Whenever I hear from someone about to make their first investment (or take their first yoga class), I get a pang of nostalgia. I’ll never forget my first investment — the thrill, the terror, the sense of achievement, the self-rewarded grown-up badge. 

Fear was definitely the biggest part of it. True to form, I made it as hard as possible on myself by doing a single lump-sum investment. It was the biggest amount of money I’d ever had. Sending it into the unknown was nerve-wracking. When I finally made my first investment, an RMB Top 40 product via etfSA.co.za, my money disappeared for five days. Nobody had warned me this would happen. “Great,” I thought. “I lost all my money in the stock market.”

We dedicate this episode of The Fat Wallet Show to those about to take that leap for the first time. We hope to ease you through some of the scarier parts without robbing you of that first time feeling.

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Kabelo 

I am able to save R10k a month. I have no clue where to invest. Seeking any tips to help me invest?

Win of the week: Brendon

I am currently debt free after three years of a hell ride trying to free up all my debt.

I am now at a point in my life where my partner and I have a combined amount of 21k a month to invest.

I am thinking about an emergency fund before investing as well as going the ETF route in a TFSA.

Do you think this is enough fuel in my investing engine?

Quinton

Should one rather invest in a low volatility ETF like the NewFunds Govi instead of a money market type portfolio with similar annual returns because of the tax implications. Are you investing in an asset which is subject to CGT instead of income tax? 

Robyn

I invested in six different ETFs in my tax-free account. I also mistakenly bought Woolies shares through my normal online trading account before I heard about the tax-free account.  

The brokerage cost more than doubled the cost of the three shares I bought. It was a rookie mistake but I know better now. 

Last week I received a tiny dividend on those three Woolies shares (a whole R2.69). I also own CSTOP50 ETFs, and Woolies is one of the shares within it. Should I not have received dividends on that?

Is it ok to use my online trading account as a savings account as it gives me 8%? I’ve been told that’s what I need to get on my investments to reach my financial freedom number.  

I’m not getting 8% on my ETFs, so I thought it better to put some cash into the online account instead of investing in flat lining ETFs.  What do you think?

Siphathisile

I was listening to  the "Keep your expenses low podcast" and I laughed because I know I'm a hoarder, I keep things because I always think "One day..." . 

I have this pair of jeans I bought with my first "hard earned money" when I worked over school holidays during my A Level holidays in 2005. Because I had been home for a while, I wore a size 34. A couple of months later I went to varsity and I have been size 30 to size 28 since. I kept my near-brand-new jeans because "one day...". Finally last Christmas I gave up and took them home to my mum to give away because clearly I was never going to be a size 34 in my life. 

Guess what, I'm a size 34 right now and am laughing at myself. But still, keeping that one pair of jeans would not have made much difference I guess.

Hazel

I have a dollar investment offshore in some sort of a Momentum insurance/endowment wrapper. I opened it years ago through 'financial advisers'. At that stage it was too daunting to do it myself. 

It has done nothing but lose money for the last five years and it has very high fees. I'm just trying to figure out how to move it to a low-cost tracker fund without incurring too many expenses. 

Needless to say they are not going to help me and I just want to be free of them. I'm getting pretty desperate! I do have a UK bank account, if that helps.

Terrance

If one has bought the same share every year for a number of years, does SARS use the average price to calculate your capital gains?

OR do you have to work it out in the bundles in which you bought them at that bundle price. This seems a messy and complicated way of doing it, especially if you have been buying the same share every month for the last 20 years. 

Hannes

I find the concept of buy-to-let properties is quite attractive. I recently had a discussion with a friend who wants to do exactly that in order to generate some basic passive income in about five years time. He’ll pay off his first small property, then buy a second one, supplementing it with the income from the first, etc. up to a point where the passive income is enough to cover basic living expenses (hopefully this makes sense).

What are good ways to generate passive monthly income from investments only. Right now buy-to-let properties still seems pretty good for this.

I'd like an apples vs. apples comparison between investments & buy-to-let properties for passive income generation.

David

I have attached an EAC calculation that I received from Discovery for a client. 

If Discovery's EAC over the term of the policy is - 0.10% (notice the negative sign, as per attached doc) shouldn't we all be investing with them as they are essentially paying us for the privilege of having our RA with them? 

I’ve been through the notes and it states that if a client sticks with their Life Cover premium and RA premium until retirement they will receive a bonus which basically reduces their fees to less than nothing! 

The problem is that Discovery have a stipulation that all RAs must increase the premium by a minimum of CPI+3% pa (under the age of 30) and this increases to CPI +4.5% above 30 years old. 

I take it that Discovery realise that most people won’t be able to afford this increase in the long term. If the client makes any changes to their life cover OR to their RA contributions they won’t receive this magical bonus. They also need to keep their life cover in retirement when they probably don’t need it anymore. 

When I come across smoke and mirrors like this it just makes me so frustrated. I would love to hear your comments and point out anything that I have overlooked. 

Javier 

My wife and I are opening an RA to contribute up to our 27.5% of our salary and TFSA which we intend to max out every year.

We are pretty set on investing in the TFSA and RAs with the low-fee operators in the market.

What are the risks of both of us using the same providers, not in terms of performance but of the companies going under, or doing a Steinhoff? 

Should we diversify suppliers to avoid these risks? If a provider defaults, what happens to the investment, ETFs, unit trust etc that might have been bought throughout the years?

Ramoloi

I currently stay with my parents, but have been property hunting for a while now. I’ve set myself a savings target for various things, including a comfy emergency fund, a fund for household items like furniture, as well as helping my mom with whatever I can. 

I have been disciplined enough to contribute to this target, I haven’t met it yet because the time I have set to achieve the target has not elapsed.

I recently found a property that appears to check a lot of the right boxes. I am yet to view the property itself, I have driven around the area once ( and plan on taking a few more drives around the area). I’ve done Google Maps Searches around it, as well as checking the kind of internet they have in the area (they have fiber, which is huuuuuge plus for me).

While I am willing and ready, I have not "gotten my money right". I know exactly when my money will be right but I worry the property might be gone by then. 

Is there a way I can buy the property now and start paying and move in at a later date of my choosing? 

I'm aware that buying a property is not an overnight thing (a friend told me that his purchase could take 3 months to finalize). What are the costs and possible penalties I could face from trying to do this sort of thing and is there any reason why this might be a bad idea?

This week’s show is the second of the risk-series, sponsored by the Index and Structured Solutions team at Absa CIB. In the first episode we spoke about financial risks that aren’t investment-specific. This time, we talk about risks specifically related to the stock market and your portfolio. 

When it comes to investing, we’re most concerned about losing money. In share investments, losing money generally means selling a share at a lower price than you paid for it. However, it’s also important to remember that an investment that goes neither up nor down over a long period of time is losing money through inflation — that dreadful, silent wealth killer. 

We go through risks related to specific investment products, starting with cash and bonds, all the way up to individual shares and actively managed portfolios. We talk about using ETFs to manage these risks and how holding too many ETFs can actually introduce risk.

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Wins of the week: Wilhelm

In the past three months two medical officers also working in Livingstone Hospital has asked me if I am the Wilhelm who has sent emails to The Fat Wallet Show.

Both of them are my seniors with whom I have never discussed personal finance!

So kudos to both of you for the great work you do to educate people about personal finance!

The knowledge is spread out as far as the Eastern Cape!

The value of what you do is immeasurable and it is such a privilege to have been a small part of what you do.

My personal finances are doing great! I’ve reached my annual limit for my TFSA and am already saving up for next year’s allocation (utilising the 9% p.a. you can get from TYME bank). I received a nice tax return from SARS of which half was immediately reinvested in my RA.

I’ve found mountain biking is generally quite bad for personal finance. But then again everything in life isn’t about FIRE!

Win of the week: Gerhard

* The easiest way to look at it, is that you get 25 days from the date of your statement to pay your credit card. 

* You must pay the full Closing Balance on that statement, before those 25 days are over to not pay interest. 

* If you don't pay the full statement amount, then you will be charged interest on a daily basis from there on in, and the whole interest free portion falls away - until you pay it all off and the cycle resets. 

* If you only the pay the minimum, you always pay interest  - there is no interest free period then. This is why it's always important to pay the full outstanding statement balance.

* Read your statements, there should be a pay by date on the statement (At least on FNB there is)

The whole up to 55 days thing comes from, if you buy something on the first day after your statement date, you won't get interest charged on that item for this statement month + the 25 days leeway you get to pay this months statement.

A credit card is a useful tool to have, but it's important that you budget your spend on it and do everything to pay that full amount every month.

Boitumelo 

Would you please tackle the grim matter of estate planning?

I am asking for myself so that I can prepare adequately. I am single with no children and I live by myself, but I also have family members who have no Wills. It would be a tragedy if one did all the work in living a financially responsible life as much as they could, but fail to put measures in place to adequately 'protect' it and those who are to benefit after one is gone. 

1)     What happens to all your money/accounts upon one's death? 

2)     Importance of a Will and its place during a death

3)     Implications of dying without a will

4)     What is an executor and how does one go about choosing/appointing one? 

5)    Other questions I may not have thought of yet related to the topic

Daniel

I am busy applying for finance for a car for R170,000.

I have R40,000 saved up in cash for a deposit. Trade-in for my current car is R25,000, so I have R65,000 in total.

The guy at the dealership said if I put down a bigger deposit they will give me a higher interest rate because they need to make the loan worth their while. He said I should put down a small deposit and then a month or two months later when I have locked in the interest rate I put down the rest of the money into the loan to lower my repayments. Do you guys think this is a viable strategy?

I thought bigger deposit = less risk = lower interest rate but dealership guy says otherwise. Not sure if he is incentivized in any way by the size of the loan amount.

Pascal

I've just begun earning an offshore, tax-exempted USD salary that is paid into a Standard Bank offshore account. Aside from maxing out my tax-free account every year, I'm opting to keep as much money in US Dollars as possible since I can see myself Immigrating in the next five years for work.

I've just opened a TD Ameritrade US brokerage account. It turns out any South African can do this and it seems to be much cheaper, fee-wise, than Standard Bank Web trader.

I plan to start investing in US low-cost broad-market index funds from there. My big question is.. Tax. How does foreign withholding tax work and how will it affect my returns? 

Is it 15% or 30% because I find conflicting information online. Am I taxed twice by both the IRS and SARS? Can I claim back tax in the event of being double taxed? Are there any other tax considerations that I'm missing that might significantly impact my investments or land me in hot water with SARS?

What happens to my South African TFSA if I choose to move to another country?

What are the implications of buying two ETFs that have similar holdings? Raesetsja is trying to figure out if they should add MSCI World to a portfolio of S&P500 holdings. In this week’s episode, we show you how to figure out what doubling up would mean for your portfolio using local Satrix ETFs as an example.

Remember, you can find the minimum disclosure documents (MDDs) on each issuer’s website, or find everything in one place on the etfSA.co.za website.

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Raesetja

I currently hold the Satrix S&P 500 ETF in a TFSA, into which I make R500 monthly contribution.

I have another R500 to invest monthly. Often you guys suggest the Satrix MSCI World ETF. 

I just had a glance at the MDD and the top 10 equity holdings in the S&P500 and the World are exactly the same.

Is it worth buying the World if my exposure (at least of the top 10) is the same as in the S&P 500? Should I rather invest R1000 a month into the S&P 500?

Win of the week: Javier

I discovered your Podcast and just listened to the last 40 of them — that’s 40hours of questions which have been awesome and fun. Though I’m extremely lucky and I have quite a few things already lined up, your podcast has made it clear how to make it even better.

Johann 

I have a few dollars in a local USD account. If the government loses its mind and confiscates part of people’s savings like the Greeks did a few years ago, will this money be safe?

Leonora

I am 59. Retired at 57. I have a living annuity with Momentum, invested in Deutsche Bank Coreshares S&P 500 at a 2.5% drawdown. I have other income for the time being and wanted to escape regulation 28.

I am looking for lower admin costs. 10X could not assist me in 2017 and on enquiry now, they still seem to be unable to do so. Any other suggestions?  Sygnia?

Ruben

I invest in the Satrix MCSI world ETF and the dividends are automatically reinvested. When the time comes and I one day reach FIRE can I change the way the dividends are paid out, or do I need to sell the ETF shares?

Jorge

I am currently investing in PTXTEN and have done so for the past three years or so. However, the PTXTEN seems to be going one way and that’s down.

Is it not time to move to another property ETF and if so, what are the options and if not, why should I continue with PTXTEN.

What is the largest liquor company listed on the JSE as SA Breweries is no longer listed?

I have found Distell (DGH) on the JSE but they only registered in 2018.

Mike

Given the short/medium and longer-term risks in the SA economy, what are your thoughts about the % of offshore exposure in a portfolio (medium to high risk)?

If I backtest a portfolio of 20% Fairtree income fund and 80% Satrix MSCI world index I get 6.5% above inflation for 5 years annualised (11.5% gross) and 6.2%  above inflation (11.6% gross) for 10 years. In ZAR.

That's well ahead of my long-range target of inflation plus 4%.

Dave

My plan is to live off the cash I have saved until I am 60 or older. At that time I’ll decide if I convert any of my annuities to a pension draw-down.

How do I invest my current cash savings, which I will use as income for the next couple of years? 

I will obviously be drawing from this on a monthly or quarterly basis, but would like to preserve as much as I can. My thoughts are to just transfer all the funds to a Coronation Money market account. 

What is the best vehicle to use from a tax perspective? I’m currently in the highest income tax bracket. 

Aubrey

I am building emergency fund for at least six months to a year. Which cash account or investment options I can use to grow my savings? I have a seven days notice saving account with one month salary for emergencies. I want to open another account where I can put my six months emergency account.

I was  thinking of money market account or should I open another Tax Free? Another question is safe to have all your TAX FREE with one organization?

Nico-Ben 

A few people have written you about student loans and the very low interest rates.

I had a student loan. The interest rate is low (8% in my case), but you start paying interest immediately.  By the time I finished studying, my loan capital was just short of R90,000. By that time I already paid R45,000 in interest without paying a single cent on capital.

I struggled for a while to get a stable job and was only able to pay the absolute minimum.  The loan period is so long that the cost multiple looks worse than a home loan.

It was only after four years of working that I finally managed to aggressively settle the loan.

On the upside, working through the loan, and listening to your podcasts made me learn about finances and looking at these costs. 

One expects a high salary with a degree, which I have seen in my field (engineering) is not the case.

The point is that the interest rate is not the only factor. Just as with any compounding a long-term loan is expensive, even if the interest is lower.

I had no alternative but to take a loan, but if you can avoid it I would strongly recommend it. The repayment period does put a hamper on you ability to fully utilize a TFIA and/or RA.

Jack

I started listening to your show a few months after I read the book Expat Millionaire — where cost of funds and fund damagers was highlighted. I don’t mind sitting in traffic anymore.

Since then my wife complains that I have become a little obsessed with personal finance and budgets.

If a very nice family member wants to give another family member a lump sum of between R500k and R1m to assist in paying of his home loan. What are the tax implications?

What is the best way of doing this?

This is our very first live recording in Cape Town, and what a pleasure it was. Our conversations with you change the way we think about our money. Also, seeing people laugh at your stupid jokes instead of hoping to goodness that someone finds you funny is a wonderful ego boost. 

This week we help Antony figure out if it’s time for his family to self-insure their medical aid. While the consensus seems to be that it’s not worth the risk, I enjoy playing Devil’s Advocate. There’s more than one way to skin a cat. I still maintain it can be done, albeit with a fair degree of footwork. 

From our live audience, we field questions about family and money, fear and optimism regarding the future of the country and fees. We also get to answer some listener questions.

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Antony

Over the last 30 years I have contributed R2m in today’s money to a medical insurance fund, but have only claimed R100k for the birth of three children.

I realise that insurance is a sunk cost, but I classify myself and family as above average healthy and medically low risk.  I retired this year at 50 and have a sizeable investment portfolio.

I have discussed with my three children if we should start our own "medical insurance”, and they are very keen. I plan on starting off the fund with a lump sum and having each child contribute per month to the fund.

Both my wife’s and my parents are deep into their 70s and are spending an annual amount of R40,000 but are contributing R60,000 to their medical aids.

At what stage of financial independence do I (or others) medically self-insure if I believe my family to be low risk?

Audience questions

• If we get downgraded to junk, is there an opportunity to be had if we’re young and can ride out the volatility ? Or should we just keep on with our current strategy ...
• What are your suggestions for saving for someone unable to work or manage their own money due to a mental illness?
• How do you talk about financial planning to a partner or a parent who doesn’t like thinking/talking about money ?
• When do you draw the line on moving for lower fees? I've moved once from old-school policy to 10X, but 1% is still a lot these days. Now tempted to move to Sygnia. But at some point a new player will offer even lower fees, or 10X will drop, or Magda will increase. Would be expensive to keep moving.

Richard

Is there any reason to invest locally?

The JSE offers very traditional sectors - finance, resources and retail. Is there any room for significant growth, particularly in a stagnant economy?

There's no tech (bar Naspers), no bio-tech, no AI, I would even settle for marijuana stocks at this point or any sector which could provide some sort of upward momentum.

If you are 20+ years away from retirement, wouldn't the fact that the Rand structurally weakens vs US$ over the long-term benefit your investment?

Mike

I have TFSAs for myself and my two kids, with four ETFs and one balanced fund in each of them.

As you know every quarter those generate dividends, which I re-invest.

My question is what is the best way to distribute the reinvestment?

1. Split the available cash evenly across the funds so the purchase values remain equal.
2. Distribute according to which fund generated which dividend.
3. Use cash to rebalance the funds so current values get closer to being equal.

Nick 

I’ve listened to your show for some time now, but I can’t make up my mind about how to handle my current situation. 

I have a big bond on my home as a result of a foolish impulse to keep up with the Joneses.

If I liquidated all my other investments I could settle half, maybe more, of the bond. If I included other long-term investments like pension and RAs, I can cover more than 100% of the bond. 

More than 50% of my equity investments are fully offshore.

More than 50% of my local equity investments are also invested in Rands in offshore ETFs and unit trusts, the rest in Sygnia and 10X RAs. 

I have a decent percentage of hard currency and local currency equity investments. But the interest on my bond alone is R22k/month. Should I reduce the amount of the bond to reduce interest payments to a more manageable level?

I can’t sell the house (unless I get divorced). I am trying to cut other expenses down to fund bigger bond payments but it’s been tough and our expenses are stretched. I can’t bear the thought of selling equities to repay debt and then watch the debt become nearly worthless anyway and the equities increase in value.