You might not be thinking about where your family will be in 2120, but Greg is. This week he shares a mad plan to make a 100-year investment. 

Greg

I thought about starting an investment with a 100- year time horizon.

A lot can happen in 100 years. Maybe we don't use money anymore. Maybe earth explodes. Who knows? But if things still kind of resemble the way they are now and there's still a stock market then once off R10,000 invested in equities could be worth around R30m in 100 years (in today's money). So I think it's worth taking the risk.

I'd have to get my offspring onboard when it came to that point and then their offspring, to keep it invested and change the investment vehicle if and when needed. Worst-case scenario, a greedy grandchild decides to cash it all in and blow it on bubbles and a house with a sea view, which is also not a bad outcome. 

I started with R10,000 in my EasyEquities USD account and bought the Vanguard S&P500.

Ultimate goal - I'm not sure yet, but hopefully it would get used wisely, to help supplement income for a few families, not get depleted and continue to grow.

Just curious if you have thought about doing this?

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Win of the week: Nokuthula and 

Bea

Thank you very much for your thorough answers to my questions. Kristia, I love how you answer questions from the perspective of all - you do not assume that everyone knows all the financial keywords. I appreciate your guidance and the presence of  JOL in our lives. Being new to all of this, both yourself and Simon's ongoing presence is a comfort to me and so many others - I am sure.

Simon’s answer to my furniture and storage question was classic and was taken to heart. ' Burn it!' This got my attention since family have said things along the same lines. Both of you also seem  to understand life situations, in my case the hold that belongings have and how they really own you. The grim reality is that, like Simon says, these things that we attached so much worth to...end being worth so little - in monetary terms...years later.

Ina

My brother lives in SA and I’m in the UK. He advised me to listen to some of your podcasts - I think they are truly brilliant! 

Could you recommend anything similar in the UK that I can listen to in regards to advise as I really need some tips on the UK market?

Get in touch with Garth McKenzie.

Peter

I listened to your podcast which I enjoyed a lot.

Someone asked what to do with a large amount of money- a windfall, obviously keeping tax efficiency in mind. I noticed that buying gold and specifically Krugerrands was not mentioned.

Could you explain why not especially with the current Bull phase of gold.

Sandy

I have a life insurance policy that has age-rated premiums. Looking ahead even just 10 years, these monthly premiums become shocking.  

My policy is tied to a dread disease benefit, so maybe that's why. But as I get older, that's when I'll need this benefit, right? Especially with a family history of breast cancer. But how will I afford it? I don't want to pay all this money in and then have to cancel my policy. 

Are there alternatives to age-rated premiums, and if so what are they? Could you be insured for a specific amount that doesn't grow each year. But then, what about inflation? Urgh! 

Please help. I'm so confused! 

Mike

A few years before I retired I became aware that I should take responsibility to inform myself about financial issues. At work in a secure enjoyable technical environment I did not have any exposure to financial issues. 

I was unprepared to manage the expected pending inadequate pension which I accepted with-out seeking informed advice from anyone. During that time I was introduced to Red Hot Penny shares material. 

I was also fortunate enough to have a small amount of capital to open an equities broker account with Imara. This is now Momentum Securities who charge me R40 per month even though I do not seek their advice and make all my own trading decisions. Over the years I have gained an interest in investing as basically a buy and hold investor. However I do now have a share portfolio despite my largely ignorant independent cautious DIY approach.

I am a client of Standard Bank dating back to 1990, but I believe the time has come to move my broking account. I have made a feeble attempt to do this before but have failed to complete the exercise. 

I find my isolation as a pensioner in the new, to me, digital environment and lack of informed personal interaction is daunting for me such that I have not achieved the move.

I know that with change I would have to work on an unfamiliar platform. Before I take the decision to commit to Standard Bank do you know if I am able to use a Demo trading account? Please could I speak to you about who to contact to get the website details and if there is a tutorial I can use to familiarise myself with the platform.

Ben

Before she even gets going she gets penalised with R20k, not to mention everything else that looks terrible with this option. 

Needless to say I put this on hold - I'm careful to meddle but couldn't let this one fly. I will recommend as an alternative a similar split in equity, bonds and cash (the proposed split is appropriate for this portion of her money), but the first two in ETFs.

Here are my two questions:

1. The equity ETF portion is easy, but is there also a bond equivalent of the "one ETF to rule them all" for more moderate risk investments that I can consider for the bonds portion in this case? (Bonds in your ETF portfolio.)
2. The product is being sold to her with the benefit that it won't form part of her estate and will be easily transferable and keep going if anything happens. Is there any merit to this? What will happen with her Ashburton 1200 and Bond ETF I buy if something goes wrong that could be avoided with the Glacier option? My first thought is to call BS on this too. 

Adam

Is it possible to use the R40 000 CGT allowance each year? By selling shares for a profit just before the tax year end at  a profit and then buying them back in the next tax year, would you then recognise the purchase of shares at the new purchase price?  Is this a way to minimise future tax costs since you now recognise future profits off of this higher value?

I've seen this being referred to as bed and breakfasting but I'm not sure what regulation is applicable in South Africa and how one would go about it.

Marco

I have a comment or question in regards to your use of acquiring a foreign currency "hedge" against the rand value declining over time. The problem (as I understand from reading around) is that there is a yearly tax "drag" on this method because any unrealised appreciation in foreign currency is taxed as income, as interpreted here: https://www.rsm.global/southafrica/news/tax-implications-foreign-exchange-differences .  

Now, I'm unsure if this is entirely applicable to a "buy and hold", as I have used this method in order to do my own taxes as I do some day trading using USD and not ZAR. Perhaps this doesn't apply if you can show you were buying foreign currency as a "capital" gain if you hold onto it for longer than 3 years?

We spend a lot of time thinking about building an asset base and which assets we should be buying. 

As you approach financial independence, getting rid of assets starts to present problems. Which assets should you get rid of first? How do you manage your capital gains liability? How many of your assets should you get rid of and when? How can you use a capital loss to offset your capital gains liability?

This week we consider the challenges in living off your investments. If you’ve spent your whole life accumulating assets, getting rid of them is bound to feel like sacrilege.

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Win of the week: Gert

Was listening to your show about the confusing jargon, synonyms and abbreviations/acronyms we use, especially the term “coupon” used in describing the return on a bond. 

I seem to remember reading about the etymology years ago and looked it up on Investopedia, but found a better explanation on Wikipedia:

The origin of the term "coupon" is that bonds were historically issued in the form of bearer certificates. Physical possession of the certificate was proof of ownership. Several coupons, one for each scheduled interest payment, were printed on the certificate. At the date the coupon was due, the owner would detach the coupon and present it for payment (an act called "clipping the coupon").[2]

The certificate often also contained a document called a talon, which (when the original block of coupons had been used up) could be detached and presented in exchange for a block of further coupons.[3]

Hannes

For equity investments, I've read that it's important that there is a "CSDP account" for each user of the platform. central securities depository participant 

They note:

"First World Trader Nominees holds a Securities Account with an authorised central securities depository participant (CSDP) admitted to Strate, in the name of FWT Nominees into which Clients’ Securities are deposited or stand to be credited."

So it sounds like some rights are seeded to EE here. Should I be concerned?

Luan

I have an RA with work which is invested in Momentum Focus 7 fund of funds which I believe has a TIC of 2.08%. Work contribute 5% and I match that – I have come to the realisation that while they will continue to contribute into that, I can choose not to and rather put my portion into something that works better for me.

I do have an RA with etfSA which I have been contributing to and wondered what your thoughts were on topping up into this or whether I should rather put it into ASHGEQ type investment?

I am also looking to help my sister start her own additional RA and wondered what your thoughts were on the etfSA RA or Sygnia Skeleton 70 fund? (will be starting fresh so not beneficial to do OUTvest)

My sister and I will likely not retire in SA and I wondered what advice you would offer on how to safeguard our future, specifically with the value of the rand (in 15-20 years) when our RA’s begin paying and we are in another country? Are we being silly contributing into personal RA’s now for the tax benefits and should we rather be buying investment ETFs like ASHGEQ it STXWDM with those monthly contributions (+-R5000)?

We do not have offshore investment accounts (do have a UK bank account) and am assuming for now the best route is through EasyEquities USD account until we have a more substantial amount – would you agree?

I want to make sure that we are putting our money to work in the right places and can then let that compounding go wild.

I find it odd that so many people fear the stock market and then get lured into financial scams. Inspired by James, who is trying to keep his clan from being conned, we help you figure out when something is just not right. 

Here are some tips to get you going:

• Find out if the company or product is registered with the Financial Services Conduct Authority (FSCA). This is not foolproof, but it takes a diligent kind of con artist to steal money in this way. It does filter out a lot of the scum.
• Run the opportunity through the Just One Lap five concepts filter:
  • At the end of this experience, will you own an asset? 
  • Will you earn income on that asset and will that income compound? 
  • Will the returns beat inflation? 
  • Compared to what your index of choice did over the same investment period, do the returns seem too good to be true?
• The promised returns are a huge red flag. If you’re new to financial matters, it’s hard to know what’s a lot and what’s a little. As a rule of thumb, when an “investment opportunity” offers monthly returns, be very suspicious. It’s industry practice to quote returns for a year. 
• Google not just the company or product (that’s usually fairly easy to control), but also every individual’s name associated with the product. Scammers love getting away with scams, so they tend to circle back.
• If you find media articles about the legitimacy of the product and the person you’re dealing with tells you they’re taking legal action against the media house, be very suspicious. This is an old trick to put potential investors at ease. Remember, you don’t have to be in the right to bring legal action.

We also spend a little time on helping you think about alternative, unlisted investments and the place they should have in your portfolio.

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James

How do you know you are investing with a fraud? More importantly, how do you convince your friends or family that they are going to get fucked?

A friend of mine invited me to listen to a guy that is willing to invest your money through his company.  The returns are absolutely amazing!  77.64% for the year in 2017! 

To the untrained ear, this guy sounds lekker.  He explained that they move the money to America and use a computer program (that his son developed) to predict the market.  The level of risk is then adjusted by the amount of gold (held at the bank of England) in a portfolio. They do all of this at a fee of 1%. 

I asked him a few questions about custodian accounts, insurance, brokerage, total investment cost, TAX and all kinds of clever shit you and Simon spoke about on the show.  I could see this guy has no idea what I am talking about and then he referred to an ETF as an "Electronic Traded Fund" then I knew this is a fucking keeper!  He told me that he is not here to convince or force anyone to invest with him. But there he was, trying to convince people to invest with him.  

I am convinced this guy is a fraud, but my friends are not and eating up every word this guy is saying.  My friends have family invested with him and have seen returns so now they are true believers.

What do I do?

Win of the week: Martie

I enjoy your writing and podcasts. Think the fact that you do not come with a background in finances makes it easier for the ordinary person to relate to you. And the fact that you have learned so much about finances gives us hope that we can do it too. Definitely an inspiration. 

You and Simon are a mean team and I am really glad I discovered you. 

Ani

I have an option to take a pension backed loan. Each month, the payment will be deducted from my salary. Should I default, they will take the money from my pension. 

The interest rate for the loan is prime minus 1%, and there are no registration costs (which would be a minimum of R35000 according to the bank should I apply for a 2nd bond).

We are expecting the renovations to cost between R300,000 and R400,000, worst case scenario. We are also planning to move overseas within 5 years.

We don't want to overcapitalise. Houses similar to ours in our area are in the market for between R2.2 and R2.4 million. We are trying to ensure our house is the most attractive house on the block. If we run into financial trouble, and we need to rent out the house, we shouldn't have a problem finding tenants. If we want to sell, we offer a better house for a similar price to the "outydse" one down the road. If we don't move out of the country, we will stay in this house. 

Is the pension-backed loan worth it, or should we take the R35,000 out of our emergency/insurance money(for registration costs) and rather take out a second bond? The Ts and C's indicate that should you leave the retirement fund, you can settle it in cash, or they take it from your pension (thinking about tax implications etc, that's the last thing I want to do).

Or should we live with shitty floors and cupboards (and increased spending on sinus meds along with cracked heels) until next year March when we have more certainty on whether there will be salary cuts etc? 

Ndida

How do I use this cost per use on a running shoe bought for R3,000. Do I use the 12 months I have used the shoe or the kilometers I have done? 

I am under debt review working my way to be debt free. I entered debt review in April 2019. In 2016 I bought timeshares with LPA under the impression that I was investing in property. The contract is for seven years until I have paid them in full, plus the annual management fees which are quite steep. I still have five more years to pay. Since I am occupying the place only once per year I am a loser ito cost per use. I am not sure how to untangle myself from this. I am paying a monthly installment of R1,700 and each year there is a seven percent increase.

Wesley

I have a bog standard TFSA with Standard bank that I've been contributing to for 3 years now. I only recently discovered your site and the opportunity to take this long-term investment and use it to buy ETFs to give me a better interest rate than the minor 3.5% I'm getting from Standard Bank.

I want to make this money work harder for me and I don't plan on using it for at least 10 years, probably longer.

Is it possible to transfer this TFSA from SB to a place like EasyEquities and start using it to buy ETFs? Is there any tutorial/how to on this process outlining what I need to do at the bank as well as with EE?

Chris 

I would like to offer the staff some resources to help them with their personal finances, I can offer some help in my personal capacity from what I’ve learnt from you guys, but can you give some resources/tips on how to deal with reduced income?

The school has applied to TERS from day 1, but those F%^&* have paid us diddly squat, and won’t tell us why…

Much of what makes investing confusing is that we use different terms to talk about the same thing. This is so frustrating for beginners. This week, we tackle jargon head-on. Not only do we tell you which terms are used interchangeably, but also what they mean. Here are the terms we discussed: 

• Stocks, equities, shares.
• Stock market vs stock exchange
• Coupons and interest.
• Debt instruments, preference shares and bonds.
• Index-tracking products, index funds, ETFs and UTs, collective investment schemes, hedge funds
• Real return, future value.
• Retirement, financial independence.
• Brokers, investment platforms.
• Property, fixed property, REITs
• Tax-free savings, TFSA, tax-free investments.
• Tax on income, tax on interest.
• Listed, on the stock market
• MDD, fact sheet

And then some stuff that’s used interchangeably (sometimes by us) that’s not.

• Marginal tax vs effective tax
• Pension, provident, RA, retirement fund

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André 

My initial plan was to have more off-shore equity, of which I put mostly into a global equity ETF. I chose the Satrix MSCI world ETF purely due to its lower cost. 

I was wondering why you chose the Ashburton 1200 global ETF for this purpose. However, now that I got my first dividends from my property ETFs, I noticed the meaning of distributions was dividends, and then realized that the Ashburton ETF pays dividends and the Satrix ETF doesn't. 

In my mind, I'm thinking that if the dividends of the Ashburton cover the difference in costs between the 2 ETFs, then the Ashburton ETF will outperform Satrix MSCI world in total returns  to me. Is this due to a difference in the type of ETF (feeder ETFs) that the one pays dividends or not, or is that simply a choice of the ETF creator to pass on dividends or not?

My question is if you could elaborate a bit in your thoughts comparing the Satrix MSCI world ETF vs the Ashburton 1200 global ETF regarding the dividends.

Win of the week: Leonora

I have it that Reg 28 doesn’t apply to Living Annuities. I have mine with Momentum in Coreshares S&P500 and a small percentage in their money market. 

(After asking, my EAC is now down to 0.77%.  Still too bloody much.  I take a minimum 2.5% drawdown. The fee was +/- R2000 per month, now R1700!  For what?)

Zanele

I wanted to open a tax free savings account but a friend told me that after 15 years I or my Son who is 5 years old will not be able to contribute because a person is only given 15 years to utilise the tax free account. I have researched this and I got no information  on the time limit, please assist if this is true or not.

I am currently investing anything from R200 to R500 a month which is what I can afford.