You may not be very happy with your workplace pension fund. In this week’s episode, we think through some of the things you can do to remedy that situation. Pension funds, like all other retirement products, have to be Regulation 28-compliant. That means you don’t have much control over what’s inside. However, you can control your contributions and the fee you’re willing to pay. You can also insert yourself into how your workplace pension is managed by becoming a pension fund trustee. 

You can find Gerrie’s article on maintenance we mention at the top of the show here.

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Kyle 

I’ve been curious about forced pension fund contributions in the workplace. Is there any way we can direct portions and where this gets invested? 

When stocks are discounted, would I not be able to take a more aggressive approach and direct this more towards equities? Alexander Forbes deals with my pension fund.

Win of the week: Steve 

Jason 

You said it is "illegal to record someone without telling them".

This is sort of true but in the context described it's not. This is actually covered in the RICA act.

It is illegal to record someone without prior consent. However, the Act sets out the following exceptions to the rule:

• you are a party to the conversation
• you have the prior written consent of at least one of the parties to the conversation; or
• the conversation relates to, or occurs in the course of, the carrying on of your business

Since you are an active participant in the phone call that means you are "party to the conversation" and not eavesdropping and thus can record regardless. It is still considered polite to tell people they are being recorded, but even if they say decline it's not illegal. If you think the person is going to lie then maybe you shouldn't ask. I'm not a lawyer but this advice was given to me by one of my company's lawyers after I recorded a conversation we had with a client who was blatantly lying to us over the phone and I needed proof.

Dhiraj 

One can hold cash in an interest bearing bank account or invest in a money market with a fund manager at a small fee.

Is it safer to hold cash with a fund manager even if one has to pay the small fee?

Specifically is one more likely to retrieve the money from an asset manager than a bank if both were declared insolvent?

Eugene wants to know why one would choose a preservation fund instead of an RA.

Meryl 

How can you find the interest rates of the bond ETF? Obviously this depends on the price but where do you access the return?

On my Standard Bank investment account I have quite a few Sygnia ETFs. In my statements it shows a deduction for ETF fee whenever there is a dividend or interest payment. Have you any idea what this is?

Eric

For a relatively new retail investor like myself the information on your site is priceless, thanks again.  

I just listened to your podcast on Covid bonds and the 11.5% interest sounds very appealing, my concern is SA Inc. In your opinion what is the chances of a default…thinking Greece and Argentina where a haircut was imposed on sovereign bonds.

Nolomo

1. Besides buying shares, what other assets can one accumulate with a budget of less than R2000p/m. 
2. My dream is owning a house where I can live and raise my family. Is it possible to afford a bond with a salary of R10000p/m with monthly expenses of R4500 over a 20year period? I have a R30,000 lump sump
3. Is a bond the only way to own a physical house with a salary of R10000p/m and R4500p/m expenses?

Nadine

I was just listening to an episode when I heard you say you paid $16 for a kindle book! Kindle automatically makes the US store your default store but you can change that to the U.K. store (www.amazon.co.uk). I did this myself and I usually only pay £3-5 for a book on kindle now. The U.K. store is just SO MUCH CHEAPER! 

Google how to do it - I can’t remember the exact steps, it’s somewhere in settings on the kindle. You need to open a U.K. account and connect your card etc. but it’s worth it. 

Ndida wants to know if there are any benefits to using offshore investment platforms over local platforms offering offshore exposure.

John

I hear SASOL may be forced in doing a Rights Issue in the future.. I have SASOL shares that I picked up at the lows in march and now am thinking of offloading them before the Right Issue occurs. 

There seems to be a battle for dominance raging between medical professionals and engineers on this show. This week we happened to receive emails from four healthcare professionals. Considering what’s happening in our hospitals at the moment, we decided to dedicate this week’s show to these heroes.

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Win of the week: Busi

I am a doctor who has worked in both the public and private sectors.

I have a stockbroking account and always wondered what these random amounts of money popping up in my account were. Nonetheless would use the surprise money to buy more etfs and go on with life. Now that that I listen to you guys, I realise that these are dividends. I felt so stupid when I came to this realisation but thrilled at these little rewards.

I also had a chat with an older colleague of mine nearing retirement age. He advised me that the biggest hindrance to one's retirement plans are kids. His advice to me was not to have any. Fortunately for me, unfortunately for my retirement plans, I already have a rugrat and I'm not planning on sending her back!!! 

I thought I'd help the lady who had a question about medical aids in episode 186.

There are medical aid 'brokers', the company Optivest comes to mind. They don't deal with all medical companies however, so like insurance brokers, they have their pool of companies they deal with and so any quotations you get are based on that handful of companies. 

My advice is that since she already gets a subsidy from work on Discovery, to rather remain on there. Switching to another medical aid has implications as waiting periods may apply which is not idealnsince she has a chronic condition with expensive treatment. And much aa it pains me to say this, Discovery is one of the better medical aids. She should prescribe to the chronic programme, opt to collect her medication from a network pharmacy like clicks or Dischem or something, and can even look at switching options within discovery. The advantage of living in KZN is the coastal options work out somewhat cheaper. 

A listener had mentioned considering switching to medical insurance. A medical aid scheme and medical insurance are 2 different things, and though the insurance is cheaper, its best to go with a medical aid scheme if one can afford. 

P.S. What are Chuckles?

Kendra

I have a financial planner who advised me to go with Sanlam Echo Bonus as my RA. My current contributions are about 5% of my income.

I only recently started doubting what my financial adviser has recommended. I have seen the very high EAC of this RA. Is it true that the Echo Bonus is reliant on Sanlam's performance as a company and is not guaranteed at my retirement? I could be wasting money in an RA with high EACs without this buffer of the Echobonus. I understand I will forfeit a fee if I make changes to my RA now, but I would rather do it sooner than later if there are better long term investment options available. Please help! 

The information I shared in this episode was found on the Sanlam Echo Bonus page. Double-check me there.

Carlo 

I am a young doctor. I just started working with one of the big cruise ship companies before the covid 19 apocalypse hit. Currently I am drifting in the pacific on a mission to repatriate some Asian crew members with no idea when I myself will be getting home.

Having some extra time on my hands (to say the least) I stumbled upon your podcast and proceeded to binge it religiously. My mind has truly been blown by your wit, charm, judicious use of swearing, and of course financial wisdom. Somehow you guys have had a calming effect during these difficult times, please keep up the good work.

I have just completed 2 years of internship and 1 year of community service in the pandemonium which we like to call the South African Public Health Service, and promptly decided to head out for the high seas.

I almost fell off my chair when I saw what the rand had done just before my new paycheck on the cruise ship (getting paid in USD) - Despite being trapped in a floating prison I feel quite happy about it.

I opened an easy equities account and decided to split my savings between the USD account and ZAR account, buying similar ETFs. 

Does it make sense for me to buy S&P 500 in ZAR and USD? Should I try to time my contributions by buying ZAR ETFs when the rand is weak and USD ones when the rand is strong (for example if we head back down to R15 to a dollar?) 

If the rand does strengthen again I feel like I will get hit double because my salary will decrease and the ZAR ETFs that have offshore exposure will surely also take a knock. How can I protect myself against this?

Is it stupid if my TFSA and my discretionary investments mirror each other? Should I be throwing specific types of ETFs into my TFSA?

I see that some sectoral ETFs like the Satrix FINI have been "klapped" - do you think any of these have room for growth (which sector should I buy with my "F you" money?) 

On the offshore side of things, are there any interesting USD ETFs which could offer interesting types of exposure that we can't necessarily get access to from rand based products? I see there is an iShares HealthCare ETF and an INDIA ETF for example.

I am wishing everyone back home the best of luck and I can't wait for Cyril to open the airports so I can come home and help with the fight.

Mary 

I work in healthcare. Believe it or not, our job and salary are precarious right about now. I was fortunate to receive a bonus now and my question is :

Do I pay off my credit card of R12,500 or save the money to prepare for the unknown. 

Can you talk a bit more in depth about rebalancing the portfolio. If one uses the Satrix platform and EasyEquities to invest, do we still need to rebalance and how?

Thank you for all you do. I look forward to listening to all your shows. You are appreciated.

Skhumbuzo

What effect does junk status have on RSA retail bonds? Does the interest rate get better or worse?

Here’s a link to my friend’s drive-in. https://www.facebook.com/DineInDriveIn/

If you went into formal employment straight out of university or school, odds are you have some sort of pension fund or retirement annuity. You may since have realised the idea of working until you’re 65 is entirely optional. If you’ve already allocated a large part of your income towards your retirement, you need to find a way to incorporate that money into your early retirement strategy. 

Our friend Kris has been giving some thought to this process. Your challenge lies in balancing two investments. Your discretionary investments should see you through to the age where you can access your retirement fund. The longer your discretionary investments can support you, the longer you can wait before accessing your retirement product.

Once you start tapping into your retirement fund, you need to manage your draw-down rate carefully, so you don’t run out of money before you run out of body.

In this week’s show, Simon and I discuss the merits and pitfalls of this strategy. In general we find it to be Very Good.

Kris

I have some questions I thought to send to you guys about a two-stage FIRE - which is very relevant to SA since we cannot access Retirement Funding (Pensions, RA's) until a certain age. The USA (where more FIRE content comes from) is different since they have some hacks where you can "convert" retirement funding to income before you hit that age. I am surprised its not a bigger topic in the SA FIRE community. 

I had the idea for the two-stage path to FIRE and developed an approach - which basically means accumulating a large enough discretionary investment (DI) pot to last until your retirement funding (RF) income kicks in (say at age 65). This means the DI can be drawn down at a rate higher than 4%, since it need not be as large as 25x annual expenses - it just needs to last until formal retirement age. 

In the background however - your RF needs to grow from the day you stop working to a level that will satisfy the 4% rule at retirement age.

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Win of the week: Ricardo

And Martyn. Check out his business here.

I'm new to the investing world, and it's pretty exciting. I'm also an active investor in the Netherlands via DeGiro. I’ve been lucky enough to join two online investor groups. These online groups are hosted on a site called Discord Chat. It’s pretty awesome, because everyone can interact and there's a whole lot of Q & A involved. 

I've learnt SO much in the 3 weeks I've been in these groups and I think it could be so beneficial for young South-Africans to share their experiences with each other. The chat allows for different categories (i.e medical aid, insurance, passive investing, personal finance, active investing) and categories like "idea's" where people can share topics on which they want more info on. 

Hope you think this is pretty cool too - and that we can start an awesome online community of people passionate about personal finance. 

Peter

I have excess cash in my savings account and want to invest in an ETF. Is it the right time now?

I have been looking at the Allan Gray Balanced Fund which has a nice diversification and 51% SA equities and 29% foreign and is at an all-time low but the 10 year prediction looks good.

I am also looking at the Satrix capped INDI ETF which is equities-heavy and also at an all-time low but the 10 year prediction also looks very promising.

I'd rather invest now than having my money sit in the bank. In these uncertain times, what do you suggest I do?

Darth

To curb my wife's over-reliance on me for income (for her stokvels and cosmetics), we constructed backrooms and for the majority of the Tax Year, they were bringing in R2 200 per month and that has since increased in January 2020 to R4 500.

All this money goes to my wife's account and the intention is to have it declared as her only income for the Tax Year.

My question is whether SARS would rather have us splitting the rental income as it is coming from our joint property or it is okay for me to file mine as I've always done?

Talking about declaring rental income, I am realising that we don't have lease agreements in place and am wondering what would SARS require as source documents for the income. What sort of documents do we need to have in place before filing?

Javier

What are SENS announcements? when are they used? are they mandatory? where can we find them? is it important to know about them to average investors? Any tips or useful info about them?

Elaine

I took it out in 1999 and not really sure if it's performing like it should. I don’t even know where to start. They want to put it (by this she means her contributions) up to R18 000 per month which I think is just crazy. I know I will be penalised for cancelling but I just feel like it's been a waste of  time and investment .

Would you be able to advise on what to do in this situation ?

Mari

I've got an FNB Share Saver account, which invests into the Ashburton Top40 and Ashburton Midcap for you.

I figured if you invested R1000 they’d send about R500 toward each ETF. But I see they work out how to divide the money so that they buy the same amount of units from each. It struck me as weird 'cause the Top40 costs about R46.16 and the Midcap R5.65 at the time I'm writing this. So R1000 gets me 18 units from each, which means the Rand value of my investment in each ETF is very different.

What's more important here? Why do they do it this way?

Wiehan

We are currently stuck on site with no prospect of leave seeing as all the borders are closed and our charter flight can't take us to Uganda. There are no flights leaving from Uganda to SA. We’re here for the foreseeable future, producing gold at full capacity. It’s not the worst place to be, earning in Dollars with the current ZAR/USD exchange rate. More money for ETF's :)

My financial journey started around two years ago - thanks to the book "Manage your money like a fucking grownup". 

It completely changed the way I think about and manage my money. Before reading the book, I had humongous study loan debt, an awful RA and TSFA sold to me by a greedy Sanlam advisor and no idea on how or where to invest my money. 

I paid off all my debt, fired my advisor and I am in the process of moving my RA to Sygnia (will move to Outvest once I reach R400k) and my TFSA to Easy Equities. I was also able to build up a solid emergency fund. 

I started to listen to your podcast just as the markets crashed - and realised I needed ETFs. Luckily, I had a lot of cash sitting in Money Market funds, and could buy when stuff was dirt cheap. I have chosen an asset allocation of 40% local equities (Satrix 40), 50% offshore (Satrix MSCI World + Emerging Markets and a bit of Sygnia Japan just because it tickled my fancy) and then bits and bobs in bonds, cash, property and a small bit of gold (just to support my industry ;)). 

I will look at the Ashburton 1200 in the near future - hopefully it can rule all of my other offshore ETFs. 

How do you feel about EasyEquities? Is it safe to use as my only investment platform, or should I diversify and use another platform for my TFSA? Do you have any other suggestions for nice/cheap platforms I can check out?

When I am back in SA again, I would love to meet you guys at one of the meet-ups and have little chat. You guys are awesome, and you make the time here on site much easier to bear. Lastly, send me an address and bubbles of choice so that I can courier a bottle or two to you as a thank you. It is the least I could do for the wonderful advice and laughs you have provided to me.

Santosh wants to know whether he should review his portfolio in rands or dollars?

If you listened to this episode on a single ETF strategy, you know my investment philosophy. This simple approach to investing saves me a lot of drama. When a new product comes to the market, I ask myself if it fits with my original philosophy. If it doesn’t, I can satisfy my curiosity about the product without touching my investments. This is a good way to live. 

The new China ETF from Satrix disturbed my Zen approach. If my philosophy is to invest in all the companies in the world according to their market capitalisation, China should have much larger representation in my portfolio. I never thought about it before, since we had no direct way of investing in that economy. This new ETF changes that and gives me a lot to think about.

In this episode of The Fat Wallet Show, Simon Chuckles Brown and I think about how to factor in the corporate governance risk that comes from investing in China. How do we get the right amount of Chinese exposure without betting the farm?

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Lady Kabelo:

I just got an email about the Satrix MSCI China ETF IPO. 

My interest is piqued because China's growth has been all the rage for years - pre-COVID anyway. I'm sure it will be again. But I have a TFSA strategy that includes the Top40, SA Property Income, and the Global 1200 so I have emerging market exposure. Also, I'm not really an early adopter. I'd probably watch what goes on with this for a while before buying.

What would be a good reason to buy this China-specific ETF? I'm pretty sure I know you and Simon well enough to guess that you would stick with your global 1200. But might there be any merit in buying this?

I broadly understand what an IPO is, mainly from the news on interesting IPO drama like Uber and WeWork. What is the virtue of buying at the IPO stage? For example, is there a discount there that might be worth deviating from your strategy to get good value at a bargain price? I would be afraid of buying this at IPO at an inflated price only for it to sink. Is that a real risk? If so, why do people do it? What is the appeal of this offer supposed to be? Looks to me like the only upside is being first to get it, which seems a weak benefit. 

Win of the week: Herman

In this week’s podcast ‘Spend money to save money’, Andrew mentioned how, whilst poor, he had to be the King of cheap, and paid the price. You made a comment about the poor being pigeon holed into buying cheap, and it costing them. And I agree.

How often has it not been shown that the poor suffer the brunt of recessions, tax hikes, interest rate changes, and inefficient governments much more than the middle class or the rich.

THIS got me thinking: One of the reasons we should take charge of our finances, is to prevent being at the mercy of others. Be it to a horrible boss, or service providers/retailers with nasty products. One of the many ‘luxuries’ afforded to the rich or middle class, is to have a choice in our spending.

Thanks for making me think of this, and playing a role in helping me take charge of my financial situation.

Anet

I own both Naspers and Prosus. Would it not be better to sell and be in cash right now? I know that there is an Income Tax implication, but am more worried about the bigger picture right now. 

Similarly, my gold ETF (NewGold) is doing well due to markets crashing and ZAR weakness but this could all reverse in the next 6 months. 

Alistair

I've been getting all my financial advice from a podcast called howtomoney, which is in American. I wanted a South African perspective and I love your show. I've been binge listening for three days now during Lockdown.

How do you guys feel about the EasyProperties platform?