond), more of the payment will be used to cover the interest payments, meaning less is going towards the principal. As your principal goes down, your interest payments will go down, leaving more of your money to go towards the principal, so it snowballs nicely.  This is one way of getting ahead of the eight-year R.O.T.

If you can wait at least eight years before selling again, you’re in a better position to be ahead of the game, especially if you bought less house than you can afford and making extra payments into the bond.

To explain it a little differently, if you keep buying a house, live in it and sell it again every eight years, you’re no better off than if you just rented. Any equity you would’ve built up in the property plus money saved in the long run on not paying for rent escalations, is cancelled out by the costs incurred when buying and selling.  Even worse, if you buy and sell in fewer than eight-year intervals, you would definitely have been better off renting!

Aug 5, 2018

It seems having enough money to retire is only half the battle. There are so many decisions to be made post-retirement. This is true for old school retirement and financial independence, as Alistair Hennessey’s question illustrates this week.

He and his wife have sold everything to live their somewhat odd dream of following winter around. (We strongly discourage this abnormal behaviour.) They’re both in their 30s and lucky enough to have jobs they can do anywhere in the world. Having accumulated enough assets over the years to make this possible and still earning enough money to continue investing, how would one even begin to untangle all the possibilities?

Luckily we have access to our financially independent friend Patrick Mckay, who has been thinking about his options for a while. In this episode he helps think through the Hennesseys’ options and talks about the wonders of tax-free investments.

My wife and I have sold our apartment and all our shit and are moving to Lisbon.

We’ll be living in AirBNB across Portugal, Europe and back in Cape Town, probably following the winter around.

After selling everything, they have:

Cash: R2,9m

RAs: R700,000

I think we’ll still contribute the minimum monthly amount to keep them active (about R400 each).

TFSAs: R66 000 between NFEMOM, PTXTEN, CSEW40, STX40

Currently with ABSA but soon to be moved to Easy Equities.

Going forward we will just buy STX40 and/or possibly the Satrix MSCI Emerging Markets ETF STXEMG.

ETFs: $22 000 between Vanguard FTSE Developed Markets (VEA), Vanguard S&P 500 (VOO) and Vanguard Total Market Index (VTI).

I only found out after buying these ETFs that they are domiciled in the US, which means the US tries to steal quite a bit if I die. Although this might only be when it’s worth more the $60 000.

I’ll be getting new wills done as soon as we get to Portugal.

Debt: 0

The plan

We’ll put aside cash for six months' expenses in EUR. Since selling the house we have dropped our monthly expenses by about 50%.

I still want to transfer R66 000 into our TFSA each year. If we have a ton of extra cash we might top up our RAs, but there is no tax saving with us being in Portugal, so I’m not sure it makes much sense.

He has between EUR 1,000 and 2,000 to contribute to ETFs every month.

For the ETFs, the plan would be to take the bulk offshore and buy the Vanguard FTSE All-World ETF. 

To be honest, I don’t actually know where we will be living in 10 or 20 years so I was thinking of investing mainly in EUR.

The Vanguard FTSE All-World ETFs is domiciled in Ireland, which means that everything can happily pass to my wife without too much fuss when I die. Portugal also has some great tax savings around offshore dividends.  

But this ETF has an expense ratio of 0.25% (The Vanguard ones have 0.04% and 0.07%)

Assuming my maths is right, on a 200 000 EUR portfolio the annual costs would be:

0.25% TER is 500 EUR

0.04% TER is 80 EUR

So over 10 years, Vanguard all-world needs to do 12.5% annual return to keep track with the S&P 500 ETF just doing a 10% return.

Over 20 years the all-world (VWRL) needs to do 14.5% annual return and the S&P 500 (VOO) just 10% to get to the same place.

In summary:

6 months worth of expenses in EUR for an emergency fund

Rest of the cash into either:

VWRL (EUR) and VWRD (USD), Leaving what’s currently in VEA, VOO & VTI

Keep adding to VOO and VEA (and not die before my wife)

Every year add 33k ZAR each to our TSFAs STX40 & maybe STXEMG leaving what’s currently in NFEMOM, PTXTEN, CSEW40, STX40

Leaving RAs intact (sigh)


Our friend Jo wrote in for the first time in a long time!

My TFSA is in cash. And has been since it started. Let me lay out my logic for you.

When TFSA came out, I decided markets 'felt' expensive. I know, super subjective, but TFSA has quite a long horizon. At R30,000 a year it just didn't feel amazing me to me. I think you'll do okay with a TFSA, but it won't make you insanely wealthy.

As it turns out I've made about the same return in cash as I would have buying DBXWD or a some local top 40. Which wasn't guaranteed. Markets could have done amazingly and I would have had to eat my words. Theoretically it could have also gone the other way.

I'm keeping my TFSA in cash for the time being. I'll add  my emergency fund to that and wait for the next big sale/market correction. That might not happen for a while, or it could happen next week, but at some point it will happen.

For example, the PTXTEN 25% down? I took my daughters TFSA and I bought a great big chunk of that particular fire sale. Thank you.

You could argue I'm trying to time the market, but this is all still ancillary to my other normal investing - you know, dutifully plugging away into my ETFs every month. I see my TFSA as a kinda hedge bet and am happy to play a little loose with it.

Not for everyone. But you know, just thought I'd posit an alternative.


Paul has a question for Patrick.

Would you please ask Patrick what he buys in his TFSA account?

I know he's a one etf guy, but I believe he buys a local equity only etf in his TFSA to avoid foreign tax.

Jul 29, 2018

I’m finally doing it. I’m buying a house. I’ve had a cold winter and I’m finally accepting I didn’t turn out to be a jetsetter who lives in luxury hotels around the world. Clearly, this isn’t a financial decision, but it doesn’t mean I can’t be smart about what I’m doing.

Here’s what I have so far:

  • I’m looking in the price range of what I’m currently paying in rent in an (almost certainly futile) attempt to contain my cost of living. This is yet another reminder of the benefits of renting. In buying, I’m banishing myself to the outskirts of the areas I love. Everything in my range is tiny, most of it very old. I knew it all along, but it’s good to be reminded.
  • It’s very hard to compare units. Even in the same price range, they differ by age, by size, by area. I’ve decided to use cost per square metre to help me figure out if something is cheap or expensive. This makes it much easier to determine value.
  • I’m only using half the bond amount I actually qualify for so I don’t find myself strapped for cash when there’s a special levy or interest rate hike.
  • I’m terrified. While I’m perfectly capable of multi-year commitments, I don’t like to be reminded of it upfront. I guess I’ll just have to get over it.

This is the Mister Money Moustache article I mentioned.


Win of the week: Sean, for editing our swearing and for making us a spreadsheet. He, like many other people, disagrees with Simon’s view on tax-free investments for kids.

TFSA numbers_Spreadsheet

I understand kids might use the money to buy a car or holiday and can never get that allocation back.

The other side of that coin is that a TFSA started at birth creates generational wealth. You can set up your kids to never have to worry about retirement regardless of their job. Or ideally pay it forward to their kids (ie only save R500k per kid) for them to retire young (best case 38!!).

Isn’t it better to try your absolute best to educate them on the value of TFSAs and retirement? You have a whole 18 years to get it done before they can take control of their TFSA (dead means longer than 65).

I know TFSAs are not and should not be viewed as vehicles for things like education etc. But as a “pay it forward” vehicle its pretty magic (assuming you can educate your kids).


Francois is wondering about the impact of dividends on tax in offshore total return ETFs.

I've been comparing the two MSCI feeder ETFs from Satrix and Sygnia. The Satrix one reinvests the dividends, and the Sygnia one pays them out. They are both about a year old.

Instead of paying out the dividends, the Satrix ETF will simply raise the ETF price by the dividend amount.

I can only see this if I overlay the STXWDM and SYGWD charts, squint, and use plenty of imagination. A year is a very short timeframe to see a difference, so I've searched for SENS announcements for details on if and when this has happened. Will there be any info on this?

The Sygnia one has paid out dividends twice since inception. According to the June SENS, you were exempt from local dividend tax both inside and outside a TFSA. This is because the foreign tax amount, which you always pay even in a TFSA, was larger than the local amount.

It seems unlikely that Satrix will have a different price inside a TFSA, even if they had to account for local tax after raising the price a hundred times. Can the situation change if our dividend tax went up to say 25% and start exceeding the foreign amount? Ignoring the difference in TER, it would then be better to hold the Sygnia ETF in a TFSA, wouldn't it?


Gerhard has a great tax tip.

Many people don't submit their monthly RA contribution amount to their HR / finance department at their place of work. When I ask why, they say that they enjoy the bonus they get from SARS when they submit their tax return.

The benefits I see for supplying this info to your employer:

 - You get the tax break upfront

 - You don't save your money at SARS over an average period of 8.5 months not earning any interest.

 - You can increase your monthly RA contribution without affecting your pocket, for example:

You can only afford R1000 pm for an RA, if you submit this amount to your employer and you are taxed at 25% then you would get an increase in your net pay of R250. Now you can actually pay R1250 instead of R1000 into your RA or R250 into an ETF.

 - If you have a dispute with SARS or they delay the refund, as sometimes happens, you already received your tax rebate throughout the year.

I see no reason why an employer can refuse this if you have the proof of your contribution.


Robert found a sustainable farming investment website, which is kind of like the cows website we discussed last week.

They sort out the insurance and the administration on your behalf and claim to offer an internal rate of return 12% and 16%, depending on the investment you choose.

They also mention on their website that there is a tax benefit and that you can write off a portion of your asset in the first tax year. Sounds a bit like you need to be a tax guru if you ask me.

It will be great to get your thought on this. It feels like a new hipster and responsible way to invest, but is it wise? It might be a unique way to diversify?

The one option is berries, the other is solar energy, the other is beehives.


Vincent is curious about counterparty risk at African Bank.

I compared Capitec, RSA retail bonds and African Bank. I am fully aware of what African Bank went through, but having a look at their investment options I think it's viable given that the SARB has a grip on them.

They have no management or administration costs and no fees on withdrawal. Everything can be done online or via phone.

Their tax-free interest is quite high and they have two other attractive products: [Access Accumulator - 12 months [8.2%] & Fixed deposits - 12 months [8.45%].

I seek to keep the Access Accumulator and Fixed deposits short term; but I'm not sure of investing a third of my maximum Tax-free contribution to African Bank, because where will they be in 20 years time when I want to withdraw my TFSA portion?

I don’t recommend that you use your tax-free savings account for cash investments.


Edwin has a great question about the last big purchase we can make before we retire.

At some point before retirement we probably have to buy our last big-ticket items e.g retirement home, retirement car.

If I want to spend my retirement exploring the bush in a 4x4, I must purchase my last 4x4 with my savings before I retire.

If it’s a good car it will be affordable to maintain and reliable so I would be looking for that car to stay on the road for the next 10 to 15 years as a minimum. Hopefully it lasts forever.

The problem is that if I buy a cheapie it may not last all that long and break down...or I could discover that I really don’t like it and would have preferred to buy a more expensive car when I had the money. By then it is too late to change my mind. I would already be a pensioner.

Are we better off stretching ourselves when younger to buy something slightly better, but that will serve us better in the long run?

I want to drive a Range Rover in retirement, should I sacrifice the savings while still earning an income? Should we be making provision for our last “big ticket items” before retirement. Or is this a trap?


Mbasa wants to know why we’re limited to R33,000 tax-free contributions per year. Why can’t we max out the full R500,000 allowance at the outset.

Jul 22, 2018

 


Marriage is a long-term commitment to build a life with someone else (among other things). A wedding is an expensive party. This week Dr. Woofington Von Barkshire wants to know if we think it’s a good idea to spend money on an expensive wedding when you have debt and not very much money. We don’t.


  1. I have to buy a ring of the engagement type due to the expectations of my 6yr girlfriend (the time we have been together, not her age). I don't think it’s the right time to get engaged. But she is a year older than me and feels that is a life imperative to get engaged. I estimated the cost of a ring to be like R25,000.
  2. I need an emergency fund.
  3. I need to start saving for retirement. (RA and tax-free savings)
  4. I need to save for a wedding which I need to finance myself. Her parents are poor and my mother needs to save for retirement. She also has study debt (R110 000) and car debt (R120000).

My options are:

1. Defer the engagement until I am in a financial position to afford a wedding. Save on the engagement ring insurance and earn interest on the cash (savings of R30 000). And endure the fights about not being married/engaged.
2. Sell all my shares and try to do a budget wedding. He has R45k in shares.
3. Get debt to finance the wedding. I hate this option. But it is an option.

If I chose to defer engagement, should I sell all my shares and rather invest them in ETFs? Should I, instead of saving for wedding etc, assist my girlfriend in paying off her debt? Which will then quicker enable her to help me save for the wedding? Should one still get married, even though it is a bad financial decision?


Win of the week: Roland made a commitment to paying off his debt.

I am starting to pay off my debt and aim to make use of 2% of my increase to pay off more debt. I am planning to pay off one account and roll over that amount into the next account and so on. This is what I did. It’s a great strategy because of the immediate feedback.

Based on my calculations I should have all my debt excluding a car loan paid off by Jan 2019. Would it be best to pay off the car loan and close off all debt or should I keep some accounts to keep my credit score up?

https://justonelap.com/podcast-should-i-save-or-pay-my-debt/

https://justonelap.com/podcast-upping-credit-score/


Justin sent a message about cutting his losses. At the end of the message he says, “It was great being able to type swear words. Sorry to Sean for the extra work!”

A couple of years ago I started investing in shares. I was in my late twenties and having accumulated some money to invest I thought I would be brilliant at choosing my own stocks.

I got input from the team at the trading desk, but mostly my own decisions. Two years later I’m not even dreaming about growth in the investment, and rather sitting at around 25% down.

A large portion of this is due to Steinhoff (thanks Markus, you doos), but most of my shares are firmly placed on shit street. I have a knack of buying when shares are at their peak.

I have done waaaaay more research and know that ETFs are best for me. If fancy private bank traders can’t beat the market, it’s a lag that I thought I could.

But now I’m stuck with the predicament of actually realizing the loss. Does it make sense to take it on the chin, sell it all up and buy ETFs now, or should I ride the storm a bit? I would of course not like to sell at the bottom either!

Some of the shares include: Mediclinic, aspen, Steinhoff PSG and Steinhoff African retail (GREAT combo!), reinet and Ascendis.

I’ll probably hold on to the Steinhoff just to keep me humble. But also - who are the madmen who would buy this share from me?

Any advice would be greatly appreciated. I know I am young and can at this stage afford the knock. But holy fuck id like to minimize it.


Chris has a question about dividends tax on offshore investments within his TFSA.

I managed to pay off my debts recently and now have an investment portfolio which still small but starting to grow. My current strategy centres on maxing out all saving incentives which SARS gives and thereby minimising the tax payable on my salary and investment returns.

I'm currently able to put 27.5% of my salary into my company pension scheme and max out my tax free savings allowance every year. Any further savings is put into a global equity etf investment.

I would like to increase the portion of my portfolio in global equity, however from a tax perspective, I believe it's most efficient to buy a top40 or local property tracker in your TFSA since you get the double bonus of no capital gain, and no dividends tax, whereas a global etf will still incur dividends tax abroad (I.e. in whatever country the underlying companies are registered in).

Is this thinking correct, or shouldn't I be worried about foreign dividends tax in a tax free account?

Note: my underlying assumption is that the top40 will return roughly the same as a global equity tracker in the very long term (20+ years).


Jaco wants to know what we think about cows as an investment strategy.

You can invest into a pregnant cow, a calf or a portion of a cow (I think this is called steak). You earn income from the sale of the calf and help cover its feeding, medical and insurance costs. You can pick on which farm do you want to raise your cow and it looks like you can even go and visit!

I'm curious if anyone who listens to the podcasts is dabbling in this? It certainly makes much more sense than "investing" in bitcoin…

This is from the Take Charge of Your Money blog:

Invest in a calf (or in a portion of a calf if you cannot afford the full cost)
Help it grow by paying an all inclusive fee for feed, insurance & veterinary expenses
Share in the rewards. On maturity Livestock Wealth buys back the grown cow and you will receive an annual payout based on the collective sales on the farm.
The current projected ROI (return on investment) is 12.4% and is fully explained in the FAQ page.

You need to pay fees twice a year and receive a payout once a year.

https://takechargeofyourmoney.blog/2018/05/14/holy-cow-what-an-investment/


Christoff made an excellent point about Margaret’s question last week. She was worried about counterparty risk and the potential pitfalls and benefits of diversifying by supplier.

As you and Simon stated, the probability of a big, well-known RA company to go bust is very small, plus your holdings there will just be moved to someone else to continue administering your investments.

The one thing not mentioned was the sliding scale for fees by a lot of these RA providers. If you have all your investments at one specific company, you can end up with much lower fees (for example first million is at 1% annual cost, the next million is at 0.85%, etc)


Rakgomo wants to know how to invest in ETFs.

I want to invest in ETFs but I don't know where to get them, or even trade them. may I get some guidance in getting access to ETFs and where I can trade them?

Jul 15, 2018

The phrase “all their money” gives me the creeps. Throughout my life I’ve heard that line followed by something completely ridiculous. Some examples:

  • “He made all his money from property.”
  • “They made all their money from GNLD.”
  • “He made all his money from farming.”

The phrase also goes the other way, except this time it’s true.

  • “They lost all their money when their business failed.”
  • “He lost all his money in property.”
  • “They lost everything in an investment.”

The key message I got from Simon’s recent conversation with Charles Savage is that users remain uninvested because they are afraid of losing all their money. The bigger problem is that people misunderstand what the stock market is and how you make money from it.

In this episode, we attempt to explain how you make and lose money in the stock market. We follow that with why it’s very unlikely that you’ll make, or lose, ALL your money by investing.


Win of the week is Shane, for sending my favourite email of the week.

Just wanted to say - this morning's podcast was terrific! Busy researching into a shared Credit Card for myself and the missus.

Whilst we have been VERY good at mindful spending and savings, we just found out we're (unexpectedly) expecting an addition to the family 😊

Time to step it up a notch... BIG TIME.

Thanks for all you do!


Margaret wants to diversify for counter-party risk. She has investments with Sygnia and Allan Gray.

Is it better to have more money in fewer funds (to increase the power of compound interest) or have the money split over more funds/management companies to decrease the risk? Sally had a similar question this week.

Is there a rule of thumb for how many funds you should be invested in to manage this risk reward? How do you resist trying out several funds given the abundance of options?

In America they talk about investing all their money with Vanguard or in a S&P 500 fund. Here in South Africa with scandals like KPMG and Africa Bank I'm not sure I'm comfortable with having all my money managed by one company and/or one service provider.

How big is the risk of fraud/mismanagement given the regulation of the industry? I.e is it fine if I stop the debit orders to the managed funds and put them back with Sygnia?  Or should I go with another index tracking company such as Satrix?


Derek is about to retire and unsure how to choose a living annuity. He says he won’t take what we say as financial advice because he doesn’t trust people who don’t like to braai.

I need to decide in which Living Annuity product to invest.  

I naturally would favour an index-based LA for low fees and comparative net returns.   

I have convinced myself that a Medium Equity Living Annuity (CPI+5%) would best suit my personal risk profile; and allow a sustainable 3% draw-down while keeping pace with inflation and costs.

I notice that there are substantial differences in the net returns of the Living Annuity portfolios that are currently on offer.  

Direct comparison is complicated by the fact that the performance numbers are sometimes based on theoretical (back-tested) data as opposed to actual results.


Mbasa wants to know if it’s cheaper to buy ETFs at your ETF provider like CoreShares or Satrix.

When you buy shares directly via Computershare you only pay broker fees when you buy or sell, unlike having an account with a broker where you pay monthly fees e.g. Standard Bank online share trading.

I think my question is, is it better to own ETFs directly from the provider such as Satrix or Coreshares instead of buying via platforms such as Easy Equities?

TER

https://justonelap.com/etf-understanding-ter/


Danie has some feedback on Capital Legacy that Sephatisile wrote about.

Just a correction on the Capital Legacy information.

We use them a lot, but, they do NOT pay your Estate Duty upfront.

They offer an Indemnity Plan that "effectively indemnifies the costs of the Executor & Trustee services as well as Conveyancing Attorney fees that are necessary to wind up the deceased Estate."

This is a very unique and cost effective solution to estate planning, especially when kids are involved, or complex wills need to be drafted.


Patrick is earning dollars. He wants to know if he should keep them or bring them home.

I am earning US Dollars. I’ve already invested some of the dollars into an Allan Gray unit trust account and was wondering if I should keep in dollars or send money back to South Africa and invest in a unit trust there.


Anthony almost dethroned Shane for the win of the week

While listening to the radio one morning I came across an advert about a company called VeriFi. It's an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies. It does this by sourcing information from all the major life insurance companies – including Old Mutual, Sanlam, Liberty and others. The information is presented in a comprehensive report.

https://www.verifi.co.za

I did all the formalities and wanted to see if there was a better RA with low fees that they could offer.

They offered me a Liberty Retirement Annuity Builder for R1000 p.m

Thanks to you guys I SCRUTINISED this policy to see if I was getting ripped beyond repair.

They even threw in a compound interest table (with an assumed growth rate p.a of 10%) to see where I would end up in 35 years’ time. How fucking kind of them.

This compound table didn’t take into account admin fees and performance fees and advice fees and service fees and ongoing guarantee fucking fees and management fees and ongoing commission recovery fees.

ALL I SAW WAS FEES FEES AND MORE FEES

So, the quote from a fellow listener came to mind:

“It blew my mind that if I get 10% growth and inflation is 6%, there is only 4% left for growth (compounding) and if I pay 3% of 4% in fees, I will only get back what I put in (adjusted for inflation).”

The fees totalled close to 6%

Not to mention the ongoing fees, performance fees AND the service fees which are excluded.

I had to read this policy with a  bottle of whisky to numb the pain.

I’ll stick to my current RA with Discovery, for the time being as my life policy is linked and all – not happy about all the boosters and links etc…

But it made me feel happy that I’m not going to get ripped by these ridiculous fees presented to me.

Jul 8, 2018

 


Crushed under the weight of debt and desperate to get out, a younger, dumber version of me would often resolutely put money away - either toward debt repayments or honest-to-goodness cash. As often, I would have to cover some unexpected financial event (some more legitimate than others) and my resolution would dissolve. Eventually I’d accept I’m bad at saving and give up. It was easier than living with failure month after month.

For most people, repaying debt and saving at the same time is impossible. Just like we want to be rich right away, we want to sort out our money right away. Resolution is the work of a single insight, so a systematic solution is frustrating. Sadly, implementation happens payday by payday.

Sean asked, “My wife and I are going into our 30s and have no savings other than our provident funds and RAs.  We earn a net income of R28,000 and have R10,000 debt in total. We can’t afford to save more than R1,000 a month.

Whenever we save, something seems to go wrong and we use that savings to bail us out. We never go out or get take aways. The last time we bought new clothes was three years ago so we look like hobos. Our cars are fucked and we can’t replace them because there is no extra money in the budget. My wife and I don’t drink, so there is no wastage there.

I’m not sure what we are doing wrong.”

In this episode, we discuss what Sean might do differently.


We have two winners this week. Both win because of the homework they did.

Sally did a lot of legwork to understand an interest payment amount. She deserves a win for that.

I changed my debit order date (on my home loan) recently. I wasn't aware of this, but apparently if you do that they charge you interest twice.

She did a lot of investigation, calculations, eventually got in touch with her home loan provider and discovered the following

Because you change the debit order date,  they work out the interest you owe from the original date until the date you change it.

Then they calculate the interest again on the day after your new debit order date.  

Together they’ll make a month’s interest.  So they do charge you twice, but not double.

She deserves to win, because:

 

  • She knew immediately that two interest deductions went off her account.
  • She did her own calculations.
  • She wasn’t afraid to ask for clarification from her financial institution.
  • She really loves horses.

Nadia wrote us in the financial crisis episode to ask if she has the right exposure in her ETF portfolio. I sent her a link to the article on the six questions to answer before you buy an ETF. She did that, sent me her answers and in the process read up a lot more about the ETFs she holds. I’m very proud.


In the episode on preparing for a financial crisis, we spoke about Sanlam dangling a carrot for Wim to keep his RA with them. Brett wrote to explain how the echo bonus works.

I started an RA with Sanlam at the age of 22 which was based on their Echo bonus feature.

This means that all contributions that I made to the RA during its life would be tallied up and given to me at retirement on top of all my investment returns and original contributions. This bonus sounded great, but of course the fund had fees of 3.5% per year, and I am sure you know how the rest would go.

I did some calculations on this and wrote about it in the following article (although I did not name the fund):

http://www.etfenthusiast.co.za/2016/08/fees-matter.html

Sally also has experience with the Echo bonus. She currently has that RA, as well as a 10X one because she didn’t have enough invested in the Sanlam RA to qualify for a transfer.

If I assumed the same rate of growth and contribution from my side, to just compare fees between the two, you pay less fees at 10x (as expected) and the fees at Sanlam are more over the entire term.

However,  because of that Echo bonus,  the end amount I got from the Sanlam RA was similar to the 10x one with the reduced fee.  

That was my situation specifically because the Echo bonus works on how long you are invested with them and all that (the longer you are with them, the higher your percentage).

You miss out on the compounding over time, but at the end of the day, it was much of a muchness for me.  In the end I decided to just leave the two as they were, so I have two RAs now.


Sephathsile found a company that lets you pay estate duty upfront.

Last week I came across Capital Legacy. They offer free wills and promise to finalise your estate matters in 6-8 months with the option to pay your fees in advance as monthly contributions so that your family won't worry about it. They do a pay out to the family within 48 hours so that life can carry on whilst they sort out your estate matters.

https://www.capitallegacy.co.za/

https://www.zaqfin.com/


Gerhard is not loving property right now

I’ve managed to make some bad property investment decisions in my life – of the buy to let variety.

Then I thought let me try this listed property thing, as it supposedly beats buy to let over the long term, and I know you had some Magnus guy doing an insightful comparison on it.

So I am uncertain if his calculations still hold.

My challenge is simply to run this comparison again and see if it still holds.

As you can see below is the graph of the PropTrax TEN and I am no technical analyst but it is not looking pretty.

I would love if you could comment on what in the world is going on with it.

Is it okay to still hold it, I really do not want to climb out of it now… as I am far under water.


Phemelo is about to become a property owner. They want to know:

  1.       I am in the process of getting a bond, I was wondering which is the best option, obtain a 30 year bond and pay it off as quick as possible or get a 20 year bond and pay just the required instalment (something has got to give)
  2.       I am about to become a homeowner and I do not have a life cover, I would like to find out how does one go about getting a life cover for the bond. Do I need to go through the hustle of meeting 5 different brokers and comparing which one is better?
  3.       I would like to get an ETF that pays dividends, however I would like on whereby the dividend payout is invested in a tax free savings account, is this possible and with which financial provider?

Cyrus had to help a family member deal with debt. The process is frustrating, to say the least.

This is the second time you mentioned it (if I recall), in terms of supporting family. Today's mention was about paying off their debt with a low interest arrangement. Previous it was about supporting them if they are in the dwang.

So personal experience - we tried that. The supportive role. My sibling was at rock bottom - maxed out credit card, clothing account, less than R500 in cheque. So I went to town on his budget and came out with a STOP, START, CONTINUE plan.

Part of it was to financially support their essentials. I did not want to pay off their debt since I wanted them (sibling and spouse) to learn how to handle cash.

Things went south pretty quickly as I continually pushed frugality and it was not being met with my expectations. They were not keen on only eating peanut butter. I had a 10-point plan, and they were already challenging point 1.

The short of it is that another family member has bailed them out (with a low interest agreement), however I've stopped my involvement due to the anxiety and friction it created.

Family. Ugh


Stefan has some insights into the EasyEquities offshore accounts and the TFSA for kids thing.

My son is 2.5 years old. Shortly after he was born I opened his own EasyEquities accounts.  As you already know doing so gives you access to three accounts, TFSA, regular EasyEquities and also the USD account.

Every month I add to his savings, but I split it between TFSA and regular EasyEquities, so either half-half or one month I do TFSA and the other Regular.  

If need be, funds from the regular account can be drawn for things like an education, car, etc in about 18 years. We won’t have to tap into his TFSA and we can let that run until he retires rich one day.

I know there will be a tax hit on the regular account so perhaps I have not chosen the best way, but so far this has been easily managed and efficient.

* Then re the USD account with EasyEquities.

A few weeks ago I logged a ticket with EasyEquities and managed to get some clarity.  The EasyEquities USD account is real money sitting in a bank account in New York so it i’s proper offshore  cash.

EasyEquities does have an easy way to get the cash offshore. You put cash in your regular account and then you can send the desired amount to your US account. |The spreads are wide, though.


Hendrik's awesome spreadsheet is at the bottom of this post.

What is the best way to manage payments and investments between spouses?

Me and my wife each have our own accounts where our monthly debit orders go off.

We also have a joint credit card which we both pay into and use for our day to day expenses (and greenbacks of course, which covers our monthly electricity).

Because we pay a set amount into this card each month it serves as a budgeting tool for our day to day expenses as well.  

We use 22seven to track all our expenses and determine our monthly surplus, which we then split between her TFSA (mine is maxed out for the year), a retirement annuity and paying extra off on our home loan.

I figure that I am guaranteed a saving of 10% interest on the home loan and it serves as a good emergency fund as well. When it is paid off I will save that portion in ETFs/shares as well.


Fred wants to know if there’s a scenario where hyperinflation and exchange controls could lead to South African-based funds that invest offshore could be prevented from trading or shut down.

Free financial calculators

Jul 1, 2018

Dhiraj asks us to defend our index-tracking strategy in this episode. It’s hard to do when the theory works but the practice hasn’t delivered the goods in four years. At this point I can only cling to the success others have had with this strategy and hope.

Even index-tracking product providers are increasingly offering products that will give investors an opportunity to outperform the market. The index weighted by market capitalisation has turned into the ugly stepchild that nobody wants to talk about anymore.

Nobody ever knows WTF is going on in the stock market. Lots of people pretend they do, but since they all keep showing up for work instead of retiring in the Bahamas, we can assume they don’t. Maybe the market will do what it’s always done. Maybe we’ll look back at this period in our investment history, discover the yodelling goat formation and know this is when it all ended.

The index-tracking strategy makes sense to me for all the reasons Simon and I discuss in this podcast. However, when that stops being true, I will jump ship. I am not a salesperson for the ETF industry. I’m an investor, and I want to see my money grow above inflation after fees by any means at my disposal.

That said, I also know pivoting an investment strategy every time I don’t feel I’m making money is a surefire way to incur costs. When I got into investments, I knew anything less than five years is not an investment time horizon. Since I’m only at four years (and, to be fair, I’ve pivoted my strategy a few times already), I’ll hold out and see what shakes out.

Dhiraj shared a video.

You make a case for investing in a broad market index fund over the long term for cost effective wealth creation?

This Youtube video makes a case that one must study the intricate details of the share markets and invest in selected shares for best long-term risk/reward trade-offs.

It provides evidence that there have previously been extended periods where the S&P500 produced zero returns.

How would you counter his views on index fund investing?

Christiaan wants to know if it’s a good idea to have his entire portfolio, including his pension fund, in index-tracking funds.

I am a teacher. Through work we are forced to have a pension fund with the ‘Green Monster’. They have recently brought out a Balanced Index Fund with fees of just 0.30% p.a. It’s invested in the FTSE/JSE Capped SWIX Index Fund, which I have never heard of, as well as the expected bonds, cash and property.

Is it a good idea to have all my retirement assets in these, including my company pension fund?

Lady Kabelo isn’t sure what is passive and what is active in unit trusts.

I have an Allan Gray unit trust, and I'm looking to shift towards ETFs. When we talk about actively v passively managed funds, I think of ETFs as passive and unit trusts as active.

In episode 75 Simon talked about being invested in passively-managed unit trusts. I'm no longer certain that my understanding of the distinction is correct. Could you explain the difference between an ETF and a unit trust, and how a unit trust can be passively managed?

Lloyd has a three-month old daughter and would like to know where to save for her education.

TFSAs don’t seem a clever instrument for education investment because it erodes the potential before the real savings kick-in from long term holdings.

What is a better vehicle for me to save for my 3 month old daughter’s education. I am more worried about high school and tertiary so perhaps the investment time could be 10 years or more.

I am thinking the right ETF portfolio. How should I set this up to be best positioned from a tax perspective?


Wins of the week: Dan Gobble wrote a word of encouragement for Mpho and Rinaldo.

We turned the corner at just about three-quarters of R1m in useless debt - not car or home loans. I am talking revolving loans, credit card debt and overdrafts from living expenses and starting a business, which promptly failed. Rinaldo is only dipping into it with his 140k :) We swallowed our pride and went to family for help, now all the debt is consolidated with my in-laws at a ridiculously low interest rate. And we are on track to have it sorted in two years.

Also Mbasa, who is FINALLY starting their TFSA journey in July!

What ETFs would you recommend?

I have a provident fund (unit trust) and an RA (10x) at the moment.

I’d like to invest in aggressive ones. Was considering the Satrix Nasdaq 100, Satrix MSCI emerging markets and the ABSA New funds Momentum – a combo of the 3.

What are your thoughts?

I recommend reading Six Questions to Answer Before Buying an ETF: https://justonelap.com/etf-six-questions-to-answer-before-buying-an-etf/


Christoff Gouws has a book recommendation.

There’s one book that I’m busy going through a second time, because it’s one of the best books I’ve read on the topic of wealth building:

The Simple Path to Wealth - J. L. Collins 

Like you (Kris), I’m not one for active investing and trying to beat the market.

I like my Index Tracking ETFs and the amount of effort it takes to invest this way - nearly zero!

Jim Collins makes a great case for keeping your investment strategy very simple.

He proposes a one-index-fund strategy during your wealth accumulation phase of your life and a two-index-fund strategy during your wealth preservation phase.  I like that – as simple as you possibly can make it.

The book also shares a lot of fundamentals about how wealth gets built and destroyed (compounding working for or against you, opportunity cost, etc), explained in very easy to follow layman’s terms.

Edwin is able to answer Ross’ question about what would happen if we turned into Zimbabwe from personal experience.

My Dad worked over 30 years in Zimbabwe and did very well in his career. Company and personal retirement contributions were paid directly into Old Mutual in those days. With his retirement savings and various assets he was able to retire at age 45 with 3 children still to complete University...and he did! My parents had succeeded in giving us a wonderful upbringing, while planning frugally for the future.

Then hyperinflation arrived...

His life savings which, in a normal economy, would have been sufficient to sustain him forever diminished in value as the Zimbabwe dollar devalued.

When the economy moved to adopt the US dollar as legal tender in 2009, my Dad was paid the princely sum of USD250 by Old Mutual. Equivalent today to R3400. Still 3 kids to put through University and still needing to sustain oneself till death. This was a crisis and he had to come out of retirement and rebuild his financial well-being at age 50. It was heartbreaking.

My advice to Fat Wallet Show listeners with regards to financial apocalypse is as follows:

  1. Make sure you diversify some of your liquid assets outside of South Africa. When a loaf of bread costs 1 quadrillion Rand, it is handy to be able to bring USD$10/month back into the country so you know you can eat
  2. If the economy starts to deteriorate very rapidly e.g. Rand goes from R13/$ to R130/$ in 12 months, get into cash very quickly
  3. Convert that cash into hard currency very quickly
  4. Find ways to limit your liquid cash outlay e.g. consider growing your own vegetables, reading news for free rather than buying a paper, using cards to transact etc
  5. Get out of paper "products" as soon as you can and get into save haven currencies as soon as you can

The Zimbo's experienced the apocalypse first hand. When it comes along it doesn’t matter how good you look on paper. All that matters is how much of a stable currency you have access to on a day to day basis. 

Jun 24, 2018

When we get into debt, we think it’s a temporary state of affairs. We’ll get rid of it once we earn more money. However, nothing is more delicious to a financial institution than an indebted individual getting a raise. As our income increases, so increases our access to credit.

Think of someone you know who appears to be very wealthy. Now think about the debt required to maintain that appearance. An expensive home loan, car debt, credit cards and store cards all work together to make it seem like money is no object. As we discuss this week, the price we pay to appear wealthy is often the very thing that destroys true wealth.

This week Rinaldo inspired us to tackle debt in high-income households.

I am a high income earner with money problems…

I contribute 18% of my salary to my employer provident fund and R500 a month to an education endowment plan for my boy who is five years old. That is the sum total of my investments. Oh, and I bought a buy-to-let apartment two years ago and what a disaster. Battling to sell the money-chowing, headache-causing thing now.

I need to invest more but I’ve got the following bad debt:

  •        Credit card of R40,000 at 14.5% interest
  •        Revolving credit of R40,000 at 17% interest
  •        Overdraft of R60,000 at 15% interest

I’ve got a deficit in my budget due to the credit repayments and I'm considering a debt consolidation loan, but don’t want to stuff up my credit record which is rather good because up until now I've serviced my debt well. Should I consider a consolidation loan and where and what will be the impact on my credit score?

No emergency fund, which caused the debt.

How did you do it?

Jun 17, 2018

Look, if it’s the end of the world we’re all in for a bad time. Your only hope is to be at the site of the asteroid hit at the moment of impact. Be patient zero - dying will be more fun than trying to survive the apocalypse. A financial crisis is not the apocalypse. It happens in financial markets once a decade. It sucks, but you’re not watching your family getting melted by lava.

Two things have always been true of financial crises:

  1. We are dreadful at predicting them.
  2. We recover from them.

This week, both Flipi and Ross were worried about financial or political collapse. We talk about the things within our control when it comes to our investments and those that aren’t. As any World War II survivor can tell you, when things go dreadfully politically, your wealth isn’t worth much. That doesn’t mean you should live large and wait for the end.


Flipi is concerned about a global crisis. He lives in Japan, though.

Are you guys reading/hearing or similarly being exposed to more frequent comments about another crash, correction or 'bad period'?

Would there be any preparations (perhaps even just emotionally) that people may make to ensure they don't do stupid things during such times, and perhaps come out better for it (or not worse off than everyone else) post such periods?

Weirdly, Ross has a similar question.

I have an RA with 10x investments. What would happen to my retirement should South African experience an economic collapse similar to Zimbabwe? Is there any sort of protection against this? I realize it may be an extreme scenario, but I would be nice to know what would happen.


Win of the week: Mpho almost had me in tears. This is one of my favourite emails of all time.

I have had a listening marathon of your podcast from episode 1 until the recent 101 episode and decided to finally write to you as your podcast is one of the reasons we are on this path to financial independence. I’m 33 married with 2 kids and for so long being on autopilot mode when it came to making decisions - especially money-related.

I’ve been told do well in school so I can get a job and the get married and then have x number of kids, which I did without even thinking about it.

For some reason when I turned 33 I had a freak out moment and started taking a good look at our finances. Making a combined income of around 90 000 a month life didn’t feel any different for us compared to when we had a combined income of R18 000 10 years ago. We had 4 credit cards between us with personal loans, car loans and a bond - not forgetting a R50 000 loan from my sister. I forgot about the overdraft. All these decisions were made without even thinking about it. I don’t know how we got to this point.

I started listening to your podcast and reading up on personal finance. From last year May we have paid off all the credit card debt, one overdraft and we are also ensuring that we are building up our emergency fund. We are not investing yet as focus is on building up that fund so we don’t find ourselves back in debt. The plan is to pay off all the loans, one of the cars and my sister before the end of the year.

I’m sometimes filled with regret when thinking of all the stupid money decisions we have made and how we have allowed the lifestyle creep to creep up on us without even realizing it. We now analyze our spending and have really started communicating about money, which is something we didn’t do.

We’ve cut our expenses and continue to identify areas where there is potential to cut (DSTV premium had to go). It has become a challenge to find creative ways to have fun and create memories without expensive outings and this has actually made us reach out to families and friends and spending more time with them.

I look forward to when our debt will be completely paid off and we start investing. I’m also looking forward to spending my money on things that I value and not being on autopilot when it comes to my life. Thank you for the information that you are sharing out there and will e-mail after that last bill is paid.


Josh is looking at a buy-to-let investment club

A friend invited me to join him and 2 other friends in an investment club.

He wants to set up a company for this purpose.

They want to get into buying properties.

Each member will contribute an agreed-upon amount monthly, increasing annually.

I know pooling money is a way to increase purchasing power, in this case for properties, which will be rented out.

There would also be the need to take out a bond on the property in the name of the company so I have no idea how that would work

Does this sound like a stupid idea? I know you guys are not into the whole idea of buying property, but is doing it in a club/company a better way by virtue of pooling money?

I highly recommend you watch this: https://justonelap.com/listed-property-vs-buy-let/


Wim is looking to move his RA, but Sanlam is dangling a carrot.

I am paying 2.3% in fees.

I’ve seen only 6% growth over 10 years and inflation was slightly lower.

I have to move, because my money is not moving.

Here’s a tip when you’re looking at performance over a period - compare it to the performance of the Absa MAPPS growth ETF for the same period. The MAPPS ETF has

Cash (4.48%)

Equity (72.53%)

Inflation-Linked Government Bonds (10.61%)

Nominal Government Bonds (12.38%)

This doesn’t include the 30% foreign exposure allowance in a regulation 28-compliant fund, but it should give you a sense of what a combination of assets have done over a period.

They said there’s a echo bonus being paid out in new Sanlam product.

I requested a detailed growth and cash bonus for remaining 20 years if I stay invested. Am I still getting screwed?

They promise 10% growth but have not been able to do that for 12 years. Is there a way to compare my investment in eg. sygnia RA (skeleton fund) over 20 years with this installment vs the Sanlam pie in the sky prediction?

John recently pointed out when some of these institutions promise a certain percentage growth, they mean for the period, not compounded.


Kelly is getting some first-hand experience in loss aversion.

I'm 28 with no kids, and pay R222.39 for a life policy with Discovery, valued at R751 236. I have been paying towards this for almost 3 years now. I'm not sure whether or not cancel this policy, only because that would mean losing the contributions already made. Should I continue or not?


Mike has a thought about tax on RAs.

One of the biggest issues presented with an RA is the massive tax bill due once you convert your nest egg into cash and an annuity.

If you want to access a third of your R10 million in cash, you're going to pay a whopper of an amount in tax.

However, you don't need to!

You can take the R500K in cash, tax free, and put the rest into an annuity -  it's not compulsory to convert it into cash if you don't need it.

This neatly sidesteps the tax hit and gives you significantly more money to work for you in your living annuity. You'll pay tax on the income generated, but that seems fair, considering it's been growing tax-free for decades. If you've got tons of debt that needs to be paid off, then yeah, getting the cash out might be your only option, but if you've been smart about your impending retirement, then that hopefully won't be an issue.

Herman is in the process of developing a calculator that will help you once and for all find the tipping point. If he succeeds, he’ll be the Win of the Week for a whole month.


Linda is about to kick of their investment journey and wants to know which ETF we recommend. We talk about that here.


Adrian has a question about timing.

I have recently been fortunate enough to exit a business and have some cash to invest -

I haven't invested as much as I should have over the years in traditional savings but always saw my business as an asset I have been investing in.

Having sold this asset I have cash to invest but am worried about the timing of putting this all into equity markets at one point in time (markets priced quite high after a good run).

In this scenario would you do so gradually? If so, what do you recommend doing with cash as you gradually enter markets?


Ross wants to know if he’s on the right track with his ETFs.

I have the FNB Tax Free Share account. I invest in two ETFs: ASHT40 & ASHMID. How does the Tax Free Shares account from FNB fair? Are the ASHT40 & ASHMID decent ETFs?


Nadia is not sure if she’s on the right track in her tax-free account.

I opened a TFSA with Easy Equities this year after doing some research and listening to your show. I've very new to the finance world so everything is a little overwhelming and confusing. I want to tell you what I am putting my money in with the TFSA and I would absolutely appreciate it so much if you could give me feedback on if you think i'm on the right track or not.

These are the "holdings" I've chosen for my TFSA:

CoreShares Top 40 Equally Weighted ETF

Satrix 40 ETF (STX40)

SYGNIA ITRIX MSCI WORLD

CoreShares PropTrax Ten ETF

CoreShares Global DivTrax

Like I mentioned, I am brand new to this game so please excuse me if I sound like a complete dumbass. (No such thing as a stupid question in this show!)

I try to keep track of what's happening in the markets but it's happening so fast, I struggle to keep up. If I had to continue my TFSA with the above mentioned, would you say I'm doing alright or do I need to refresh my choices?

Should I be splitting my TFSA money equally between the above mentioned holdings or should I be putting most of my money in the CSEW40?


Mandla has a warning about using your credit card account as a current account.

Be careful of the credit card interest free periods. A person from FNB told me that I should not be putting all my monthly debits on my credit card.

I was moving things like my monthly rent and subscriptions and recurring payments to my credit card so that I have one statement to look at each month. He says I shouldn't do this because I will get charged interest. Basically, the following transactions still bear interest:

* Cash withdrawals

* Purchase of Foreign Currency

* EFTs out of credit card account

* All transactions linked to Petro Credit card

* All budget facility transactions

I am actually sitting down to look up the terms and conditions to confirm for myself, I thought I'd just share.

I’m looking into credit card accounts myself. While there are interest-free periods, you do pay transaction fees on almost everything. A lot of people are talking to me about the rewards they earn, but nobody is saying anything about fees.

Links:

Six questions to answer before buying an ETF: https://justonelap.com/etf-six-questions-to-answer-before-buying-an-etf/

Should I consolidate my ETF portfolio: https://justonelap.com/etf-should-i-consolidate-my-etf-portfolio/

Jun 10, 2018

Access to a great share at a discount is something to take very seriously. Khuliso’s question about Phutuma Nathi got me thinking about BBBEE shares for the first time. I’ve never really thought about it, because I don’t qualify. However, the majority of you do qualify. How do you make a decision about whether a BBBEE share is a better investment than the ETF you would have bought anyway?

I found this conversation especially fascinating. I’m keen to hear how you incorporated BBBEE shares into your portfolio, or, if you decided against it, why that is.


Win of the week: Michael, who officially moved his TFSA from Old Mutual.

I can officially say that the transfer of TFSA money works. Haven't heard anything official from Old Mutual, but the other side of the fence seems convinced the money has arrived.


Khuliso wants to invest in the Multichoice BBBEE shares, Phutuma Nathi.

I intend on purchasing some shares when I rebalance my portfolio in the third quarter. My motivation for buy is good dividend yield. Would you recommend or be against such a plan?

How are they different from ordinary shares?

What benefits do they offer that ordinary shares don’t offer?

How should you think about them in your overall share portfolio?


Frederick has a few hundred thousand left over after selling his house, paying his debt and stashing money for his emergency fund. He’s not sure what to do.

He wants to put it in a flexi-fix deposit account with Standard Bank, and get a fixed interest rate of 8,8% per annum back. Money is guaranteed and growth is also guaranteed.

It’s always important to remember that these decisions don’t have a one-size-fits-all answer. The best course of action depends on:

  • Your investment horizon.
  • What you want the money to do.

If you know how long you have and you need to know exactly how much you’ll have at the end of the period, then a fixed deposit is a way to go.

If you would just like to grow it as much as possible for as long as possible, maybe an ETF is a better option.

If you don’t have anything saved for retirement, maybe you put it into an RA.


Nitesh and his wife earn a good income, but they have three kids in private schools. He wants to know what the best way is to create wealth in his situation.


John is 70. He has a fixed return investment that’s about to pay out. African Bank is offering fixed term accounts with 10.5% and 12.95% interest. He wants to know if he should be concerned about counterparty risk.


Jaco asked for some clarity on the spending ratio.

To get your spending ratio, you divide the money you put towards paying off debt or savings by your after-tax income for the month. I know it is technical, but isn't this a savings rate rather that a spending rate? If I put R15 towards savings on every R100 I am earning, I am not spending 15% but rather saving 15%? The spending ratio will be my total monthly/yearly spent against my income.

- You're right on this one!

From Manage Your Money Like a F*cking Grownup

"Take your expenses for last month. That's all the money you spent (not money you saved or used for repaying debt). Divide that by the amount you earned that month. Multiply it by 100. This number is your spending ratio.

This number is the proportion of your income you're giving away to other people and businesses. It represents the percentage of your time that you spend working for clothing companies or for your landlord, or for your bank, and not for yourself."


Soobrie is moving their TFSA to Easy Equities.

I have three years' of allocation in the tax free savings account with the Nedgroup Core Diversified fund. I'm planning on moving it into EasyEquities. Which portfolio should I choose as I can leave the money invested for another five years?

They also have 13 ETFs with etfSA and want to know if they should consolidate.

ETF: Should I consolidate my ETF portfolio?


Ben has four ETFs in his tax-free account and wants to know if he should add one for dividends.

Dividends are taxed at 20%, while you'll never pay more than 18% CGT even in the highest income bracket. For that reason dividends are awesome in a tax-free space. The real issue is, what product do you buy?

Jun 3, 2018

 


Interest is a strange thing, because you could at any point be earning it and paying it. In fact, if you have a credit card you could be earning and paying interest in the same bank account.

Tharina has taken steps to get her financial house in order, but she has a dilemma. She has a sum of money earning interest, and she owes a sum of money on which she is paying interest. Should she be using the one to pay off the other?

The answer can either be very easy, or very complicated. We discuss her options in this week’s episode.


Win of the week: Pieter, who has his estate planning situation on lockdown.

My wife is currently a stay at home mom. We have two kids and twins coming. There is a plan for her to go back to work at some point, but currently this is the configuration that works well for all of us.

I am contributing monthly building up a lekker EM fund. I am planning moving the entire thing into her name. I know you mentioned "What about divorce", but honestly she is not earning currently and if something happens to me she needs to be able to hold down the fort.

So our plan is as follows:

Move EM fund to her name. Currently this is just a 30 day notice deposit at FNB.

This also means she does not have to liquidate some of her assets.

It does not have to be a year’s worth of EM fund, because I have proper life insurance.

They pay a R50,000 immediate benefit within 48 hours and the rest in about 2 weeks to a month.

He also has a death letter that explains everything.

P.S. Me and my kids do not mind the swearing. I'd rather they swear and know shit.


Tharina is pretty much on top of her finances except for a car loan.

I took out a car loan. Apart from my emergency savings, I have saved a decent amount to pay off my car. It is not the total amount due. The amount is being saved in a money market account.

Would it be better to pay off my car by putting the lump sum and extra each month into the Loan Account OR would it be better to save the total amount in my money market and then settle the car loan all at once?


Johannes just got a credit card. He’s very worried about it.

I am a 21-year old student and recently upgraded my FNB account to a Gold Account which includes a credit card.

My old FNB account was an Easy account which was R5.20 p/m, but I ended up paying anything between R100 - R210 p/m for additional "services".

I decided to stop that shit and upgrade an other account which is the Gold one.

I decided to take a credit card eventually. What is the best way to use my credit card? I know a lot of people use their credit card for day to day living and pay it off at the end of the month.

I know very little about all the rules/fees that apply to a credit card. How do I use it to my benefit and hopefully save money rather than paying FNB interest each year? I hope to build a good credit score.

I know some people earn a shitload of ebucks that they use for flights etc. Please inform me best on this as well. Some people suggest to pay your salary each month into your credit card and use that...I am lost and don't want to blacklisted.


Jane has something called a “last survivor” account. She wrote back after our death episode.

My husband and I have an offshore joint and last survivor banking account.  In the event of one of us dying the other one is the automatic owner of the banking account.  The bank just removes the deceased spouse from the account.

We have a HSBC account. Unfortunately my local manager was retrenched and now we only have one of the expat banking services.


Isaac is 22 and has his financial situation completely under control.

  • With regard to my TSFA, I have exclusively been buying property ETFs and own the Coronation property fund. Since REIT dividends do not qualify for the usual dividend exemption, the best utilisation of the tax saving would be for REIT dividends which are taxed at a person's marginal rate from the first cent. This is opposed to regular dividends, CGT and interest (first R23800 tax free). What are your thoughts on this? Am I overthinking this?
  • If you sell and buy ETFs often in your TFSA, will SARS deem your intention to be revenue in nature only for ETF's in said TFSA or for all TFSA's in general? (thinking that this might be a sneaky way to day trade tax free. Not that I would day trade, but I like the thought) SARS doesn’t care what you do in your TFSA accounts. Since there’s no tax in those accounts it doesn’t matter if you trade for income or are a long-term investor.
  • I own a small amount in a huge number of ETFs. Is this problem? If it is a problem, should I rebalance and incur some CGT? Remember your CGT is tied to your marginal rate, so if you want to go this route, do it now before you start earning real money. Or just pump money into preferred ETFs and leave the rest as is? (I see an IPO and can't help myself)
  • With regards to Simon's comments on the three year rule and resetting base costs of investments (section 9C): The act provides this section to ensure that investors actually invest as opposed to speculate. Since it is explicit in the act, surely SARS won't penalise the taxpayer for making use of it? Eventually they'll catch on and put in an anti-avoidance provision?

Wim has two RAs and wonders if he should be moving one.

I have a Momentum RA from my employer, which is pretty much compulsory, but I have no issue with that because my employer matches my contributions.

Then I have a Sygnia RA in my personal capacity from before. Would it make more sense to move the Sygnia one to Momentum or not? Also, I feel like I am paying too much in fees. Which RA has the lowest fees? I obviously don't want to withdraw the funds due to tax. Moving them from RA a to b is tax free.


Gerhard checked out Brightrock for life insurance and he’s very pleased.

A while back I asked about life insurance and you suggested I look at Brightrock.

I have and for a product that I am comfortable provides me roughly the same as I had before I am paying R1,200 where my liberty costs were 1,650 before.

This is a massive saving.


Jacques saw a life insurance ad that promises free money. It’s a life insurance product that invests either your entire premium (if you’re under 30) or a percentage of your premium in a money market index fund. (Think TRACI). After 60 premiums you get 10% cash back.

Check out the company here.


Thanks to Londwa for sending a great video about swearing.

May 27, 2018

One of the highlights of the 100th Fat Wallet celebration was the opportunity to interview Patrick McKay about financial independence. Patrick, who runs The Investor Challenge Blog, achieved financial independence two years ago. At 39, he boasts the title of Regional Drone Coordinator and works because he enjoys it.

In this interview, Patrick tells us how he did it. He talks about his investments, how he managed to afford having a child and what he plans to do now that he can do whatever he wants.

Hopefully this is the first of many conversations with Patrick. Listen, and be inspired.

May 20, 2018

Author Sam Beckbessinger’s excellent book Manage Your Money Like a F*cking Grownup is the unofficial written summary of The Fat Wallet Show. While we didn’t know about Sam nor she about us until after the book was published, we are thrilled at the synchronicity.

She explains every principle you’ll ever need to understand to make excellent financial choices simply and understandably, sometimes even with pictures. In fact, if you never read another thing about your money, you’ll be set for life.

We couldn’t imagine a better co-host for our 100th celebration. We spoke about the one concept in her book that we’ve never dealt with on this podcast (because I didn’t know about it) - the spending ratio. As Sam explains in this episode, it’s an excellent way to measure the health of your finances, because it’s not dependent on external circumstances like the market or even your salary. You are in complete control.


To work out your spending ratio, divide how much money you put towards paying off debt or savings of any kind (including retirement and emergency fund) by your after-tax income for the month. Times that by 100 and you have the percentage of your income that you spend. Your challenge, should you choose to accept it, is to reduce that number as much as you can. The lower your spending ratio, the higher percentage of your income actually serves you.

Sam’s book also deals with the most common behavioural traps we fall into when it comes to our money. I caught myself making the most obvious one as I was reading Sam’s book - mental accounting. I caught myself before I made the mistake and saved R600! Not bad! In our conversation, she explains what mental accounting is, why we do it and how we can try to get around it.

Lastly, we talk about the final frontier in my budgeting quest. I’ve become very mindful about my money and deliberate in my savings over the past five years, but I’ve always struggled with discretionary spending. I allocate funds to certain spending categories, like groceries and petrol, but never seem to stick to that. Sam’s book finally solved that irritating problem. She explains why it can hurt being too granular in your budget.

May 13, 2018

We’re 100 episodes old*, so we might as well talk about death. Edwin is turning out to be our most philosophical user - you’ll remember him from before. This week, we help him figure out what will happen to his investments when he dies.

We know for sure every investor, trader, RA holder and homeowner will die. Why has it taken us 100 episodes to talk about the impact of death on wealth? Mostly because it’s scary and we don’t like to think about it. Estate planning is a huge part of financial management, especially for those who have already managed to accumulate some assets. It’s moving up our list of priorities in a big way. Thanks, Edwin.

*We did also smash an entire bottle of champagne while recording this episode to celebrate 100 weeks of The Fat Wallet Show. This podcast has been a transformative experience - personally, professionally and for our business. You guys surprise us with your frankness, insights and thoughtful feedback every week. You’re a constant reminder that world is full of intelligent, sincere people who care about those around them, despite what we might think after 30 minutes on Twitter. Thank you 100 times over.

You should come party with us on Wednesday to celebrate!


Win of the week: Leonora thinks we could do better in the swearing department.

Coming from the Cape, I find your swearing vocabulary very limited.  A four year old down here might know more choice words than the two of you combined. 😄


Edwin has three kids and has to think about grown-up things like death.

As a 37 year old adult with 3 kids. What actually happens, step by step, to my money when I die?

I have several investments in fixed property, ETFs, unit trusts, overseas shares and a company pension fund.

I have debt in a primary home and investment home. All in all on the day of my death if I include my life policies my net worth with be positive.

I also have a will that leaves everything to my wife and kids. My wife will be richer than she was when I was alive. Don’t tell her :)

Will the bank freeze all my money until my estate is finalised? Will they take cash out of my life policies and pension to pay estate taxes?

Since my emergency fund is in my bank savings account does this mean it will be frozen too and my family can not access it?

How long does it take for an estate to be finalised? Will the proceeds from my life policies be taxed too?

Is there a clever way to plan for this so that my family can still live during the process of finalising an estate?

Is a life hack or best model for planning for this. Seems a waste to spend all of my life trying to maximize my wealth only for it to cause problems for my family when I am gone.


Njabulo is starting to see his investments work for him.

I logged into my ETFSA account for the first time since moving my contributions to Easy Equities only to find out the cash account grew by just over 66% from free money (dividends and interest). The "profit" from dividends and interest in enough to buy me another Satrix40 ETF. Small as it is, it reminded me of Lesegesha's email. Size matters very little in the world of compounding interest.


Cobus is leaving the country and not sure how to save for retirement in the meantime.

I’m 25 and have the opportunity to go work overseas. I don’t currently have plans to come back to SA. But I would like to start saving for my olden days and make compound interest works for me.

How does one go about this?

Because if one plans to emigrate, does one need to save in the destination currency?

Or buy ETF's that carries global risk instead of just SA denominated risk? Such as an SNP500 etf?


Conrad wants to contribute his full R500,000 tax-free allocation at once. Sadly, he can’t.


Karel has taken charge of his finances in a big way and was hoping we could help him with a share-picking checklist.

Since I started listening to you I’ve changed my RA from Investec to 10X.

I have opened an EasyEquities account for money left over at the end of the month that I save after cutting back on my spending.

I also managed to get rid of my bad debt and I should be able to finish paying of my house by the end of this year (done and dusted in 4 years).

I maxed out my TFSA yearly as well.

So far it’s been going great, I have bought majority ETFs and I had some shares that I transferred into my EE account.

NOW I am venturing into uncharted waters on picking my next share.

What I love about this is the order of operations. First things first - you take care of your future by taking care of your debt and sorting out how you’ll survive when you’re old. THEN you venture into the more fun stuff.

I am a sucker for a checklist.

Would it be possible for you to set up a checklist of the top 10 things to compare between companies to help me decide between say Metrofile and PSG?

All the monies I put into this account and every single share I buy, I plan to keep for the long run so good old coffee can investing.

Check out Porter’s Five Forces.


Wilhelm has questions about RA rebates.

Is the rebate to be based on your gross income?

What is the best way to calculate your tax rebate?

How does the primary rebate work?


@synapseza has such a cool money hack this week.

I have an Income Protection / Disability Protection / Life Cover/Let's-add-some-more-fucking-complicated-benefit-enhancements-and-accelerators-to-charge-even-higher-premiums product with Discovery.

The Income Protection is by far the most expensive benefit of the product. Looking through the policy document I noticed that there is a choice between waiting periods (not that it was mentioned by my broker when I signed up). I was on the shortest waiting period (7 days). But I have an emergency fund, so I really have no need to be covered for such short periods. Extending the waiting period to 30 days resulted in a 30% premium reduction (and they didn't quote for 90 days although this is an option in their product). Definitely something to check out and align with your emergency fund.


Dean wrote us about body corporate bridging solutions. We discussed this in this episode when Bronwyn’s financial advisor told her of a product with a 17% guaranteed return. Dean explains the product below:

BCBSs provide access to what would normally considered an institutional-only asset class – lending. Lending as an asset class is meant to co-exist and complement a range of other asset classes that exist in a client portfolio. It’s also important to qualify that these funds are a loan to a Body Corporate, not an investment. Our clients may view their funds as invested, but technically it’s loan. BCBSs products have the following characteristics:

Risk

  • The Sectional Titles Act has protected every creditor (our clients), to the extent that there has never been loss to any creditor since the legislation was first tested in 2001, where legal precedent was set in the Amine Case.
  • Legal opinions confirming creditor security include: EY Stuart, Knowles Hussain, Webber Wenztel. Contracts are drafted by Edward Nathan Sonnenberg and Werksmans, amongst others.
  • We have a parking facility with Stanlib.
  • Aside from the Sectional Title Security, BCBS will soon be introducing a Hollard capital guarantee on the Capital Growth Plan.
  • Our cash custodian is Sanne, a FTSE 250 company.
  • BCBS never touches client capital, but merely facilitates the lending process, due diligences Body Corporates and report on the capital.
  • BCBS is also just the funding arm of the larger Sectional Titles Solutions (STS): (12J VCC / Solar / Outdoor Advertising / Legal / Administrative).
  • Security afforded our clients, makes the product very low risk.
  • A further discussion should include the lending demand of Body Corporates.

Costs

  • There absolutely are costs, but none are borne by our clients.
  • The borrower covers all the costs, not the lender.
  • These include a lending rate, admin fees and a raising fee. (Similar to a bond application with a bank.)
  • We put our clients in the position of a bank, thus there is a 0% cost implication, and a 100% capital allocation to BCBS clients.

Returns

  • The very nature of a lending asset class suggests that returns are linked to the Prime lending rate.
  • This is indeed the case. All BCBS’s products are linked to Prime.
  • The products range between Prime + 3%, 5% & 7.5%. (Contractually specified.)
  • These returns are truly meaningful, taking into account the capital security, no cost implication and the fact that Prime very rarely changes.
  • Clients do not have a TER, capital is protected, there is almost no market volatility experienced.

So far, all I’ve shown are positives. As an ex-financial planner, that would make me sceptical, but BCBS clients do have negatives to contend with as well:

  • The pairing of capital with a borrower does take time as there is relatively long strict due diligence process.
  • As this is a loan, a client can be repaid all or part of their funds before they want the funds back. Thus they would then need to re-join the deployment queue.
  • The client may also be repaid amounts that are too small to redeploy.
  • Should life happen and the client needs to exit prior to the completion of a loan contract (on average three to five years), the client would experience an exit fee.

All of these items are covered in our Memorandum of Understanding and ultimately the Sale of Claims Agreement (client contract). We also encourage all clients to do their own due diligence on the products and we always gladly share any information they may require to gain a better understanding. BCBS has always been highly transparent in all areas of their products.

May 6, 2018

Factor-based investing is nothing new. The idea that certain shares will give higher returns over time is the premise behind the entire asset management industry. Absa’s newish range of factor-based ETFs are as interesting for their weighting as their methodology. In this episode, we talk about whether factor-based investing has a place is passive investing.


I hate to do this to Sean, but the ABSA TFSA account has a minimum brokerage of R15, so this spreadsheet is in error, and you are still better off going with EE either way (lump sum or monthly) by a whole R34.50 per annum. That’s a free glass of wine right there!

Free wine gets you a win of the week. 


Antoine discovered something in his dad’s RA that I didn’t know about. Anyone else notice this?

He wanted to know the reason for multiple endowments and investments, taking interest free loans from one and investing it in another.  I confirmed with the product manager again that there are no benefits doing things this way. I believe these guys keep on lending and reinvesting the same money, because for every new investment, they generate a commission.

I explained to my dad that a R50 000 commission might sound like small change if you compare it to the final outcome of each of these investments. But consider this :

R50 000 upfront commission

Momentum borrows this against your investment at 10% interest per year for 10 years = -R79 290.00

Plus you lose a potential growth of 10% per year = R85 352,08

So the difference is R164 644,08, which means every time they generated a R50 000 commission  for a new 10 year investment, with the same money, my dad is R164 644,08 poorer. There was no real value added, they probably just get their secretary to send my dad some forms to sign. It would have been better for my dad if they just took the same cash out of his pocket every time.


Thinus

If you had R10 000 per month to invest, what would be the ideal split between putting money away for retirement vs. implementing/maintaining an aggressive investment strategy?

For example, let's say this person is in their early thirties and has a healthy appetite for risk. They want to invest in the following:

Buying an RA has obvious tax benefits, but might be limited if one is seeking more risk.

Buying ETFs via a TFSA, which is obviously tax free and less risky.

And, buying single stocks (equities) either locally and/or internationally.

The responsible adult would lean more towards the RA and TFSA, but the risk-reward-seeking side of them wants to put everything in single stocks (equities).

How do you balance the risk in this scenario?


Phemelo (who was a book winner) made a difficult choice about a car.

I’ve been battling to make a decision.

We bought an SUV 2 years ago. Because service plan expires, we needed to make decision.

1.Trade in it and get smaller car

2.Surrender it to the bank

3.Extend service plan for an extra R500

4.KEEP THE CAR, SERVICE IT YOURSELF AND DRIVE IT until the WHEELS COME OFF.

We decided to go with friends’ advice to keep the car and drive it till the wheels come off. I feel I need to celebrate making this decision.  Hopefully it will pay dividends in years to come.


Tshepo has a question about over-the-counter shares.

I was introduced to the word but not the research. Do you need lots of money or can an average Joe also get into it? I am looking at a company called Equity Express.


Jonathan said women with kids are excluded from the podcast because of the swearing. We asked you what you thought.

Madelyne, Ronel and Chris said they don’t like the swearing.

Tim says he doesn’t like it, but if we must he doesn’t want bleeps.

Apr 29, 2018

Growing up, investments weren’t often a topic of conversation. Even so, I knew that people got rich from property. I don’t ever remember someone telling me this outright. I knew for sure we weren’t the people getting rich. Still, it’s just one of those “universal truths” I absorbed as a kid.

Looking back, I realise it’s because I grew up during a property boom and a lot of people really did get rich from property. Share investments weren’t accessible or easy to understand. Financial products were sold by unscrupulous insurers who gorged themselves on the hard-earned cash of their clients. The vast majority of the population were excluded from the financial system. Property was a great way to accumulate assets and build wealth under these circumstances.

That is no longer true. The market has changed. Legislation has changed. Easier, cheaper, less risky ways of building assets are now available to everyone with a proof of residence and identification. Property is suddenly one of many ways to get rich.

In this episode, Simon and I discuss the role non-share investments can play in your portfolio. We think through two listener questions - one around S12J companies, the other, property.


Garth wants to know what we think about venture capital investments.

Since I started listening I have opened an account with Easy Equities. I’ve set up a budget, started with a financial plan, and invested in ETFs & normal shares.

My question is around Venture Capital Companies. Is it wise to buy Private equity, and get the tax relief? Or is it only for high income individuals? There is a lock in period of 5 years I see as well. This is similar to the MTN BEE shares bought a couple of years back.

I am trying to diversify my portfolio and looking at all avenues to spread the risk with the bulk being in Shares/ETF's of course.

Ros has a property investment success story.

I bought my first home - a small 3-bed townhouse in which I still live - in 1999 for R180,000 - got a loan from my dad and paid him off (including interest which he did charge me!) in two years. Then I bought a rental property in the same complex for R370,000 (including all costs of purchase) in 2004 - got a bond for R280,000 which I paid off within 3 years. I then bought a second rental property (mistake!) for R707,000 (incl. all costs) in late 2013 for which I liquidated some Satrix Top 40 and accessed the remaining capital in the existing bond, which I decided to pay off at the end of 2017. I've left the bond open and use it as my emergency fund or to help with short-term cashflow issues if a client pays me late (I'm a freelancer).

The rental income that I get from the two properties means I hardly have to work at all to cover my monthly expenses.

But with the property market currently where it is, I do agree with you that it makes no sense to buy an investment property today. The first rental property has seen capital growth of around 127% over 14 years (approx 9% pa), and then there's all of the rental income. The second property has seen capital growth of around 13% over 4 years. The two properties are of similar size in the same complex, so the difference is purely down to timing - the first was bought when property values were still going through a high-growth phase, the second when property growth had plateaued out.

We talk about this excellent JSE Power Hour presentation by Magnus de Wet in this episode. 


Jonathan made the best case I ever heard for not swearing on the podcast. So good, in fact, that I’m actually considering it.

Personally I don't mind that you swear. I understand the need for creative and relaxed expression on the podcasts, which is breath of fresh air compared to radio shows.

The only problem is that it excludes mothers who have children in their cars. Yes, there are some dads that take their kids to school but invariably it’s the mom.

The result is that mothers don't end up as being financially literate in the household. As a husband, I can’t get my wife to listen to your podcast because she won't listen to the swearing. As a household, we have shared decision-making. It’s very difficult to convince my wife to listen because driving in the car is probably the only time she has to listen to the podcast.

I would very much like to improve the financial literacy of moms, especially stay-at-home moms (my wife by the way is a professional and still works) but alas, she is excluded from your otherwise excellent podcast.

I could even suggest that you take a poll in which you ask your listeners whose wives won't listen to the podcast because of the swearing and thus you could gauge from your listeners themselves.

If we are to create gender equality in financial literacy, let’s get more women involved.

  • I take the point on kids in the car.
  • I disagree with the view that women are more offended by the swearing than men. In fact, every email we’ve ever received about swearing has been from a man.
  • That said, I’d love to hear from you on this. This show is about inclusion, which, ironically, is why we swear in the first place. We want to feel comfortable ourselves, and we want our users to feel comfortable.

Richardt let us know about a very cool tool for Sygnia investors.

Sygnia has this excel sheet which allows you to select all the funds you like on the first tab for a Reg 28 compliant investment, and then once you click Generate, on the second tab it will show you the complete breakdown of fees and total asset class allocation!

It has been updated following the budget speech.

  • It’s very cool. It includes the actual rand amounts too, so you’re not just working with a percentage.
  • If you contact customer service they send it to you.

 


Nicole is following up on the tax issue on global funds in tax-free savings.

You made a comment on having global funds in your tax free savings account.

The issue is that you pay dividend tax on dividends issued in the countries where the shares are held. The tax gets deducted from your dividends before they’re paid out to you or reinvested. If you receive dividends in a TFSA, you don’t pay local DWT, but you can’t avoid the international tax.

I have the Ashburton global 1200 and the sygnia 4th industrial revolution in mine and I'm trying to figure out if these would result in the problem you identified.

When I received local top 40 dividends last week, my offshore dividends were a line item. I hold these outside of my TFSA and I noticed that I paid local DWT on those. That’s also a line item in my statement. What we’re trying to work out is if there’s an offshore tax that was already deducted and not included as a line item in my statement. Getting an answer to this question is proving to be really hard.  


Jacques has a question about his retirement tax break.

Is the  27.5% on the total pay you receive, i.e monthly salary + overtime + bonus + ......

or is it my basic cash salary before all those extras only?

My company contributes 15% of my BASIC salary (+ my 7.5%). If SARS gives us a tax break on 27.5% on total salary, that means my current contribution is much less than the "22.5%" shown on my payslip.

If I could spare enough to save the full 27.5% of my total earnings, what do I do with the extra money? Retirement annuity or Tax Free Savings account? Is there something else? HR seems to be unsure about increasing my contribution deducted directly from my pay.


Denzil wrote us in episode 94 about his Liberty RA. We made a fire under him. He also has a question about moving TFSAs.

I decided it’s time to kick these guys to the curb.

I’ve started the process to transfer my RA from Liberty into my 10X RA.

The FA was not too pleased and tried all the tricks in the book. He even then asked me who I’m moving to.

I informed him about 10X. He had no idea who they were!! I even told him about this a year ago, so much for keeping tabs on the disruptors!!

I’ve also started the process to withdraw my the other investment from them. I’ll be maxing out my Easy Eq TFSA for the year. 50% to my Emergency fund (taking it to my comfortable 6 month level). The rest will go into my Trading Easy Eq account. Again, crazy FA not happy, and has all excuses. So all is good and here's to my money actually now growing(well lets hope so!!!).

When you transfer a TFSA from one account to another TFSA Provider, do the contributions count in the year I added them, or does a transfer count for this years R33k cap?


Gerhard knows he missed the boat to win the book, but he wanted to contribute his mind-blowing financial fact anyway.

The single biggest tip I have on finances: never ever buy anything that someone is trying to sell you.

If you didn’t initiate contact the answer is always no, no matter how awesome the deal.

Saves you from being overcome by superior salesmanship and buying something you didn’t want all the way to being scammed.

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