If you’re a regular listener, you already know your emergency fund is the most important thing in your financial life. It’s boring, yes, but crucial. You should protect the assets you have with insurance. For as long as you’re earning an income, you are your most important asset, so dread disease and disability cover is a big deal.
Once those two elements are in place, where you go next becomes more complicated. We think everyone should have tax-free investment account. If you’re a salary-earning tax-payer, taking advantage of the tax breaks offered in retirement products is a good idea.
In this episode, we get five versions of the same question: which investment option is better in the long run?
We come up with the following check-list of questions to help you decide:
Win of the week: Candice
My “work husband” recommended the show. This was roughly around the time I found out I was pregnant. I mostly started listening out of fear, but since then we’ve paid our debt and started an emergency fund.
Is it advisable to max out our daughter’s TFSA annually and just deposit bits and pieces to our TFSA? Or should we spread our contribution equally across all three?
We will only draw from her TFSA in 20 years, if we need to for studies. If not, we’ll hand it over to her for her 21st.
I have a company ra with the green company, but we’re going to start contributing to a 10X RA as well.
We don’t want to be financial burdens on our daughter when we’re older. We want her to have enough money available to not have to take student loans etc and get a helping hand at starting life. I just want to know we are on the right track.
Herman wrote an algorithm. The results are in an article called “The ideal pre-retirement allocation mix” on justonelap.com.
Nico-Ben
It seems the market is currently going down. At the moment my Satrix 40 is at a loss. This does not bother me as this is a long term investment. In one of your podcasts, you said this should be seen as the JSE is having a sale, just like a retail store might have a sale. This makes perfect sense.
I was planning to put the rental income into the bond, and top up my TFSA balance in February. Looking at the prices dropping, it also seems like I should consistently buy the Satrix 40 in the TFIA.
Which course of action would you suggest? I get it that we cannot predict the market from now to February, and that is too short term to really expect any real profit.
Guido
After maxing out my tax free savings I'm not sure whether I should carry on saving in a global vanilla etf like Ashburton 1200 or something like the 10x high equity fund.
Should I invest in both or am I overexposed as the 10x fund invests in the satrix msci world as well. I am 40 years old and looking for long-term growth. I prefer a global etf at the moment as S.A equity is not doing much. The 10x high equity fund has 50% local equity but otherwise is nicely diversified. Which one should theoretically give the better return in the long run?
Gerhard
I currently maintain a 50/50 split between international and local investments. Every month I use the new money to try and keep it in balance. Hopefully it's 20+ years before I need to touch any of this money.
Recently I stumbled across Galileo Capital's YouTube channel. One thing Warren Ingram keeps mentioning is the "fair value" of the USD to Rand. He feels it's at about R13.90 to the dollar. One should only move money offshore when we are below this level. This includes buying the international ETFs on our local market.
Should I just ignore the USD/Rand and keep buying international every month?
Or, does one keep the money earmarked for international in cash, and wait for the Rand to strengthen back to those levels?
Andy
I now own three properties in Cape Town.
I live in one (paid off, but lets ignore this lifestyle asset) and 2 investment properties.
Paid R800k for the first flat and I’m renting it out for R7800, which covered the bond repayments and the levies and rates.
I ended up settling the bond with a lump sum. I used the bond to pay "cash" for the 3rd flat.
I now have bond debt of about R600k (on the first investment property) which I’m smashing with my monthly salary savings and rental income from my 1st investment property.
The third flat hasn't got a tenant yet as I bought it off plan.
I do have market exposure and the necessities covered. Example:
Do I start filling up my Standard Bank OST account with my favourite ETFs or do I smash the bond and then fill up on ETFs?
Albert
I stumbled across your podcast while trying to find out why the yield of the Satrix MSCI World Equity Feeder Fund Unit Trust was less (by a few hundred rands) than the yield of the Satrix MSCI World Equity Feeder ETF in my TFSA over a period of two years.
On a simple TER basis the Unit Trust version of the same product was 0.63 more expensive. At first this didn’t seem too bad, until I started running the mathematics with a few assumptions and looking at the lost return over time. Naturally this infuriated me beyond belief.
Since then, I’ve been working my way through your library while going through all of my expenses, investment activity, insurance and pension funding.
Being in my early 30’s, I have some investment groans about poor investment choices in my 20’s like:
That said, I currently don’t have debt, have always contributed as much as possible to my employer’s retirement fund and am grateful to have some savings and enjoyed some treasured memories of overseas vacations.
You have both inspired the following change in my personal life:
The Question:
Given the amount of money I ought to have saved this year thanks to your sage advise (far better than any financial advisor I’ve met), I would like to send through a bottle of Veuve Clicquot. Then I took a look at the price of those particular bubbles, and surmised that it is beyond what I am prepared to pay for quite a while. Would it be possible for you to set up a Patreon or something? I wouldn’t mind kicking a few rands your way on a monthly basis to keep the show running.
Alexander
From listening to your podcast and speaking with friends and family, I would like to avoid credit. But I am also cognisant of the fact that I’d most likely have to incur at least some debt for a house one day.
The Standard Bank consultants informed me that building up a credit score starting now would make applying for future loans easier and that I’d possibly get lower interest rates.
Do you have any general tips/advice for how I can start planning/structuring my life to minimise my future debt and living costs? At this stage in my life I’m very flexible regarding where I decide to work, buy a house and so on.
Chris
On the Sygnia website they claim to charge an admin feed of 0.2% on Sygnia ETFs and 0.4% on other ETFs.
Since my ETFs are all from other service providers, the 0.4% admin fee would apply + the TER of the ETF itself. (e.g. Satrix World = 0.4% admin + 0.35% TER = 0.75%).
However, on the Sygnia RA platform, there is a tool for calculating EAC fees which gives a slightly different output. It states my current EAC fees are 0.89%.
On my quarterly statement, it gives a table of each ETF, with the respective TER and management fee applied. The management fee ranges from 0.1% to 0.3%, which is quite reasonable. However this does not tie up with the EAC quoted on the online platform.
I'm a bit stumped.
The way I see it, worst case I am paying 0.89%, which is in range of the 10x fee of 0.9% so this is acceptable. The fee appears to go down to 0.61% over time which would then make it
cheaper than 10x.
I should also mention that you do occasionally have to rebalance the portfolio to remain Reg 28 compliant. Sygnia charges a 0.1% brokerage fee for these transactions
Ross
I have my money back home in a brokerage and savings account. I would like to invest my overseas earnings into something without converting back to Rands. Preferably into USD, EU or GBP. What options would you suggest? Are there any multi currency account banks that accept sign up without residency?