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.
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?