Just when you thought Christmas couldn’t get any more festive, looky here! A bonus episode of your favourite money podcast! Neither of us could stand the idea of ending the year with 29 episodes. We hope you enjoy episode 30 with your favourite cool beverage and a beautiful view.
In this episode we discuss some outstanding feedback, talk about our investment plans for 2017 and share our favourite lessons from 2016.
We’re looking forward to becoming filthy rich in 2017. Hopefully we can take you along for the ride.
Who can resist a Christmas theme this time of year? While this episode of The Fat Wallet Show is technically about what happens to ETFs when there is a share event, Simon and I spend quite a bit of time trying to navigate the tricky landscape of gifting.
If you’re not very careful, Christmas can become be fraught with crushed expectations and financial ruin. In addition to the gifts for family, friends, colleagues and Christmas party gifting rituals, there is the dreaded Christmas lunch. The turkey stuffed with chicken stuffed with rabbit stuffed with a smaller rabbit is not going to pay for itself.
I’ve found myself emotionally exhausted and financially tapped out by the time the new year rolls around more than once. If a more meaningful life resulted from all that drama, it might have been worth it. Unfortunately, I am yet to come out of a holiday season a better human being.
I’ve realised that automatic opt-in events like Christmas can be murder on the finances. We tend to do what we think is expected and then struggle for months to regain financial equilibrium. This year, I am doing things differently. If the season ends in fraught relationships anyway, I might as well save money on the gifts. And I’m the nice one about this.
This is our last episode of the year. We’ve been surprised and humbled by your support over the past 29 weeks. Being able to admit my ignorance, learn, swear and crack terrible jokes with my friend and have other people be excited about it has been the true gift of 2016. Thank you. And thank you again.
P.S. If you want to give the gift that keeps on giving this year, please review us on iTunes (if you have something sweet to say).
At the beginning of the year I decided to buy Simon’s Momentum Portfolio. Veering from the ETF path, I bought 15 individual shares. Before this brave foray into the world of individual shares, I only held five Sasol shares that I bought on a whim once. Call me Investment Strategy Joe.
This decision has caused me some consternation. Firstly, the portfolio included gold shares, which I refuse to own for reasons discussed with perhaps a touch too much passion elsewhere. Secondly, you’re supposed to hold the shares in the portfolio for a year. Throughout the year at least half of them were in the red every time I checked the portfolio. Which ones were under water kept changing throughout the year, because we’re basically living in the end times. That makes it even more alarming. It’s like knowing someone is about to poke you with a sharp stick, but never knowing who has the stick.
Lastly, I’ve been receiving way too much communication about these shares. I’ve gotten mail. On paper. Delivered by a human being. To my house. I prefer to ignore my portfolio as much as possible. I overthink things, and overthinking is a terrible investment idea.
A few weeks ago I received a 16-page document that seemed to want me to do something. The trouble is, I couldn’t understand a word of it. I've attached it here, if you’ve never seen one. I hope it’s not illegal. Apparently renounceable claw-back offers are a thing. Who knew? Certainly not me.
I dealt with this situation the way one is apparently supposed to deal with bears: roll into a ball and play dead. I realised a little while later that that’s old, stupid, indebted Kristia’s way of dealing of things. I am not that person anymore. I’m fearless about finances. So I asked Simon.
Remember that we have our final JSE Power Hour of the year on Thursday. I hope to put some faces to names on the day. Come say hi!
P.S. On the day we recorded this we got an email from Jane Matthews asking us to discuss renounceable claw-back offers, because she also got this godforsaken document. Jane, we were in sync there for a moment. I hope it means we get to be best friends.
Kris
I bought my Huyndai Atos at a time when I seriously couldn’t afford to buy a new car. Between 0km and about 50 000km I only serviced it once, because it was as young and invincible as I was at 24. I still find it miraculous that we both managed to survive that time of my life relatively unscathed.
It pains me to say that perhaps the end might be looming for my dear Atos. I can remove the key from the ignition while the car is running and nothing happens. I’m told this is not normal. Thankfully my Atos and I have matured together. I’m hoping to get three more years out of the old so and so before buying a new car. I want to spend that time saving for a new one.
If my portfolio performance over the past three years is anything to go by, the stock market isn’t the place to save for a new car. With a short investment horizon, what is the best way to save?
In this episode of The Fat Wallet Show, I masterfully manipulate Simon into telling me what I want to hear. It’s true. Listen for yourself.
Send your pressing money and investment questions to ask@justonelap.com. I’ll see if I can do it again.
Kris
I hate the legwork that goes into making decisions about insurance and medical aid. Imagine, then, my delight when Wesley Amos asked me to do a show on choosing a medical aid. I procrastinated for a while, but then my friend Amy added her voice to the chorus. Et tu, Amy?
@kristiavh please look at doing a show based on medial aids cause this is a huge cost for most people some spending more on this than on RA
— Wesley Amos (@wba1310) October 24, 2016
This week we forego some of the feedback and attempt to give Wesley and Amy a base to work from. There are actually a few local medical aid comparison sites that help you choose between different funds and options. I liked this one. However, they won’t be of much use if you don’t know what to look for.
A photo posted by Kristia Van Heerden (@k_r_isis) on Nov 17, 2016 at 2:33am PST
The strategy I came up with is simple: start with cover for whatever is most life-threatening and build from there until you run out of budget. I am a happy taxpayer, but watching my grandmother ail and finally die in a public hospital with minimal care has impressed upon me the importance of access to well-staffed, well-funded medical services. Nothing like actual, literal death to bring that little lesson home.
Because I abhor the idea of doing the paperwork to change medical schemes, I make sure that I make the most of the plan I have. For example, for some reason it’s perfectly acceptable for medical aids to make you pay for your medical care from your savings account and your pocket until you reach a certain amount before jumping in. It’s a fuckery I don’t understand, but I take it very seriously. Every medical transaction is a bullfight. Come at me, bro.
The worst part of the whole medical aid business is watching myself get slowly screwed over the years. I received the annual “benefit and contribution changes” email at the beginning of November. Not only will my contribution go up by 12.5% per month next year, my out of hospital benefit has been scrapped, my threshold level has been increased, reimbursement rates have halved, prescribed medication limits have decreased. The list goes on and on. It’s death by a thousand papercuts for which you can receive no medical attention because you can’t afford it.
This show is a reminder that world is a crazy, cruel place. If you’re looking for places to storm, start with your medical aid headquarters.
This week’s episode is a little like The Twilight Zone. By sheer fluke, we received three questions from two Chrises and a Christo. While the questions aren’t related to each other, by the end of the episode Simon and I realise that the entire episode is about one thing: having a plan.
With a new year comes new financial decisions. People are changing jobs, moving house and rethinking medical aid and retirement funds. I’m in two minds about my own portfolio. In March I bought Simon’s Momentum Portfolio, but I don’t love the mess of individual shares. ETF methodology makes more sense to me and I know ETFs take care of themselves.
My foray into individual share investing made me realise my portfolio really needs a strategy. Currently I’m all about the equities, with a light splattering of property. Come the new financial year, I want to start balancing out my portfolio.
We are launching ETF baskets soon. The baskets will offer a guide for investors looking for ETF suggestions based on their investment time horizon. Because I fancy myself a young'un, I’ll be going for the aggressive portfolio. I need to up my property exposure, which I’ll do within my tax free account. I also need to invest some money locally. Currently my money is mostly in x-trackers. I used to like that, but Donald Trump and Deutsche Bank and hell in a handbasket.
The basket I'll be looking at has 40% exposure to the CoreShares Equally-Weighted Top 40, 40% in db x-tracker World and 20% in the CoreShares Proptrax Ten. Because I'm a smart-ass, I'll probably end up doing 40% in CoreShares' new offshore property ETF since I already have most of my portfolio in DBXWD, 40% in the equally-weighted 40 and 20% into bonds, because bonds excite me.
Come to think of it, perhaps I should cash the whole thing in and spend the end of days on a boat.
Simon is back from holiday and all is well with the world again. In this episode we catch up on some of the feedback and questions we received over the past two weeks. Coincidentally all of the questions we didn’t get to were submitted by people named Chris. Next week we’ll do a Chris episode - a Christening, if you will.
In the episode I mention that both David Pretorius and Alec Viljoen recommended I try investing.com for free data. What both of them failed to mention is the aggressive sales call that followed my registration on the site.
5 missed calls from the UK over 2 days. My imagination flies. I finally get to answer. Telesales. pic.twitter.com/qaUHggmAqj
— Kristia van Heerden (@kristiavh) November 3, 2016You know it’s a sales call, because the person on the other end says, “Thank you for asking” when you ask them how they are. This person also asked me if I don’t trade because I don’t like money. I can’t make this stuff up.
We also delve into how private placements work, how they differ from public offerings and what this means for people like us.
You thought we were just a podcast, but we also time travel. With Simon on holiday, we pre-recorded this episode two weeks ago, when #twentiestaughtmethat was trending on Twitter.
I learned my biggest financial lessons in my twenties. Reading through the tweets, I realised that that’s true for many people. I also realised how lucky I was to learn those lessons in my twenties. Of course it would have been better not to fall down a debt hole like a dystopian Alice in Wonderland, but at least I managed to claw my way out while I still had time left to correct my mistakes... We hope (she thinks grimly).
Three tweets in particular stood out for me, but I embedded the search below. Read through it. It’s quite amusing.
#TwentiesTaughtMeThat it takes more than a degree to own a Range rover.
#TwentiesTaughtMeThat it's easy for habits to become a lifestyle
#TwentiesTaughtMeThat: money matters even R1.00
Simon and I kick some ideas around about the best way to spend and invest a windfall. My deep-seated Calvinism has me shunning moderation in favour of austere financial measures. Thankfully I have my much more hedonistic friend around to pull me back to centre.
We received so much feedback after last week’s retirement episode. We’ll get to all of that next week. I still can’t get over the fact that people actually write us. Know that you’re making me very happy.
Remember to send your questions and comments to ask@justonelap.com. If you have a moment and would like to do something nice for us, please rate us on iTunes.
I recently realised, to my horror, that pension fund and retirement annuity providers are winning at consumer education. With my first job came an onslaught of pension fund providers vying to communicate with my broke ass. I didn’t know how to budget, how to manage my debt, how to navigate myself out of a brown paper bag, but did I know who to call about retirement.
Unfortunately, in the process of educating consumers to sell retirement annuities, providers fail to connect retirement savings with other aspects of financial life. The tax implications can be especially worrisome. Understanding taxes in relation to retirement savings is an important piece of the asset allocation puzzle in a broader portfolio.
This week we received two excellent questions about retirement savings and taxes. Organisations like Gradidge-Mahura Investments are devoted to helping people figure out how to navigate this tricky terrain as part of a larger wealth management strategy. We asked co-founder Craig Gradidge to answer two questions.
Firstly, what is the most tax efficient way to treat your retirement savings when you change jobs? Secondly, what does it mean to get a 27.5% tax rebate on retirement savings? Craig drops knowledge bombs all over this episode.
Thanks to Petrus Booysens and Tim Milner for your excellent questions. Remember, The Fat Wallet Show is about learning. If you have a question about money or investments, no matter how simple, send it to us at ask@justonelap.com.
Finally, at the beginning of the episode I allow myself a little indulgence by talking about one of my favourite Johannesburg hangouts, The Orbit. You can find out more about that here.
Erik Thiart sent a question that I’ve subconsciously been avoiding on this podcast. He wanted to know what the deal is with my debt story. I talk about paying back my debt often, but I’ve never really gone into how I got into debt in the first place. If I’m perfectly honest, it’s because it serves as a reminder of what a total moron I can be. It makes me look bad and I don’t want people to know about it.
This week I come clean. I explain how I got to owing R100 000 on a R10 500 salary in the blink of an eye. After unburdening myself, we discuss possible scenarios where debt could be helpful. We discuss how store accounts are trying to lure you in, how credit cards allow you to arbitrage the bank, buying a car and (oh goodness, why?) home loans.
I mention Jason Pieterse’s fantastic email in this episode. I published that mail here.
If you love us, please go tell iTunes here. It helps other people find us.
If you have questions or comments, feel free to send them to ask@justonelap.com.
When I finally paid off my debt three years ago, I was in the perfect position to start building wealth. It took two stark years to get out of a very dark place of my own making. No salon visits, no new clothes and a helluva lot of peanut butter later had me looking a little furry, but I felt good about myself.
Paying back all that debt made saving easier. I was already used to running a tight ship and sending my money to financial instruments. Six months after paying back the last of my debt I had saved enough for an emergency fund and my first lump sum investment.
I understood why I had to invest. I understood compounding, wealth creation, setting goals and the 4% rule. What I didn’t anticipate, however, was that my investments would flatline for two-and-a-half years. The drama with Deutsche Bank over the past three weeks gave me pause. Many Just One Lap users have been asking us what to do about their x-trackers. Since my entire tax-free allocation for the past two years has gone into DBXWD, this hits very close to home.
My investment portfolio has never really done much, and that never really bothered me much. However, this week I also got my monthly Capitec interest SMS. Over a one-year period, my emergency fund has earned me nearly R5 000 in interest, while my investment portfolio is actually worth less. Over a two-year period, I would have been better off sitting on a hunk of cash.
- How not to time the market. What the JSE Top 40 has done since I started investing.
In this episode of The Fat Wallet Show I turn to Simon for a much-needed pep talk. Yes, I understand the principles of investing. Yes, I know historically speaking the market always recovers. However, the market hasn’t really been kind to me. I want it to show me the money, not take the money.
I’m not planning on doing anything differently for the moment, but I’m ready to see some upside. Pronto, please.
I’m a big believer in having an emergency fund that will cover my expenses for at least three months. I don’t want too much cash sitting around doing nothing, but I also want to avoid cashing out investments to cover emergencies.
My emergency fund creates an interesting dynamic in my personal finances. Because I have cash available, I think differently about warranties and insurance products. My 2008 Huyndai Atos, for example, is currently insured for R25 000. I have that amount available in cash. At what point does it become uneconomical to pay insurance? If something happens to my car, having access to the additional R25 000 probably wouldn’t hurt. Would it be better and would I be able to save that much before I need it?
Quinton Hoffman is facing a similar problem. He sent us this question:
Should I bother with extended warranties and service plans or should I use a emergency savings account? Which method gives me better value?
In this episode of The Fat Wallet Show, Simon and I talk about how to work out when a financial protection product becomes unviable.
Home calculator
The calculator I mention in the podcast can be found on rollingalpha.com. It’s a great toy!
I’ve been memed! Our friend Stealthy Wealth was on point with this one.
At a recent @JustOneLap podcast... pic.twitter.com/mv32ubuQb7
Prepaid and contract
Ourmoney.co.za wrote a great article about finding the most economical airtime solution. Check it out here.
Shoes!
My irresponsible behaviour inspired The Disruptors to write an article about shoes. I’m flattered and honoured. Speaking of disruptors: I get so many emails from guys, but I hardly ever hear from women. Where my girls at? Drop me your questions at ask@justonelap.com.
This podcast forces me to do an annoying amount of personal growth. This week I had to work out what I disliked more: being wrong or being irrational.
My early 20s was a haze of red wine and shopping on credit. In three short years I managed to rack up debt ten times my monthly income. If you’ve ever had debt you couldn’t honour, you know how terrifying that is. When I finally worked up the courage to tackle my debt, I developed a strong aversion to big corporations taking my money.
Cancelling my cell phone contract was one of the first things I did. Getting a new phone every two years was part of my consumer mindset. Naturally I didn’t want a manky-ass entry level phone either. Top of the range, baby, or nothing. What a moron I was.
Cancelling the contract saved me a huge amount of money. At the time I kept my airtime to a minimum and I started holding on to my phones and replacing them with second hand phones when needed. It was an important part of developing the financial discipline I needed to get out of debt.
It’s been three years since I settled my final debt. I stayed on prepaid, when along came Petrus Booyens, who apparently thought it was a good idea to ruin my life.* His calculations indicated it was more cost effective to get a contract to buy a new phone. “Surely not,” I thought right away. “If this is true, I’ve been wrong for a very long time, and that totes doesn’t sound like me.” Ha!
This podcast is me eating a huge serving of humble pie. Here are some of the incorrect assumptions I made about being on prepaid:
- While I only budget R300 a month on airtime, in reality I spend on average R553 per month.
- I remember the cost per minute being much lower on prepaid than contract when I researched this long ago. That either was never true, or it stopped being true since then.
Over a two-year period, I spend R29 178 on my phone. The three Vodacom contracts I looked at worked out to R27 816, R29 256 and R21 096 respectively. Only one contract is more expensive by R87, and that contract has 700 minutes of talk time, vs the roughly 200 I get in a month. Dogdarnit, Petrus. What did you do?
I hope I made a mistake somewhere and I’m wrong about being wrong about this. If I am, let me know at ask@justonelap.com.
Please also let me know what you think would happen if all the world suddenly paid off its debt. I’ve been obsessing over that question for nearly two weeks now. Drop some knowledge!
*I’m being hyperbolic for dramatic effect, Petrus. I’m actually very grateful that you wrote us.
WARNING: This episode contains some insipid moralising. Vomiting might ensue.
Please allow me a moment to be a little philosophical. It’s my birthday week. This can be your gift to me. Last week I featured the NewFunds NewSA ETF. It’s an ETF that invests in companies based on their empowerment ratings. As our bestie Nerina Visser points out in the article, the ETF has a few glitches. It’s over exposed to the local market, because locally-listed international companies aren’t required to be BBBEE compliant. The weighting methodology leads to problematic exposures. All things considered, it’s not the best investment choice.
However, it gives me the feels. I want to live in a country where the workforce reflects the demographics. It means 51% of the workforce would be women. You can guess why I care about that one. Black South Africans would make up 80% of every team. This really matters to me. Should my investments reflect that, even if it’s not the most rational financial choice?
I’d love your thoughts on this. Are you an ethical investor? Tell us at ask@justonelap.com.
Then, finally, we get to some questions we received after our retirement podcast. We consider two questions in this episode:
- If you only had R30 000 per year, should you put it in a tax-free account or a retirement annuity?
- Should you consider in-house products that don’t offer a tax benefit if the fees are really low?
If you love us, please tell iTunes.
Fat Wallet listener Kennith Brand asked us to unpack the advantages and disadvantages of endowments. In this podcast, Simon and I try to wrap our heads around what these products are, why they’re offered by insurance companies and whether you should be putting your money in them. Regular listeners will be unsurprised to find that we end up in ETF territory without trying very hard.
I can see a world where endowments would be useful. If you struggle to keep your hands off your savings or investments, endowments could become a savings vehicle. However, opting for an expensive product with little transparency might not be the best way to address this issue.
I am a firm believer that your financial house should be in order before you start investing. You can’t grow your capital if you still have debt. You should have a financial fail-safe in place in case you become injured or disabled. You should have an emergency fund so you don’t have to sell your ETFs when you need money. Putting all of these things in place should help you develop the financial discipline you need to save towards a goal and to invest without needing to sell your investments.
Simon totally stole my thunder by doing a presentation on the basics of wealth creation like a boss, which is good, because he is my boss. I highly recommend you spend the hour.
It’s really great to be part of a community - especially when it’s a community of excellent individuals. While many didn’t love what we had to say in our homeownership podcast, almost all of the feedback was of the intelligent allow-me-to-disagree variety. There wasn’t even a light shanking. I am grateful. We should all hang out.
In this episode we go through all the counter-arguments and feedback. We also answer questions about shorter payback periods and cash purchases. The biggest criticism was failing to account for rental escalation and the inclusion of structural insurance in levies. Many people also pointed out that the situation would look very different if you paid your bond off over a shorter period. These are all excellent points, which I concede.
For all the comments and calculations go here.
Kristia
Until now, most episodes of The Fat Wallet dealt with investment concepts. When it comes to money, however, smaller personal finance choices can arguably have a much more profound impact on your financial well-being. We address this often when we talk about keeping your lifestyle costs in check.
A concept as simple as “value for money” can be immensely complex, as we discover in this episode. When you have all the information to quantify value in terms of price per unit or use, you can make an informed decision pretty easily. The trouble is, when it comes to consumer goods there’s a huge incentive not to make all the information available. Add to that the amount of options available to consumers and you soon find yourself paralysed by indecision in a straightener isle on voting day. I know this pain.
In this episode I rally the forces. Simon Brown, Petri Redelinghuys and Dineo Tsamela all pitch in to help me figure out how to quantify value when you don’t have all the information. While all of us have excellent ideas, I’m afraid there’s once again no tidy answer. This is probably the most frustrating thing about money - tidy answers are few and far between.
That, by the way, is also why we don’t check our language in this show. Money is a bastard. It ruins lives, it causes divorce, it drives people to do crazy things. Corporates have to gloss over the very messy, dangerous underbelly of money to sell you products that make you feel safe. As consumers of those products, we feel everything but safe and comfortable in the world of money. We hope having frank, messy conversations about money helps you to do the same.
Kris
We spend a lot of time at listening to debates on whether low-cost index investing is better than paying someone to manage your money. During these debates, there’s invariably a chart that compares the performance of a fund against an index. The problem is that fund returns aren’t always represented in the same way. Sometimes the reported returns are annualised, sometimes since fund inception. Sometimes costs and performance fees are deducted, sometimes not.
Interpreting fund returns is as important for investors considering a fund as it is for index investors looking to gloat over how little their investments are costing them. In this episode of The Fat Wallet Show, Simon and I try our best to park our predilection for index investing and throw a bone to our friends in the active space. I pick Simon’s brain to find the best way to interpret active management fact sheets. Unsurprisingly we both end up gushing over index investments. We tried, though.
Kris
Are share buybacks an indication that a company is trading on the cheap, or a sure sign that management has run out of good business ideas?
In this episode of The Fat Wallet Show, I try to figure out how share buybacks affect investors. From time to time, a company will buy and destroy some of its own shares. While the reduction in shares theoretically reduces the amount of claims on dividends, is this type of corporate action really in the best interest of shareholders?
I’m surprised to learn that share buybacks happen on the open market at market value. Doesn’t that indicate that a company is trading below its net asset value? Wouldn’t that be my cue to jump in and grab shares at a reduced price? Simon isn’t convinced.
I think it comes down to a bigger question: Why did I buy this share to begin with? If I hold a share because I understand the business, believe in its ability to make money in the future and think the management team know what they’re about, the buyback might be an opportunity for me to pick up some more. If I hold the share as part of a momentum portfolio, on the other hand, I might see the buyback as an uninspired use of free cash. The moral: know thy companies.
Given our political history, it’s hardly surprising that South Africans take homeownership very seriously. Many young South Africans will be the first homeowners in their family. Like so many financial decisions, homeownership is emotionally charged. However, once you start running the numbers it’s difficult to make a financial case for buying a home.
In this episode of The Fat Wallet Show Simon and I open ourselves up to a world of outrage by doing the maths. We are unsurprised to find that owning a home is an exercise that has more to do with the feels than economics.
It is, of course, perfectly acceptable to buy a home for emotional reasons. If it makes you feel safe and happy to own your place, why shouldn’t you? We do encourage you to go through a similar process we went through in this episode before you commit to buying, though. Understanding the full financial impact of your decisions is a really big part of responsible adulting.
Below is a list of the factors we included in the price of buying a home. I assumed structural insurance is always part of the deal, but Simon pointed out that it might be included in levies. The insurance number was a thumb-suck based on what Simon, the homeowner, currently pays, with allowances made for smaller excess amounts. Before you start this calculation, phone your current insurer for a quote to get a more accurate number and confirm whether structural insurance is included in your levy.
- Home price
- Initiation fee: The fee your bank charges just to open a home loan account
- Interest rate
- Pay-off period
- Levies
- Rates and taxes
- Maintenance: Either 1% rule, or R1 per square metre, which seems very low.
- Insurance
- Transfer duty
- Conveyance cost
You are welcome to send your abuse or follow-up questions to ask@justonelap.com.
Ten whole episodes, and not a single rock thrown at us! I’m surprised and delighted. This week we kick off with quite a bit of feedback on previous endeavours. Thanks for taking the time to write us. I’m even grateful to George, who came to Magnus’ defence after last week’s episode. There’s enough space on The Fat Wallet Show for all views*.
If you’re wondering why we’re talking bonds again, it’s because we recently fell into the trap of People Who Know Things. When I’m around Simon, there’s often a very good case to be made for I’m with stupid t-shirts. Because he knows so much more than I do, I’m forever reaching for new levels of understanding. In a previous episode on bonds, I forgot to mention where I’m reaching from. I already had some information and I assumed everyone knew what I was talking about. The intent always was to talk about what bonds are and how they work, but I got excited and ended up doing exactly what The Fat Wallet tries to combat.
@kristiavh I still dont understand bonds. Never even heard of corporate bonds. What difference between that and a share?
— Charmaine (@charmaine59) July 21, 2016
Thankfully I had our friend Charmaine to keep me honest. Her tweet made me realise that I missed the mark on the bonds episode, so I’m having another go at it in this one. Charmaine, I apologise for being an
If you’re wondering why we’re talking bonds again, it’s because we recently fell into the trap of People Who Know Things. When I’m around Simon, there’s often a very good case to be made for I’m with stupid t-shirts. Because he knows so much more than I do, I’m forever reaching for new levels of understanding. In a previous episode on bonds, I forgot to mention where I’m reaching from. I already had some information and I assumed everyone knew what I was talking about. The intent always was to talk about what bonds are and how they work, but I got excited and ended up doing exactly what The Fat Wallet tries to combat.
@kristiavh I still dont understand bonds. Never even heard of corporate bonds. What difference between that and a share?
— Charmaine (@charmaine59) July 21, 2016
Thankfully I had our friend Charmaine to keep me honest. Her tweet made me realise that I missed the mark on the bonds episode, so I’m having another go at it in this one. Charmaine, I apologise for being an arrogant asshat who assumes people know things by magic. I hope this episode clears the whole thing up. I will continue to count on you to remind me what this is all about - access to information everybody can understand.
This is a gentle reminder that anything worth doing is also worth swearing about. If you are offended by swearing, The Fat Wallet Show might not be for you.
*Unless the views are racist, sexist, bigoted, full of logical fallacies or generally stupid, which George’s was not.
who assumes people know things by magic. I hope this episode clears the whole thing up. I will continue to count on you to remind me what this is all about - access to information everybody can understand.
This is a gentle reminder that anything worth doing is also worth swearing about. If you are offended by swearing, The Fat Wallet Show might not be for you.
*Unless the views are racist, sexist, bigoted, full of logical fallacies or generally stupid, which George’s was not.
Let’s start this week with a slow clap for Magnus Heystek. In a single article, he managed to troll an entire industry. Well done, sir. You got me.
I’m a huge ETF nerd. I love thinking and writing about and investing in them. I love them, because I understand them. That is not something I can say for many financial products. I believe ETFs are the easiest, safest, cheapest way for me to grow my capital. Once I got over my initial outrage, however, I remembered the point is exactly to grow capital. If there’s a chance that ETFs aren’t the best way to do that, I want to know sooner rather than later.
Stephen King advises writers to kill their babies. If your witticism doesn’t fit anywhere, the only solution is to throw it out. That approach, I believe, is a very healthy (albeit uncomfortable) way to live. Am I holding on to an idea too tightly? Am I becoming inflexible and closed off to alternatives? I’m grateful to opposing points of view, because getting angry and uncomfortable is a good indication that I need to check my ego at the door and revisit the facts.
In this episode, I try to kill ETFs. I have to keep reminding myself that I am not a crusader for a particular style of investing. If ETFs turn out not to be the best option, fuck ‘em. I’m here to grow capital so I can retire early, move to a beach and dance the salsa all day. Whatever gets me there is what I’m going to do.
Kristia
The Fat Wallet Show is a weekly humble pie eating contest (on iTunes, for all the world to witness, as of this week).
For about the first six months after joining Just One Lap, I left every meeting with a list of things to Google. Half a year in, I finally knew enough to start asking questions. However, nobody around me ever asked a question. I realised that either the expert-to-novice ratio was skewed and I was literally the only person who didn’t know what was going on, or someone was bullshitting.
The Fat Wallet Show is a direct result of the process of owning my ignorance. Since I’ve already claimed the Village Idiot title, I’m no longer shy to ask smart people to explain things to me. They already know how little I know. Once I started unabashedly owning my stupidity, the rate at which I learned things increased dramatically. Yes, sometimes I ask stupid questions, but once in a while I ask a really good question, and I’m proud of that.
This week, something really cool happened. I was reading through a report we got at the CoreShares ETF Exchange and noticed something I didn’t understand. This did not shock me. I went through my usual process, which means I asked Simon. He didn’t know. So I asked the three ETF geniuses, Helena, Candice and Nerina (*whistle*). They didn’t know. Then I asked my smartest friend, who drove over to my house so she could draw pictures. Only, she couldn’t figure it out either. It turns out an important piece of data was missing and nobody knew what was going on.
This excites me, because the financial services industry as we know it today came about in a time before fintech and, you know, cars that weren’t attached to horses. Like all new things, it didn’t start out effective and efficient. It remains a work in progress, a living thing that exists for our benefit. A simple question like, “Why is it like this?” naturally leads to, “Is there a better way to do this?” That question, hopefully, leads to improvements that can benefit the human race, not just some dude in a suit.*
Information is such a powerful tool. To get it, though, you have to plant your feet firmly in what you don’t know. This week, I tell this story, which you now have to go through twice. I apologise. Then I talk about bonds. If that’s what you’re here for, skip to the end.
By the way, ETF geniuses, where my retail bond ETF at? Gimme it.
I mention our friend Daniele in the podcast. You can follow him here.
*I’m actually a big fan of dudes in suits. Especially well-made suits that fit just right. Please don’t stop wearing them. You look fantastic.
At Just One Lap, we don’t shy away from financial products. If it exists, odds are you can find it in our archives. We do, however, have an Achilles heel. We don’t like talking about retirement annuities. Personally I have no qualms with them. I wasted the first decade of my earning life getting shafted by credit providers and poor decision-making, so I only started contributing to my RA in my 30s. By that time, 10X existed and I could settle comfortably into that delightfully cheap little nest. Simon wasn’t as lucky.
Retirement annuities are worth talking about. A few product providers are making an effort to contain fees to 1% of assets under management (AUM). While AUM is a bullshit concept, I like that they’re making an effort. 27.5% of my contribution is tax deductible, and can live in a double tax haven in my tax-free savings account. My retirement annuity also keeps the money out of my irrational little paws until I hopefully have some sense.
In this episode, Simon and I start off discussing the merits and limitations of retirement annuities. You can’t really talk about retirement without talking about lifestyle, so our conversation quickly veers into the dangerous realm of personal finances. How much should we be saving? That turns into how we should be living. Odds are you won’t like what we have to say. Perhaps you shouldn’t listen to this episode after all.
This discussion was prompted by a question we received on Facebook. Send your questions to ask@justonelap.com. It’s a judgment-free zone.
A completely risk-free investment is pretty much a unicorn. Even cash in the bank loses value over time as inflation rises. Hedging is a word obnoxious trader types use to describe investment strategies aimed at protecting your portfolio from losing money. Traders mostly hedge using derivative products, but I steer clear of the d-word as much as I can. Does that mean I can’t protect my portfolio from risk?
In this episode of The Fat Wallet Show, Simon and I try to figure out if there’s a space for hedging for a boring long-term index investor like me. Spoiler alert: There is.
Kristia