Like many of you, I have listened to every episode of The Fat Wallet Show. I’ve learned so much over the years, but I find it interesting that some lessons keep repeating. This week, Simon and I spend our last episode together reflecting on lessons we keep on learning. Think of this as the TL;DR version of 245 episodes of this incredible show.  Here’s what we know for sure: Many people who listen to the show think their biggest financial decision is ahead of them when actually they’ve already made it: being an active participant in your own financial life is the best financial decision you’ve ever made. Emergency funds are more important than any other product we ever discuss, but you can’t tell because it’s boring. A bad plan is better than no plan. Time matters more than money. Lesegisha pointed this out using a kota as an example, so I also learned what a kota was. Fees matter at least as much as returns, if not more. Grant Locke explained why this is when OUTvest introduced its Onefee product. 100 years worth of market data support this. Because there are so many variables in the market, it’s worth being suspicious of people who sell certainty. Cash offers certainty. Fixed interest bonds offer certainty. Aside from that, forget it. “The best investment” doesn’t exist (but bad investments do). Taking positive action, keeping a close eye on things and learning as you go is the only way to do this. Start with what makes you comfortable and build from there. If that means a GIANT emergency fund and one fixed-interest bond in addition to your work RA, that’s as good a place to start as any. The habit of setting money aside matters more than where the money goes. There is no single right answer. In fact, there are as many ways to get to financial independence as there are people in the world.  ETFs are the market. When ETFs try to beat the market, they are no longer the market. The harder they shout, the farther I run. Wealth building is either silent and slow, or extremely hard and slow.  Just because someone says they’re doing something in the media doesn’t mean that’s what they’re doing.  Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Tim I feel like you are both good friends due to the millions of hours of the Fat Wallet Show I have listened to. I have been there from the beginning when I discovered your show in 2016 during the start of my financial obsession ( don't judge me for not writing, I'm an expert procrastinator). Although living in Germany since 2018, I have been listening to your show religiously and a lot of what I have learnt is the bedrock of my financial strategies. In October last year, my world changed forever, when in the week of the birth of our first child, my partner and I both got Corona which was a complete nightmare. Now 5 months later, a healthy beautiful boy, 2-3 hours of sleep a night, I am emerging from the haze of these challenging last few months to get back to old habits. I turned on the Fat Wallet Show and was shocked and saddened to hear that you are leaving Kristia. I just wanted to thank both of you for the amazing job you have done over the last 240 something episodes. You have taught me so much and done it in such a fun and enjoyable way. As a teacher myself, I hope that some of my students could have such an enjoyable learning experience as I have had with the two of you over the last few years. Ros It's worth looking into the bottom-of-the-range Discovery card.  The Gold credit card, on its own, is R60pm. If you want, you can add R15pm for Vitality Money. I would recommend adding the Vitality Money for the extra discounts and rewards it gives you. I'm attaching the Discovery brochure that explains the "dynamic discounts" (it's almost impossible to find this on their website, and almost impossible to understand the product without it, which is why I'm attaching it) as well as my spreadsheet showing how much I "make" out of Discovery Health and Card each month. Some things to note about the spreadsheet (there are two tabs): All my calculations are based on Diamond Vitality money status. (Also Diamond Vitality Health status, but I'm not sure that has any effect on the cashback calculations). A lower Vitality Money status means lower Vitality Money cashback percentages. I got to Diamond Vitality Money status without really trying - you should be able to as well. I'm a single person and generally a low spender. About 90% of my food spend is on "Healthy" food at Pick n Pay. I don't spend much on HealthyCare or HealthyGear, so the extra monthly cost of the Platinum credit card, or taking out a Gold transactional account, isn't worth it for the extra percentage discount on HealthyCare or HealthyGear.  I battle to hit the R12500 monthly credit card spend in order to hit the maximum Vitality Money extra cashback percentage on HealthyFood, fuel, and exercise points to miles. And I put *everything* on my card - even a chocolate for R15! Of course I pay it off in full every month.  Even at my low spend levels, I'm netting R450 to R650 per month (and that excludes my gym savings).  Download Ros' Discovery cashback spreadsheet. Discovery dynamic discounts

If you’re new to this money business, access bonds will confuse you. Not only do we use the word “bond” to mean “lending money to the government” and “borrowing money from the bank to buy a house”. The access we’re talking about has changed over the years. As Simon Brown explains in this week’s episode, in the bad old days before the 2008 crash, banks used to give you a little additional spending money when you took out a home loan. Those days are long gone, but the idea prevails.  These days you can’t access the interest or principal repayments you’ve already made. You can only access additional repayments you’ve made to reduce your interest payments over time. For this reason, many people store their emergency fund in their access bond. It simultaneously reduces the interest you pay by reducing your principal amount outstanding and protects your cash from tax on interest.  In this episode we discuss the possibility of using your access bond to become your own credit provider. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Gwen  I am in the process of searching for a house and I often hear people saying that they use an "access bond" as an emergency fund. A friend of mine once told me in the past that I should never take up an access Bond because you never finish paying it.  Listening to a lot of podcasts I often hear people saying they use it to put their emergency fund and then they get the benefits to reduce interest. Am finding it difficult to understand how this works, can you kindly explain this to me and how it works practically.  I need to understand how I put money in the access facility, do I deposit it and will the interest reduce automatically?  Win of the week: Katrien Just a short note to say thank you for the work you’ve done at Just One Lap. I’m one of the many thousands of people who drive to work on a Monday morning with a big smile to start our week. In addition to learning about personal finances, you guys lift our spirits and give us hope. Greg Moving towards pulling the trigger on the investment side so getting there...  TFSA for kids... (trustworthiness aside)  If I want to play catch up with their contributions (or mine) as we are all starting late (12 & 14 for them and 49 for me) I am aware of the 40% tax on over contributions, but surely in the long term their returns will work this off and they will be ahead of the slower sticking to the limit curve?  No.. I have not tried to spreadsheet this yet... My assumption is that the tax is on the input only? 

It has always been the philosophy of this show that a good question is more valuable than a good answer. It’s incredible what you can learn from a really good question, both about the topic and about the person asking the question. This week, Frank had an excellent question about moving retirement funds. This question reveals, first and foremost, just how much Frank already knows about the market. It also reveals a thoughtful person who has found a balance between taking calculated risks and doing whatever he can to protect his assets. In this episode, we address issues around the ethics of retirement product providers, loss aversion and rand cost averaging. All of that, from a single question! Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Frank I have been contemplating transferring my retirement funds to OUTvest. I have some money with Allan Gray, some with Sygnia and most recently with EasyEquities. Combining all with Outvest will qualify me for the R4,500 fixed fee. My concern is switching providers too frequently and whether the risk associated with the potential savings is too high. The time out of the market between the exit and the re-entry may result in losses. Is it worth considering? What happens if someone cheaper comes along next year and I'm tempted to switch again? My other concern is the potential manipulation by the provider that I'm transferring away from, the amount that went to Allan Gray from Old Mutual was significantly lower than the balance showing on the investment platform around the time of the transfer. I had no control over what day the selling of the units happened and had no way of verifying whether the sale actually happened on the day they said. A number of weeks pass from the day you notify a provider of your intention to move away to when the move actually happens. What prevents them from selling on day two after I notify them, but selecting the lowest unit price in the following days and reporting that to me as the day on which they sold my units? They could sell on 1st of the month for R50, but the transaction is only finalised at the end of the month (31st) - they could then see that the unit price on the 12th was R46 and report to me that my units were sold for R46 - giving them the profit (is this a kind of arbitrage?). I'm conflicted about whether I should move to Outvest now and whether the benefit would be substantial or whether I should just leave the money where it is to grow and perhaps consider Outvest the next time I change jobs. With the bulk being in a Preservation Fund, what are the considerations I should take into account when combining it into my RA? Sygnia had allowed me, at the time, to change the allocation of my provident fund to 75% SYGWD (MSCI World ETF) and 25% SYGP (Global Property ETF). My concern is that with the uncertainty around the changes, the online platform is now reporting that my investment is not reg 28 compliant. What are the risks? Whose responsibility is it to ensure that the provident fund is compliant (me or Sygnia). What happens in reg 28 compliant providence where there is "drift" in allocation (ie I may have had the correct percentage in equities during January, but price changes in asset classes may have resulted in "drift" where the asset value in that class is now outside the allowed percentage?) In a previous episode Simon briefly mentioned that there may be scope to use available funds from a bond to invest in the market for returns that neat the interest. My current bond interest rate is 6.55% and I have a substantial amount available in the access bond portion. Could you discuss whether I should use those funds to buy ASHEQF? Am I correct in stating that 6.55% per annum is 0.55% per month? My logic says that as long as ASHEQF returns more than 6.55% per annum I should get out ahead. Thoughts? Win of the week: Shumi I am 33 years old, single, female with no dependents. I am not a cat, engineer or doctor. I studied Philosophy, Politics and Economics and ended up in finance but not the math side. I found the Fat Wallet in late 2018 after a financial awakening when I found FIRE and Stealthy’s blog. Since then my net worth has grown from -R660 000 in June 2018 (I bought a house before I found FIRE 😓) to over half a million in March 2021 (technically over a million if you include the house but I know that although it is an asset it is not an investment). This is attributable to two main factors, my standard of living remained the same as my income increased allowing me to save and invest the difference. Kristia once posted a hand written note of the Fat Wallet manifesto on twitter and I followed it to the letter. I live on less than 40% of my income, no debt except for my bond, have a 12 month emergency fund, max out my RA and TFSA and also have ETFs in a local and offshore discretionary accounts. I also save and invest any increases and bonuses (Simon’s rule of thirds really helped me). So far I’ve stayed away from bitcoin, bees, gold and Tesla. Precovid travel was my money dial and I happily spent on frugal and extravagant local and international trips. Most of that has been diverted to chuckles & diy during the pandemic. This simple plan has worked well for me. My income is relatively high (2 promotions in 3 years) so a lot of this success is because I earn enough to have a gap between what I make and what I spend. But without the Fat Wallet, lifestyle inflation would have creeped in and I wouldn't have known how to grow my money. From the outside nothing much has changed, I live in the same house and drive the same car (pushing 8 years now) as when I was in debt but I sleep much better knowing I have a solid financial base. Thank you for all you do. Good luck on your new journey Kristia. Simon I listen to you 8 times a week so I will still be learning. Feedback from Kris about contributing to a bond vs investing in the market A good approach could be to use asset allocation. E. G. If you already have a lot (or some) home equity but now want to start investing then why not aim for a certain ratio e. G. 50% each. So over time contribute to each such that you reach equal amounts in home loan equity as in stock market investments. Once you reach this equilibrium just maintain it going forward. It's diversification. Itshekeng I was swamped with debts and could not repay them all at the same time. I sold my house and have a lump sum which I would like to invest. On the other hand, I wish I could use some of it to reduce my debt repayment period. I am still working and would really like to get out of debt and be able to save up for a house and a car and retirement, and take out policies for my child. What is most important and where to invest with good returns over 5 years?

A conversation on our excellent community group had me wondering why we’ve never dedicated a whole Fat Wallet to finding passive income streams outside of investments. It took about ten minutes for the realisation to dawn on me: true passive income is a myth.  We often talk about side-hustles. “Hustle” is the operative word there, because we’re describing a second job. The appeal of working in your free time is the diversification of income streams and the potential to eventually earn your monthly income doing something you enjoy instead of your day job. True passive income means you work at nothing but capital for the initial investment. It’s important to remember capital can be physical or it can refer to your time. We discuss the potential of online businesses and the enormous amount of time required to get any sort of momentum. We talk about rental income, having an Uber fleet and selling products online and in each case talk about the work required to truly make it work. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Kay I stumbled across your podcast Sep 2019, via Sam Beckbessinger's book. I binged listened to all the episodes in a rather short space of time. I got a much clearer understanding of TFSA, and opened one immediately. My fear of stocks (which was more a lack of understanding) disappeared. Took my ostrich head out of the ground, and looked at my liberty RA. Ouch.  That got shifted out, can't say immediately, but Liberty did eventually let me go.   I started pumping money into an emergency fund. Life had taken an interesting turn in early 2019, and my income was more than halved. Come 2020 I had an emergency fund, which has saved my ass (or more like my animal’s asses....pet insurance is definitely a future consideration with younger animals ) more times than I thought I could possibly ever need to use an emergency fund. If I had not discovered your podcast before 2020, I shudder to think what may have been in 2020. Once again, thank you for all that the two of you have done. It really has been life changing. I have a feeling once I finally retire, and I am able to still drink a fairly decent whiskey, I will think back to the early days of The Fat Wallet Show, and think thank goodness I discovered the podcast. On a side note, does Simon get to keep all the future donations that will be sent once we all have it made? Inge  I currently hold Ashburton 1200 and Satrix top 40. Now, with SATRIX I am guessing I am not taxed on dividends as these are SA stocks and fall under SARS, so they can't shaft me here. But do I pay tax on dividends and gains in the Ashburton 1200? Is there any benefit to holding it in my TFSA or should it just be a discretionary investment? Should do a 50% , 50% split between these two? OR because I have a local RA, do I max my offshore in the TFSA and do a 70 ash / 30 satrix split? I am torn between putting extra into my bond to reduce the term (and amount of compound interest paid) vs putting money into my RA/TFSA for the future. Currently my bond is also my emergency and travel savings fund. My current strategy is-  RA: maintain and only do standard annual increase.  Bond: pay in an extra 50%,  I take about the same amount I put into my bond and put 2/3 into a TFSA and 1/3 into an FNB share account. Do I pump up that bond and get it done, or maintain the current strategy? Do you have any suggestions of what calculator to use to show someone the value of time in the market? Una  I began a new job in early December and had my daughter in early February. While I understand the value of getting medical when you have a child, I signed up for health insurance instead of medical aid because I was in a hurry. I'm not sure if I should cancel and get medical aid; could you please advise which of the two choices is the best?  Tim She owns her home and should downsize. She likes having 2.5 vacant bedrooms for myself and my brothers.. despite 2 of us being married.  In 2014, we started buying apartments in Joburg, she owns a 1/3 of the company that owns 4 units (1.5 still bonded). She is a member of the GEPF  She has minimal discretionary investments (Satrix etc.) and I started her on a TFSA last year. My stepdad lost all his pension funding assets in his divorce. He’s a (retired) teacher with a (small) preservation fund (and a TFSA from this year).  My mom currently has R15k per month cash to invest. My thinking is smash R6k into their two TFSAs and convert the balance to USD through EE/Shyft and buy VT through EE or TD Ameritrade.  She will need to leave that money for at least 5 years. She has a large amount of property and Reg28 exposure relative to offshore/ETFs.  Is there anything else you would suggest looking into? I’ve heard you say a few times that dividends within an RA/preservation and a TFSA are tax free whilst in the vehicle. Apart from the total return ETF complication, how does the company paying the dividend know that it is going into one of these vehicles and, therefore, doesn’t deduct the tax? Christiaan It might seem that we have some tax relief, but when electricity prices are going up 15% and the fuel levy is increasing by 27c/l, does it just not mean indirect taxes are just diminishing any perceived gains?  Are we being tricked into feeling good, but when you look at your personal cash-flow you realise there is not more left? When electricity and fuel go up, would it not mean we have increased food prices, inflation in the general economy and will pay more for goods and services in general? When that happens, are we also likely to see interest rates going up? Mo My goal over the last year was to get an apartment and pay it off quickly to avoid big interest payments. I have already set aside an emergency fund and I am now paying extra into the bond to get it paid off hopefully under seven years.  Having discovered the wonders of TFSAs, ETFs, etc. I am now torn as to how to go about spreading my money. I am struggling to find a good ratio between the additional bond payments and an investment account (ETF invested account, not TFSA). I like the idea of having the apartment paid off but I am worried that I am putting too much emphasis on reducing the time period of the bond and at the same time losing out of potential growth of ETFs. I was previously putting all extra cash into the bond account, but am now looking at putting 2/3rds into the bond and 1/3rd into investments. I am still young and doing what I can to live frugally and not stuff up being in a good position.

Many people take their first wobbly steps into the financial world because they understand money is meant to do something. What exactly that “something” is, is often left to someone else to figure out. However, once they start learning about the financial environment for themselves they realise there might be products better suited to their needs. Moving a lump sum away from a provider you’ve trusted for a few years is a daunting process. Even if your reasons are sound, it’s not an easy decision to make.  In honour of the brand new tax year, we spend this week’s episode helping Carmen decide what she should do with her existing high-cost retirement product. We hope the discussion will help you decide what to do with an investment product that no longer suits you. We apologise for the ear worm.  This week’s show is also the last of our shows sponsored by OUTvest. We are deeply grateful to them for their support. Also remember tomorrow at 11:00, Bobby from AJM Tax will talk about how the tax changes announced last week will affect your pocket. Join the Facebook community group to watch it live and ask your questions. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Carmen  Do I keep pumping money into my high cost actively managed RA at Old Mutual (I like the idea of money going somewhere that I do not think about)? Do I transfer the current balance to my low cost EE and let it sit there and grow (along with the increased monthly premium plan)...but then continue the R3500 contribution to OM (which will likely have even higher fees because now my base amount is R0). Do I reduce my RA contribution to Old Mutual to the minimum R500 per month (so that I don’t incur an “admin fee”) and increase the RA amount to my EE RA immediately by R3000 per month? Do I get outta dodge re: Old Mutual RA and move alles completely? Ancillary reasons for sticking with an actively managed fund at a big investment house are: not to have all my eggs in the EasyEquities basket; my personal risk insurance side is sitting with Old Mutual (disability, illness etc) and my OM is invested in other items than my EE portfolio (bit of diversification); keep contributing to one RA up to age 60 and only pull from it from 65...and other RA only pull from later. Win of the week: Nalisa I started this email about four months ago, and listening to this week's podcast made me decide to get it done. Especially when pet expenses came up!  To clarify, I'm a vet and best you believe my creatures are on insurance! Yes, I'm a vet and proper medical care is still expensive for me! Akina, my eldest, decided to go ahead and twist her spleen (after hours, fucking typical) and the resulting bill came to about R20 000, and the medical aid paid me back in under a week. Even if it wasn't for that incident the peace of mind we get from it is worth every cent. But do your research and (I can't stress this enough) read the fine print! Know what they cover and what they exclude, and especially look at their limits (per claim and annual limits). They're still insurers, they're still trying to screw you.  My fiancé and I were discussing how one could become completely self insured.  We only insure our cars, our home and our pets. We both have life insurance ( to cover the bond), medical aid and I have income protection. We've always agreed that our home contents (aside from his laptop) are considered self-insured because our quote for insurance was exorbitant. In an ideal scenario, we'd need to have enough saved to be able to replace everything with cash, and have about R50k for the animals. The figure gets big really quickly. The main concern would be that you'd have such a huge pile that needs to be fairly liquid and would earn very little (but still more than handing it over to someone else every month). Are there any strategies for self insurance? Or is it actually a silly goal and we should resign ourselves to gamble on bad luck against insurance companies, while trying to save whatever else is left?  Solly I really like how you break down things for us that are so complex and make it consumable. I started listening to Just one lap last year around February and I have gained life changing insight. I just thought my first email to Just one lap is to say thank you so much!...for all the effort, the laughter and swearing😂, but most importantly for sharing the financial concepts in the simplest way that we all can understand.  I always had an interest in finance, but you guys made me love it.   Petrus It feels like I am losing a long time friend even though we have never met. I still remember some of our exchanges very well and also how ridiculously simple some of the things was that I deemed necessary to send you an email for (buy a cellphone or take it on contract 🤦🏼). I will admit, I might have had a finance nerd crush on you at some point. A lot has changed since the first email I sent you from a train somewhere between Regensburg and Munich while still working and living in South Africa. Since then I, - cleared all my debt - started investing  - got married - moved to Germany - figured out investing in Germany - learnt German - close to hitting €150k net worth in 3 years (after starting with 0€).  - just bought a house in Munich. Funny how all us finance or FI nerds say buying is not a good investment, yet we all do it. My transfer fees is more than the cost of my house in South Africa. 😭 I say these things not to be windgat, but to document the influence you had on my life. I never really knew how to manage and grow my net worth until I started to listen to The Fat Wallet Show. It gave me confidence to take charge and I am blown away by what was possible. You have probably made and influenced many future multi-millionaires.  Ryan I had twin boys in July last year. I opened them TFSA days after they were born and put R36k into each account. I remember Simon saying if you max your child’s TFSA at birth and leave it, by the time they turn 65 they will have enough to retire. This is the time horizon I am looking at for them.  I bought SYG500 for one and SYGWD for the other. They have both done very nicely.  With 1 March approaching, I have been thinking of buying SYGEU for both of them. What are your thoughts? My other option would be the Ashburton1200? I know Simon will probably say I need to add some local exposure but with the current rand strength I think it’s a good idea to get as much offshore exposure as possible? I have been contributing to my own TFSA into an RMB fixed deposit for the past 6 years. I know I need to move it into an ETF based account which I have applied to do (EasyEquities). I am 34 years old with no plans on using these funds for at least the next 30 years. What would your and Simon’s suggestion be in terms of the ETF’s to split this into? Keith  I enjoy listening to your podcast. Even though I’m in the USA I get very good investment advice from you guys. I am an amateur at best and a lot of the things you discuss are unknown to me. Do you have anything that starts with the basics on up? Jennifer Most of my closest family and friends live in other parts of the world. I love South Africa and don't want to leave but it makes me sad that I won't be involved in my family and friends lives like I would like to be and I'm not sure whether I'm in SA to stay.  Unfortunately I'm not sure where I will end up - either the uk (I have a british passport) or Australia. What do you advise I do with my investments? I don't want to contribute more to a retirement annuity (other than what I contribute through work) because I don't know whether I will be here for retirement... but who knows - there is also a good chance I might be. Because I'm so uncertain I don't know what the best thing to do with my money is.  I'm struggling to understand market makers. I've heard people say ETFs can turn out more expensive than unit trusts due to the spread between the bid and ask price. I understand what the spread is and I understand that the market maker can redeem and create units in order to create liquidity for the ETF... but who is the market maker and why can the spread be massive at some parts of the day? How do they determine the ask and buy prices? I recently watched one of the JSE power hours where Nerina Visser went through all the costs associated with investments. It was so informative but made me think a bit about my EasyEquities investments. The webinar seemed to say that for every investment I make I am paying JSE fees and levies and these appear to have a minimum fee. I can't seem to find these on EasyEquities though. Essentially my question is -  Does it cost me more if I invested R10,000 split into four R2,500 transactions vs a lump sum? The only fee that I can find that could potentially be fixed is the STRATE fee but EasyEquities appears to not charge a minimum fee here either.  My second question is to do with total returns funds in a TFSA account. I know this has been spoken about a lot but I'm still a bit confused. I like the Satrix MSCI World more than the Ashburton 1200 for some reason but the tax issue surrounding the total returns worries me. I understood that you couldn't avoid dividends tax charged by the foreign entities anyway... So why does it matter if an offshore eft is a total returns within a TFSA?  Louise I love ETFs (easy to understand and invest in myself), but I also like me some Unit Trusts (UTs). What I however find daunting, is the long alphabet list of UT classes. Thus far this has forced me to go via a financial adviser, when buying UTs. Did I mention that I am allergic to financial advisers and their high fees? And then sometimes the adviser afterwards willy-nilly moves me into a different class of the same UT, and I wonder when this is in my favour from a fee perspective or not. The classes include A, A1, A2, A3, B, B1, B2, B3, B4, B6, 3B1, C, C1, D, E, F, G, H, O, P, R, etc., etc.  (Let's first just stick to local UTs - offshore UTs is a kettle of fish for another day.) I've figured some of them out, e.g. the regulated class R, those that are available only for Institutional Investors and those that are for Retail Investors. Those that come with a with/without adviser fee, the clean classes etc. ASISA publishes quarterly spreadsheets that help a bit, but not much. I've also learnt the following: There is no standardisation in terms of the naming of the different fee classes between the different management companies, with the only exception being the “R class” (deregulated in June 1998). Some "clean classes" are cleaner than others. FSB Board Notice 92 of 2014 specifies that UT management companies are required to publish the most expensive class that is available to a retail investor. Well, that's good in that the available MDDs tell me how bad the fees can get. But it is bad in that I want the cheapest class that I can get into, which is not as well published on the internet. I also read a Moneyweb article (by a PSG Adviser, nogal), where the guy shows how much better performance you get by just switching all your UTs to the cheapest classes, which makes me green with envy and hot under the collar. Where is the FSCA in all of this? They are responsible for consumer education in this regard (non-existing) and also responsible for regulating the industry in a manner that creates standardisation, consistency and transparency, to allay the frustration and confusion experienced by poor little retail investors like me. "Power to the people", I say!  Until such time as the FSCA steps up, can you, Kristia and Simon, please help me find my way through this maze that is UT fund classes? I understand MDDs, TER & TIC, but per Board Notice 92 not all MDDs are published.

After five rewarding years as host of The Fat Wallet Show, my time with the show is coming to an end. This episode is a short retrospective of our time together, followed, as usual, by your questions.  On 30 May 2016 we published the first episode of The Fat Wallet Show. We knew from our personal experience and from our work at Just One Lap that money was such an emotional topic. All so-called financial education came with an assumption that you would already know the jargon and have some basic understanding of how the system worked. Based on the questions we got at Just One Lap, we knew that wasn’t true.  I had started at Just One Lap a year before that and I was like a toddler, asking a hundred questions a day. These questions weren’t orderly. I’d latch on to one topic, ask every question I could think of, mull it over and come back a few days or weeks later with either the same questions or more questions. I was learning a lot, but I wasn’t learning it all in a straight line, because learning isn’t linear.  Luckily for me I had a mentor with superhuman patience, who would keep explaining it to me until I got it. I figured if this is how I’m learning about money, this could probably help other people learn too.  The Fat Wallet Show was an experiment. It was just going to be questions and answers. It was always just going to be two people on the show. We decided to swear in the show, because we swear when we talk to each other normally. We didn’t want any barriers to making the show sound just like our ordinary conversations. We didn’t want experts, we didn’t want to interview CEOs. We just wanted to get together once a week and talk about money. Since our first episode, the show has been downloaded 717,000 times. We’ve received 2,600 emails. Our Facebook community is 9,000 members strong. We’ve been supported by companies we truly believe in, companies where we have our own money. OUTvest especially has been a true friend to this show. We’ve made friends that I hope we’ll have for life. I’ve been so inspired by the members of this community. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Ernst, in response to Louise’s question: Louise is referring to her provisional tax estimates. So there is a timing difference as she will only get her certificate around June but she needs to estimate it now. She needs to run her own calculation and try to get as close as possible taking into account rate adjustments etc. Again tax works on accrual or paid, whichever comes first. It would seem that she has a considerable amount of interest as she probably uses up her annual exclusion amount. So if she ‘underestimates’ her taxable income she may be liable for penalties if it's too far off.  She needs to do an excel calc to try calculate her interest so she can estimate accurately before 28 Feb 2021. She cannot wait until she gets paid or gets the certificate. Suzanne I did a little happy dance this week, on reviewing my OUTVEST RA statement. My transferred RA landed @ OUTVEST in May 2020 and the growth YTD has been SUPER! My set R4 500 fee, which is about 0,75% of my investment, has really made a huge difference. I will be saving my butt off over the next 10 years, to reach that minimum 0,2% fee balance.  This led me down an investment spiral, and after listening to episode 183 again I ended up asking the following question….where are the OUTVEST fixed fee living annuity products?……. If I am happy with the asset class breakdown, would there be any reason not to be able to continue with my pre-retirement investment strategy, after my retirement date, at the same 0,2% fee? I have no idea what the general going EAC is for a living annuity, apart from what I have seen on my Dad’s statement – which stated a 1,5% fee. Chris I listened to your Money and Travel episode. Simon mentioned that the SYG4IR is bespoke and doesn’t have a US equivalent - that is partly true. I fill up my TFSA with SA listed ETFs with risk that I like (STXCHN, STXEMG, SYG4IR, SYG500), build up some cash to make the EasyFX worthwhile and then buy similar exposure in the USD account. Long story short, SYG4IR tracks the Kensho New Economies Composite Index (KNEX). There is a US-listed ETF, SPDR S&P Kensho New Economies Composite ETF (KOMP US), that tracks the same index. The current hurdle is that KOMP isn’t available on EasyEquities currently, but I have reached out to them to add it to the platform. Perhaps if enough of us chase them it will get listed sooner. Doris I've been a loyal listener since near-inception of the Fat Wallet show (via my spouse, though we tend to listen separately.)  You kick-started my TFSA journey. Eventually I figured I need to get this RA business sorted (I've been lax due to GEPF; OutVest it was when I eventually got my 💩 together). Going from listening to action is a big step, and I still feel like I'm in process, but getting there.  The year that was left me with little time to listen to your invaluable show, but #bingelistening ftw. I've been wondering about marriage (or long term relationships) and investing/saving for a good long time now and cannot find a satisfactory South African-specific answer anywhere.  As far as I can tell joint accounts aren't really a thing in SA. There's the main account holder and someone else who is granted access. What are the options for joint savings/investing? If there are any! For instance, saving as a couple for a house: What's the best way to save or invest jointly, in a single place to benefit from two sources of funding, without the account being in one person's name? As far as I can tell, the main tax implications when getting married is income outside of your salary and how SARS taxes those married/in a civil union. For those married in community of property - this is shared between spouses. For those married out of community of property (with/without accrual) it's only really divorce or death where things have to be figured out.  R.C I have a home that's paid off, a tax free plan with Old Mutual balanced fund (started in 2016). I also have an Old Mutual core balanced fund with a monthly debit order. Gepf R.A Property unit trust Old mutual equity I have an investment that matures in May. I owe 70k on a car (only debt. How do I make sense of my financial goals going forward? My divorce really confused me and my goals. Should I continue with my discretionary investments and where should I invest the R650k maturing in May 2021. Please help to put a plan in place as I was looking at retirement at age 56/57. Mr P Ok, your statement on episode 235 about the request for rate review just reminded me to do mine, I also want prime or less. So, I sent them FNB Housing Finance an email requesting them to review the interest rate on my bond. Unlike last time where they changed the rate with no hassle, this time they sent me a form. I mean a whole Form that I must print and manually complete, scan it and email it back to them or fax it. I think they are discouraging us from sending these requests with the paper work. I'm certain only people who listens to the show are the ones sending the requests.  Is there any Fatty whom FNB responded with a form? Otherwise I'm not deterred, I will gather some strength and fill in the form. PJ I recently requested FNB to adjust my home loan interest rate, 6 years into the 20 year term. They immediately reduced the rate with the below information: "The rate has been amended from 7.60% (P+0.60%) to 7.30% (P+0.30%). Prime currently is 7.00% and therefore your new rate is 7.30%." My emergency fund of course comes from the Flexi portion from the bond so I requested that if I restructure R100 000 of this flexi amount if they could give me a further reduction. They then replied with: "Furthermore, should you agree to restructure the prepaid amount of R 100 000.00 the bank is willing to improve the rate to 7.20% (P+0.20%)." Is it worth the 0.1% reduction and not having this money immediately available to me anymore? The money remaining in the flexi portion is still enough to cover my emergency fund needs. I have a second Home Loan at Standard bank. The rate is somewhat confusing to me. These figures are from July 2020. Weighted Average Interest Rate (non-VATable) :7.81 First amount :R 0,00 - R 846 000,00 @ 7.77% pa Next :R 846 000,00 - R 1 128 000,00 @ 7.82% pa Balance of the loan :R 1 128 000,00 - R 99 999 999,00 @ 7.92% pa Registration amount :R 1 410 000,00 So I'm trying to figure out, are the brackets just generic or does it mean the more I pay into the bond the less my interest rate will be? i.e. if the outstanding amount goes below R1 128 000 I will pay less interest. Stewart  invested 250K in feb 2016. value now jan 2021 184K  only started taking an interest now.want to retire soon!!! what can i do now?? still very busy with work,but want to stop now. ANCHOR GROUP LIMITED - ADH ADVTECH LTD  APN ASPEN PHARMACARE HLD ARA ASTORIA INVESTMENTS  BAT BRAIT SE  BTI BRITISH AMERICAN TOB BVT BIDVEST LTD  CFR COMPAGNIE FIN RICHEM  COH CURRO HOLDINGS LIMIT  EOH EOH HOLDINGS LTD  FSR FIRSTRAND LTD  MDC MEDICLINIC INTERNAT  NPN NASPERS LTD -N- OML OLD MUTUAL PLC  REI REINET INVESTMENTS S RFG RHODES FOOD GRP HLDG SNH STEINHOFF INT HLDGS  SRE SIRIUS REAL ESTATE L STP STENPROP LIMITED  WHL WOOLWORTHS HOLDINGS Louise  By now all Fatties are aware of the two ways to invest offshore: a) use your foreign investment allowances, and b) via an asset-swap, provided that the FSP has adequate asset swap facility available, as regulated by SARB. My questions relate to the latter: 1) What determines an FSP's asset swap capacity? 2) How can a retail investor check this? 3) When / how can an FSP replenish this facility? 4) Is it better to stick with product providers with ample such facility? E.g. Sygnia recently ran out of capacity, which meant that, temporarily, their living annuities could not allow for a large offshore investment component via asset-swap. This was temporarily limited to 30%. Theoretically one can invest 100% offshore in your living annuity, should you wish to do so. Jen from Damn Good Looking My parents have recently sold their house and will have money to invest in the coming weeks. They are in their mid-70s and they have various bits of income aside from this amount like foreign pensions, my Mom's pension from her job and until covid my Dad ran a business and will hopefully do so again. They also have a living annuity with Ninety-One that is invested in Nedgroup Investments Property Fund A1, this was comfortably covering their living expenses but they have drastically reduced their drawings because of how horrifically this has performed over the last few years. It is actually nauseating. My Dad wants to put this money into an income-generating product and has hinted at possibly even just adding it to their existing annuity (if this is possible) - I want to ask what you and Simon would suggest? My feeling is that adding to the existing annuity is a rubbish idea because their timeline is not a long-term. Their living-annuity has really been atrocious and to me this seems like a good chance to find some better and that could add some diversity to their situation.

Christmas is the most wonderful time of the year, but tax month is a close second. For buy-and-hold investors like myself, this is the only time of year I get to do anything significant in my portfolio. That’s why I take a moment to reflect on my portfolio every February. My tax-free strategy may seem static from the outside, but it has changed as new products have come into the market and as I’ve matured in my investment philosophy. The market is a highly dynamic environment and even a buy-and-hold strategy requires sharpening every so often. In honour of tax-free savings month, we think through tax-free investment strategies in this week’s episode, with the help of a few listener questions. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Rhona  I am asking on behalf of my daughter (turning 30!) regarding her tax free investments. Are there any recommended changes for 2021 to the high risk etf portfolio. Sonya I am 30 years old and have recently started worrying about my future financially. Until now, I have been using most of my savings to pay off as much as possible into my bond. I have also been contributing to my pension fund.  I’ve gotten to the point where I can finish paying off my bond in about two years and I have that additional money to put towards my investments. Should I continue to pay extra into my bond and pay it off in my two-year timeframe or rather put more into other investments? Any advice on what to do with that extra money?  I recently opened a TFSA started putting 60% in Ashburton 1200 and 40% into Satrix Top 40. I plan on putting the maximum monthly amount in there but not really sure of what ETFs to invest in.  I then plan on putting the money left over into ETFs but am unsure of which ones - I have thought of adding MSCI Emerging markets or maybe Dividend Aristocrat. Also, is it worth adding bonds into the mix?  Boitomelo I like how Kristia pronounces her name as KRIS-tia while Simon pronounces it as Kris-TIA with emphasis on the last three characters. Have you guys noticed? Just love it 😊.  Thank you for your contribution to my getting my act together as it relates to finances. Towards the end 2020 I became debt free and I am never going back to debt for anything. It has been a long 4.5 years’ journey, but very rewarding. Thank you for your service to the community.  Anyway, my question is this. Why / How does it happen that the same ETF, Ashburton 1200 for example, can be green in my normal ZAR account, while it is red in my TFSA account or vice versa? Does the different amount in both ‘accounts’ matter? Edwin Like many Fatties I am a pet lover. Many decisions I have made about my dogs are purely irrational, but hit the budget really hard. I want to share a summary of my recent pet experience just to alert people about what they can prepare for in terms of how hard a pet can hit your budget.  I have an 11 year old basset hound named Rossie. He is low cost and low admin. Loving, gentle, healthy and clever. A perfect dog. We realised that Rossie doesn’t have many years to go and decided to phase a younger pet in so that when Rossie kicks the bucket we have pet continuity.  [caption id="attachment_24694" align="aligncenter" width="225"] Rossie: the perfect dog[/caption] Wanting to be a good person, I opted to get a rescue from the SPCA and chose a lovely mixed breed something named Lucy. The entire adoption process cost me about R800  as the SPCA sterilise and vaccinate the pet too.  Lucy arrived home on a Thursday  and by Saturday there was a dog fight. Rossie ended up at the Vet. With after hours rates his treatments for his bites including meds were R2.5k. He is not on pet medical aid because he has had a very good track record and in most cases my emergency fund could cover his expenses easily.  A day later we found out that our rescue Lucy could easily scale the wall and visit our neighbours. 3 quotes later this was another R8k in expenses to raise our wall on one side. With the 2 dogs not getting along we decided to get a pet trainer in to assist us in managing the transition. The total bill for pet trainer was R2k for 2 sessions.  [caption id="attachment_24693" align="aligncenter" width="225"] Lucy: a menace[/caption] Yes, in 7 days our new pet had cost us upwards of R13k. Deep down I know more drama is coming.  The rational option is to get rid of her and return her to the SPCA, but the emotional option is to try everything we can to integrate her and give her a home. The latter option costs money. Fatties, when the day comes...be prepared. Pets can be very expensive. Second, get pet cover. Even if it’s just the cheap accident version. Lastly, don’t expect to think rationally once you have the pet. Jacques I am 38 and receive a non-taxable disability income through group insurance. 21% of the total non-taxable amount goes into my provident fund directly from the Insurer and the balance I receive as a non-taxable salary. I have no other retirement products, but have opened a RA for my wife over and above her pension fund to maximise tax returns. A few years ago, I withdrew money from my first preservation fund to buy our house cash and save on the interest over 20 years. I am working towards a balanced portfolio (TFSA, unit trusts, shares) across all asset classes. I am wondering if I should open an RA to manage tax post retirement with contributions that carry over.  Scenario 1: I create taxable income with our Airbnb flat rental and keep rental income very low, i.e. R1000 for each year for the next 20 years. I open a low cost RA and contribute as much as possible each year. The contribution builds up at SARS for the next 20 years. At age 60 I convert my provident fund into a living annuity and then draw income which is taxable. I can reduce my taxable income by 27.5% which is taken from the contributions that didn’t previously qualify until that’s depleted. The time frame can extend depending on whether I continue to contribute to the RA post retirement. This RA also provides options where I then have two retirement products to be converted to different annuities if needed. Scenario 2: Instead of trying to manage future tax liability, I don’t open an RA and invest into high equity products. I am thus not bound by Reg28 and may have a significantly return higher. This higher return could far outweigh the over contribution in the RA I would have built up as an example. However, there is no tax benefit post-retirement as I would be in a position to live from an annuity anyway which is taxable. This scenario seems from a returns perspective better, but from a tax management perspective not so. Louise I am a provisional taxpayer and must submit a second period estimate by February 2021. - I have"received" my first interest payment in September 2020, so I know what to report to SARS. - But I don't have clarity on how Treasury will reflect the interest from October 2020 to February 2021. Remember, it only gets paid in March 2021 (in the next tax year). - Will they apportion 5 months worth of interest in my 2020/2021 IT3b, or nothing at all, as it is not "in my hands" as yet?  - Remember that there is also an option to exit early (with a good excuse), so Treasury does not know in advance what I might do. I remind you that there was, a couple of years ago, a change in tax rules, which forced FSPs to report not only just the interest capitalised, but also interest accrued (but not yet capitalised). So, for a normal deposit with a bank, it is easy: Your IT3b shows both interest capitalised and interest accrued thus far, even if the capitalisation of the accrued portion only happens in the next tax year. But this wonderful product from Treasury is a special child that might get special treatment, especially given all the wonderful optionalities that come with it (such as early exit and resets). My tax practitioner does not know the answer. (Apologies to the Fat Wallet community for admitting that I actually have and pay one, that can't even answer this question. I cut costs where I can, but tax is difficult.) I've also approached the RSA RSB helpdesk for an answer, only to get the following nonsensical response: "Please note that you will only receive a Tax certificate in 2021 [duh, sic], the certificate covers for both reinvested interest and paid out interest." Ash I hold a bit of the CloudAtlas Africa Big50 ETF (AMIB50) in my discretionary portfolio & I came across a disturbing titbit hidden away at the bottom of their fund fact sheet (attached).  While the TER in the summary is 0.85% (already quite high but understandable given the illiquidity of other African markets), another TER of 7.32% 🤯 is provided right at the end, incorporating a bunch of different fees & ‘dividends not distributed’. I had to do a double take because this is more than triple the fee of an average actively-managed unit trust. l Is this really what I am paying as a retail investor to hold this security or am I missing something? If the latter TER is the real one, it would likely wipe out any long-term gains from the investment, even with its supposed growth potential. The fact sheet also gives a bizarre asset allocation of 70.8% Cash & only 29.2% Equity, which I am struggling to comprehend.  I understand CloudAtlas is a smaller boutique company but surely this needs some clarification for investors. I would appreciate if you and Simon could unpack this as it is a real head-scratcher for a novice investor like myself! Cloud Atlas’ Maurice Madiba says, “We are required to disclose all the fees going off the fund which includes Audit, Administration, Custody fees, Index fees etc expressed as a percentage of fund size. Some of these fees are variable like our management fee at 50bps and custody fee at 35bps but the others are fixed. Last year the fund size reduced dramatically because of two factors: market movements and redemptions which significantly increased the fixed costs expressed as a percentage of fund size. We are exploring the options to curtail the costs and will provide more details.” Theresa Where does Simon invest for his niece and nephew? Are the accounts in their own names or in his name? I opened an ETFSA account about 6 years ago for my special needs grandchild who will be 9 this year.  It’s not a tax free account.  It’s in his name, with his mother’s details and bank account listed and the R500 monthly debit orders are paid from my bank account.   It’s still administered by AOS and I find them extremely painful to deal with.  Simple things like changing his mother’s physical address and bank account is taking a ridiculously long time to process even with the correct FICA documents. I have various accounts with Easy Equities, I enjoy the simplicity of the app and wonder if I should open a TFSA account for my grandchild with Easy Equities and invest into that in future. I’m 67 but hope to keep this up as long as possible.  I can’t decide if I should just cancel the debit order on the old account and leave the existing ETFs on the AOS platform or should we redeem them over two tax years (R75000 total value) to fund the TFSA and avoid any CGT.  Hopefully his mother won’t spend the money in between!! If I’m going to start closing the EFTSA AOS account I need to take action fairly quickly to redeem the first lot before the end of this tax year.

We are still running our survey. Please take two minutes to help us here. Around the beginning of every year we notice a strange phenomenon. Energised by the holidays and inspired to turn life into an everlasting vacation, investors start searching for the investment Holy Grail. “What is the one, hot thing that will finally liberate me from the shackles of employment?”  The opportunity that generates the most excitement changes every year, but the pattern is the same. Newbies and impatient veterans alike flock to alternative assets, penny stocks or underdog listed companies believed to be the next hot thing.  This is an especially alarming tendency in first-time investors who have no other savings or investments to fall back on. Some of the questions we’ve seen this year are: Is it wise to buy Aveng shares now? Has anyone invested in the alternative stock exchange on the JSE? If you have, how does it work ? I'm looking to invest in penny shares through my bank FNB, how do I go about that? How do you buy "Doge Coin"? I don't know a lot about it but I just wanna try it out. What makes this question complicated is that there are sometimes hot things that run forever. By the time the rest of us wake up to the opportunity, it’s over. How can we tell what has the potential to be the next hot thing and what is sure to wipe out our investment? Here are a few tips we identified throughout the course of our conversation: Do you have an investment strategy unrelated to this opportunity? If you have an existing investment strategy, have you confirmed that this purchase fits into your long-term investment plans? Why are you considering this? If it’s only because someone else said so, do more research. Can you afford to take this risk? Only consider it if you can afford to lose 100% of your money. Are you considering this because a company called you about it? If it were really that great, would it need a marketing strategy? Is it listed? If it’s a penny stock (a stock whose share price is only a few cents), has the price been steadily increasing over a period? Remember, for something to be a ten-bagger, it first needs to be a one-bagger.  What are the fees on this investment? Your fees have to be deducted from your returns before you get your real return.  What is your investment horizon? If this is part of your long-term investment strategy, will this product be around for long enough? How do you get out of this investment? Some over the counter (OTC) products can only be sold under certain conditions. A 100% profit is worth 0 if you can’t cash in your investment. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Wesley W  Hey Buckles (better combined name than Chubbles...)  If one assumes a dividend yield of +- 2% and you pay foreign DWT of 30%, then the effect would be a DWT of 0.6% (30% of 2%) of your total investment. If you were to have this in your TFSA you could almost treat this as an additional cost to your TER for comparison sake. If the index did poorly and no dividends were paid the extra cost of DWT wouldn't apply, but based on a long-term investment that yields the 2% dividend average, you could factor in what you're losing out in tax as per the below. E.g if you were choosing between MSCI World vs Ashburton 1200 you could compare the costs as follows: Ashburton = TER = 0.55% p.a  MSCI World = 0.6% DWT + 0.35% TER = 0.95% p.a I initially went for the MSCI world in my tax free account based on TER difference and assuming the DWT might be minimal but now that I look at the numbers it seems I might have been mistaken. Vincent  Will the government increase the 1/3 of the lump sum value withdrawal on maturity of an RA? What is 500k going to be worth in 40 years? It seems pointless to take out an RA when the withdrawal amount is not adapting with inflation each year or at least increasing to cater for the cost of living?  I'm doing the RA thing, but only until my TFSA lifetime limit is reached via all my rebates from SARS [13 years to go]. Thereafter I'll stop contributing to the RA. RAs aren't podium investments, but should I set the quality of growth in an RA aside and see the tax break as the big win?  Would you say that having an enormous amount of money well distributed in ETFs is the way to go when debts, TFSA, RA and emergency funds are sorted?  You'll have this major asset base ready to sell when the tekkie hits the tar. You'll pay CGT and Dividend tax at most, and both will be lower than your marginal tax rate. Dividend payouts or general interest/capital gain can be used as your monthly income, versus monthly annuity payouts as you'll probably outlive your RA and never use/see the full value. Stephen  I see Long for Life have an aggressive share buyback strategy. Berkshire Hathaway and others also utilise this mechanism to boost their share price - I assume. From my observation it normally illustrates that the company believes their share is undervalued. However, can this not also be seen as insider trading? What's to stop a company initiating a share buyback when they know there is something big in the pipeline? Are there corporate governance processes in place to stop this happening? I just don't know if we as investors should see a share buyback as a buying opportunity. Hendrik I am trying to understand the NFGovi ETF. I am looking for a high as possible risk-free income yielding investment for my in-laws, whose capitec 49-month deposit at 10.25% is about to lapse. The renew options look very poor under current circumstances and I am struggling to find anything north of 8% that defends capital. I am aware that nfgovi etf does not guarantee capital and there is price movement risk. I would just like to wrap my head around that option and understand all factors.  Wesley Instead of two RA accounts which was my plan, rather a much larger single account. At 55, immediately convert this large RA to a living annuity. Growth in the account is still tax free, as is income and Dividends. Adjust asset allocation of this big LA to get more international diversification. (I expect a significant amount of my spending to be in other currencies so global is a basket of currencies, which is ideal.) If I don't want additional income and tax burden, set the distribution to the minimum percentage allowable eg 1.5%. Contribute to a new RA account to offset the tax burden of this excess income. My LA + RA asset allocation in aggregate can have geographic diversification, can be better matched to my spending and I have control of my income / tax.  If the tax free lump amount is adjusted upwards, check if I need to contribute extra so that 1/3 takes advantage of the adjusted tax table, then retire from this RA the following month. Repeat as necessary. This will get the significant tax free lump sum(s) out as soon as possible, which seems ideal to me. I can spend this lump sum cash initially while deferring higher withdrawals and therefore higher tax from the LA(s) to squeeze out a bit more tax free compounding. Craig Despite my attempts at getting them to increase it sufficiently enough so I don’t need to go through it every month, I fail. It seems it might all be automated with fixed rules, as the “agents” never really seem to read or acknowledge my pleas / questions. They just ask for payslips and bank statements then I get an email saying it's all sorted. Rinse & repeat the following month.  Have you guys heard anything about this process? How would you suggest I explain to them why the percentage they have chosen should not apply to me, as previous attempts of mine have all failed? I’m wondering if once your portfolio hits a certain size or if your monthly contributions are over a certain size, if it might be better to go with another provider? Do you know if other providers also make you jump through these hoops to spend your money on ETFs? Brett I have just been sent an email from the money transfer company I use. I am not sure if this is new regulation that has been put in place. I am a SA tax payer, but am starting to rethink this decision. Can you confirm that this new tax has in fact been put in place? 

There’s nothing like lockdown to induce a bad case of wanderlust. 11 months into the biggest bummer of many of our lifetimes, it’s wonderful to hear some ordinary good news. Remember weddings? Lady Kablo certainly does. She got married in December. Lockdown is giving her a little time to think about what she’d like for her perfect honeymoon.  Many of us striving for financial independence hope to travel once we no longer have to work. Every time I take a trip, be it abroad or local, I’m reminded travel money works differently from ordinary money. While I’m extremely frugal in my day-to-day life, when I travel I don’t think about money. I also don’t worry about how much I eat or drink, I never check my phone and in general I’m just a much cooler person. In this week’s episode we help Lady Kabelo think about her honeymoon. In the process, we reminisce over some of our own adventures and dream about a time when we can do exciting things like visit friends and go to the shops. Hopefully this episode delivers a spot of whimsy to your lockdown.  Please take our survey here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Lady Kabelo I got married in December. Having spent the last 3 or 4 years following your savvy advice to tackle debt, emergency fund, insurance, retirement and medical aid, the time may have arrived for an international honeymoon trip (Yes, Covid is also a factor. I'm hoping when it's over some hard-hit places will be a little cheaper in an effort to attract visitors.) Every overseas vacation I've taken has been with my parents, so I've never considered the planning and budgeting that goes into an international vacation. My biggest nightmare is running out of money in a foreign country. As a result, I am leaning towards all-inclusive packages - even if we overspend, we'll at least have food. The downside is you're in a resort removed from the "real" place and people but then you can get cabs into the nearby towns for daily excursions.  But I'm not sure if this is the most cost-effective way to travel. So, my questions: Are the all-inclusive packages a good way to travel? What are the hidden costs people commonly forget to plan for? What are the biggest financial mistakes people make with regards to travelling? Any additional tips for cost-effective travel? Win of the week: Charlene Thank you from the bottom of my heart for the financial education. I’ve been reading and listening to all your advice since lockdown in March and it has really made a HUGE impact on my financial decisions. I cannot thank you enough. I live in Mossel Bay. Should you ever be in the area I would love to offer lunch/dinner to thank you both for everything. I’ve been getting my financial house in order ever since. I have identified ETFs that I have invested in and I am very happy with the performance. I have invested in Satrix Emerging Markets(20%), Ashburton Global 1200 (60%) , Sygnia 4th industrial revolution (10%) and Satrix Nasdaq 100(10%). I have now sold a property and have money I want to invest. I want to invest it in the overseas markets directly. I’m currently using EasyEquities and I see I can use their platform for international investments as well. I had a look at their fees and I see they charge a brokerage fee of 0.25%. This whole world story is a bit intimidating and scary... so I am thinking to approach it using EasyEquities even though I know it's a bit more expensive. What are your views on this? My next hurdle is choosing what to buy. I want to buy similar ETFs to those I currently have, but don't know where to start. I saw Vanguard has a Total World stock ETF etc etc. Could you please kindly point me in the right direction? Dylan I was wondering whether a RA can be paid out to more than one person? In a family where the wife was a stay at home mom for most of their life and they only really have the husband's retirement fund to live off when he retires, would it be possible to pay the fund out to both people in order to split the retirement income between two incomes to save on income tax? I read the blog on Tax on lump sums in retirement. It states that if you have discretionary investment funds available at retirement, it's a good idea to hold on to your retirement savings and rather use your discretionary savings to cover expenses. It explains that by doing this, you allow your retirement savings to grow some more. Now this got me wondering, why would you want to cash out discretionary investments to have your retirement savings grow more? It seems the wrong way around to me. If your retirement savings grow larger, sure you save on the CGT and DWT inside the retirement product for the time your discretionary savings last you, but now you will probably pay more income tax on the extra retirement income than you ever would pay on CGT if you did it the other way around. My gut tells me it would be more efficient to take your retirement income when you start needing it and supplement that with your discretionary savings where required while trying to minimize the CGT of the investments you cash out. Jean We have been saving for our son's tertiary education and now have a sum in our bank account earning pathetic returns. We will need to start drawing from this in about 9 months time. We have been thinking of Satrix world as we really need better returns. Are ETFs/ international ETFs, too risky for this application?  Chad I am a great fan of 1 share to rule them all. (Vanguard total world in my case). However, your recent podcast wrt the dangers of too much exposure offshore got me thinking about Rand-hedging. What would you say is the best ratio of Offshore vs Local equities in a total equity portfolio (apart from 20% which is Reg28 compliant)?  Then there is the question of which is the most diversified local ETF? I have been investing in the Satrix 40 when the Rand is really weak but realise now that this might not exactly be a Rand-hedge ETF. Is the Sygnia itrix SWIX 40 ETF a good rand hedge option? Please help? Martin My brother sent me a link to one of your shows when I took an interest in my finances and I’ve been hooked ever since. Thanks for all the education, even if the majority goes over my head at the moment. But I can confidently say there is a huge difference now in comparison to when I started a few months back. I follow the Dave Ramsey baby steps: I am currently saving my emergency fund and up to two months-worth of expenses. It is a decent amount but I feel it is being wasted in a savings account.  I keep hearing everyone say put the money in a money market account. I have been looking around with no luck. I bank with FNB and for example the one they propose I open is one with an opening amount of 100k. I also came across one from Old Mutual which seems reasonable and you get a card as you would want to have easy access to the funds when needed.  What are the options out there and which do you guys use?

Time is such an odd ingredient in the realm of wealth creation. When treated with respect, a good amount of time can be your greatest ally. When ignored, however, time can be your biggest risk. In a country with so much historical inequality, the idea of intergenerational wealth seems entirely mythical. However, a small amount of money sprinkled with a great deal of time makes building a nest egg for the next generation seem downright simple. By the same token, sleeping at the wheel creates an opportunity for inflation to eat away at real returns.  In this week’s episode, we explore intergenerational wealth building strategies using two real world examples. Is this our cutest episode yet? You tell us. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Mark  I have twin girls who just turned five. I have contributed to their own respective RAs since they were eight months old. I started at R1k a month each and this contribution has increased by 10% a year. I will keep up with the annual increases for as long as possible, but I realise the contributions will become pretty large over time.  My girls have Capitec bank accounts and are registered with SARS and file tax returns. They are building up tax credits from the RA contributions in their name with SARS given they have little or no taxable income.  I realise this might not be the most tax-efficient or tax-effective option for saving for your kids and DeWet and others might disagree with it. I have outlined below why I went with this strategy over TFSA or unit trusts in their name or the plethora of additional options and combinations.  RA is with Sygnia, so it is a low-cost product, and their capital can compound tax-free over a long period 50+ years.  They can't touch it when they turn 18. I acknowledge this lack of access can be a double-edged sword given they might like it for a car, a deposit for a property, starting a business, etc. The tax credits they are building up with SARS should see them receive some decent tax refunds when they first start working which they can use for the uses as mentioned earlier or to plough into their own TFSA or back into the RA for even more tax credits. I acknowledge I am giving SARS an interest-free loan and the effect of inflation on the tax credits is a downside here. I also recognise I am losing out on the tax credit myself.  They can keep contributing to the RA's when they start working as it is already set up for them.  Having the RA, Bank A/C, EasyEquities account, and a SARS efiling profile provides an excellent financial education base when they are older.  TFSA and/or unit trust they can access when they are eighteen, and they could withdraw everything and blow it all so this strategy guards against this. Some may see this as excessive control or control from beyond the grave, and I take their point.  This RA is their inheritance which should be substantial even in today's rands by the time they can draw down on it. Some of their inheritance they get when they are younger once the tax refunds kick in from the contributions and the balance when they are older.  There are pros and cons to the above approach compared to other kids saving options but after I weighed several different approaches and strategies, I decided to go with this one for now for better or worse.  Wesley The lifetime limit is inflated periodically The scheme is abandoned to inflation The allowable limits are significantly increased (as has happened in many other countries) If the lifetime limit is not increased periodically, the TFSA scheme is abandoned to inflation and will become worthless, much like the interest income exemption has been abandoned. At a 4.5% midrange inflation target, assuming the original 30k annual contributions took 16.7 years to max out the 500k, the value of the 500k limit at that date will be around 240k in today's money for someone starting out on that future date. Those future starters will be proportionally disenfranchised from the TFSA scheme.  The time horizon from birth to earning enough to contribute to a tax-free account is 20 or 25 years. The optimal time horizon for a TFSA is much longer than that.  A child born now, six years into the TFSA scheme, starting their contributions at 25 years old would have lost 75% of the value of the original 500k limit. It's not a very valuable loss at that point. I’m assuming the lifetime limit will always increase to allow an annual contribution. If not, the best possible course of action is to get in on the ground floor on this once off opportunity before it becomes worthless. Win of the week is: Henno Feedback for Lizl, whose company wants to force her to move her brokerage accounts in-house.  “It’s always important to take a closer look at the conditions of employment in your contract on the day you started. Anything that changes after that requires a process of consultation. The employer can’t make changes unilaterally. The consultation process is more than an email from HR. What typically happens is HR sends an addendum to your employment contract, none of the employees query it before signing and then it’s as if the consultation happened and you accepted it. I’d argue if my original employment contract didn’t include anything about this, if there was no consultation process and if I didn’t sign anything, they can’t enforce that rule. If they want to fire me after that, I’d go to the CCMA on the grounds of an unfair dismissal.” Gerrie My employer is massively exposed if I were to abuse any potential privileged information to do some insider trading, either on my own accounts or within family accounts. The regulatory world has changed massively in recent years and fines from the FSCA can run into 100s of millions in addition to imprisoning my employer’s directors. Banks and other institutions take this very seriously and would rather have too harsh restrictions on their employees than to allow anyone to abuse the system. Financial institutions force all their employees to trade under a watchful eye.  It’s not fun, but I understand why.   I informed my employer’s compliance team of all my and my family’s accounts at EasyEquities and I told them I have no desire to move it.  Turns out the process was slick and simple.  I only buy ETFs at EasyEquities and never individual shares.  My purpose is to invest and not to trade and ETFs fall outside of the trading restrictions.  I made a declaration to that extent and the compliance team told me to happily continue doing so.  They may ask me for a statement from time to time and I’ll gladly supply it, but there is no need for any ongoing burdensome process.  The entire process took me half an hour to resolve.  I made full disclosure.  They are aware of my accounts and my or may not check up later.  I have undertaken to inform them the moment I intend doing anything other than investing in ETFs.  I prepared myself for much pain that never happened.  So Lizl– my experience was that there was no need to move accounts and trigger capital gains events.  What a relief. Koketso  I started looking into my investments and was horrified that: - My EAC was sitting around 2.45%; 1.15% of which was advice fees - The general performance of my investments in the last 3 years was not great and with the 2.4% in fees I practically kept money under my mattress and all that prudence was for nothing! What I have done so far is: - Got rid of my financial advisor dropping 1.15% of fees from my EAC - stopped contributing to my RA as I have intentions to move abroad in the next 2-5 years - Moved funds from the more expensive products to a global feeder while I figure out what to do I recognise that this is not ideal, but this was a first step and one step at a time! And the questions: For my global money, I would like to invest most of my USD abroad (not using any local platforms) and in ETFs. Do you have any recommendations?  I understand that from an estate planning perspective, Switzerland recognises SA wills should anything happen Before I fired him, my financial advisor recommended two products, the first with the above in mind: the Galileo balanced fund which has fees of 2%+. I must mention here that the advisor works for Galileo so I was not 100% sold on this idea.  the nedgroup investments core global fund, details also attached For my local money, again I am all in for ETFs and would also want to look at moving away from my expensive platform. - If I wanted to say move to a cheaper provider, how do I actually do that? Would there be CGT on my unit trust and TFSA? - I am thinking the following for my ETFs TFSA: 50% ashburton 1200 ; 50% MSCI world Unit trusts:  50% - ashburton 1200, 30% satrix 40 and 20% MSCI world Retirement annuity: I won't add to this for the moment. I know there is a requirement to have a max 30% offshore holding so I'm thinking to change the makeup of my RA to: 15% ashburton 1200; 15% MSCI world and not too sure what else   Brendt  My mother is 62 years old, and will be retiring from work in Apr 2022. My parents plan to save R20k a month from now on until they retire. My mother has no retirement products apart from one RA that has a current balance of R80k. My parents want to have as much of their savings available in discretionary savings as possible. My idea was for them to pay the R20k monthly saving into my mother’s RA until it reaches a balance of about R220k. Then open up another RA with a different service provider and save the remaining monthly amount to this RA.  That way my mother would have two RAs on retirement, both of which will have a balance of less than R247k, which is the lowest amount for which it is mandatory to buy a living/guaranteed annuity with. Meaning that she would be able to withdraw 100% of both RAs as a lump sum, tax free (She has yet to make use of the R500k tax free withdrawal concession), to invest in ETFs for retirement. She will be able to reduce her taxable income in the year or so that she invests the money in the RAs, without being bound to a guaranteed/living annuity and the personal income tax implications on retirement (CGT is sooo much cheaper). In effect SARS will be paying them. :)Chris Many young South Africans are drawn to the idea of working on the yachts in the Mediterannean as a way to explore the world and earn some hard currency. I spent five months as a steward, sailing from Monaco to Barcelona with plenty of glamorous stops along the way!  I managed to save some of the Euros that I earned overseas and those are in a Standard Bank Isle of Man account (earning next to no interest). I am keen to make that cash work a bit harder, so I would like to exchange it into Rands and invest it in some ETFs (a question for a later date). I have been hesitant to “just transfer” the Euros to my South African bank account until I fully understand the tax implications.  What is the most tax efficient way to get the funds from my Isle of Man account to my South African account? What is the best way to actually transfer the funds from one account to the other? Brett  My emergency fund will cover about 6-9 months of living costs. That is more than I’ve got invested in equities. I’d like to have much more exposure to equities to get maximum growth over the next 20 years.  How would you recommend investing such a lump sum to gain relatively high growth for cash (5-10%), while keeping it relatively low risk, and liquid? I’ve considered the following: FNB Money Maximiser - 3.75% interest, completely liquid. The interest rate I believe is fixed to the lending rate as it was closer to 7% a year back. It’s still higher than typical liquid saving accounts. Fixed deposit or 32 day notice was not considered liquid enough. Money Market products offered the highest growth out of the products i looked at, i.e. a few percent above inflation. But the costs and fees were also the highest, and based on recent performance and inflation, the high fees largely eroded any gains.  High dividend or REITs ETFs, which seems to have a yield of about 2-5%, so very much in line with inflation. (And then some growth) Bond ETFs, like New Funds GOVI, which was about 6-7% growth based on 3-5 years.  And last is to keep it in my mortgage to reduce the interest I pay each month, at prime. So many options right? Would you recon it is best to keep the cash? Candice De Wet mentioned asking your HR department to adjust the RA contribution figure on their payslip to include the personal contributions. My payslip has been showing an R2906.75 shortfall in contributions as I have been doing my own thang.  I asked the HR department to adjust this and the difference is just over R1000 extra on my net. This will be going straight to my TFSA monthly. Lebo I currently have a tax free account with EasyEquities. I've maxed out the R36000 limit for the year and I know the lifetime limit is R500000. I was wondering once the lifetime limit is reached, can I open another tax free account and receive the R36000 tax free benefit on the new account? Basically can I start the process over with another account and effectively have a R1m lifetime limit?

There’s more than one way to raise taxes. You can subject yourself to the ire of the masses by being up-front about it, or you can eke out little tax wins on the sly. Our government likes to do a bit of both. This week, with the help of Wesley, we explain how tax creep works and what you can do about it. We also talk about lump-sum withdrawals. You are taxed on previous withdrawals taken after the following dates: Withdrawals: 1 March 2009 Retirement benefits: 1 October 2007 Severance benefits: 1 March 2011 If you took lump sum withdrawals before these dates, consider that an entry for your gratitude journal. Wesley  It’s been 6 years since the lump sum benefit was last adjusted and we have lost 26.5% of the value of the incentive during this time. Where is my inflation adjustment? Obviously someone is desperate for cash right now, and SARS doesn't think it is pensioners. When the lump sum is adjusted from 300k to 500k, but you already took 300k in the past, what happens when you take a 200k lump sum from your other RA account? More complicated. Was 300k, take 400k, pay 18% tax on 100k = 18k tax. Now the limit is 500k. take another 300k lump sum from your other RA account. What on earth happens? Do you not get any benefit from the increase? Does 100k at 18% wipe out half of your new 200k tax free lump sum? Or do you treat it as a 700k lump sum on the new provisions less 18k tax previously paid on lump sums. It seems like a good idea to have at least 2 RA accounts. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Candice Just thought I'd say a HUGE thank you.  After being introduced to the show just 3 years ago, I feel like we are in a committed relationship. It's the only podcast I listen to and look forward to my Monday morning drive to work with you guys.  I finally budgeted.  I’m horrified to see where our money goes monthly.  I can't complain though, because without knowing I wouldn't be able to change spending habits. Martinus I've always championed Total Return ETFs. Outside a TFSA you’d have to pay Capital Gains Tax. TRTs also save on brokerage costs and admin. However, the feedback from De Wet has me reconsidering that approach. If the fund is a feeder fund like the Satrix MSCI World, is there any local tax event? To me, it makes sense that if they just reinvest the distributions they receive outside SA the only tax event would be in the foreign country. Your only local tax concern then is CGT. It is possible to switch from Satrix to 1invest MSCI world at an increase in fees of 0.05% and then have dividends paid out. This leaves an increase in brokerage costs and personal admin.  Martin  I’ve been putting money into the Satrix World. As I understand it, I lose the benefit of the saving on dividend tax in a Global ETF, but I’m at least hedged in a way with the rand weakening over time, and it should show better growth over time than local (who knows though).  So I just listened to your podcast (Asset Allocation Problem – 14/12/20) regarding total return funds (like MSCI World). Am I correct in my understanding that the dividend tax is in the region of 28%, not 15%? Furthermore, are we saying that tax free investments should pay out the dividend, and not reinvest? That feels wrong though, that money then can’t keep growing? Then, to make matters worse, when you Google “tax on tax free global etf”, you get many links proclaiming that you do not pay ANY tax on either local or foreign tax free investments, e.g. https://www.sygnia.co.za/press/how-to-invest-offshore-and-pay-zero-tax Please put me out of my misery on this one! Lizl I have the *honour and privilege* of working for a financial institution that recently decided all employees must close all accounts with other brokers and open a stockbroking account with them. Exceptions may be approved, but I don't want to open that can of worms just yet. I have EasyEquities accounts - both an Easy Equities ZAR account with individual shares and a TFSA account with a few ETFs. Does Easy Equitites count as a stockbroker in this case? Should I just sell the individual stocks and hope they'll let me keep the TFSA? Does the TFSA fall under this prohibition as well? And why is it that they can legally do this? I have zero energy for the admin of moving and the inevitably higher fees, preferential staff rate or not. Greg  Normally I put my TFSA allocation of R3000 per month into my bond. At the end of the financial year I draw R36000 and buy the Ashburton Global 1200 ETF in my TFSA. Should I still be doing so for the coming year? Is this still the one ETF to rule them all?

For all the flack they’ve been getting, there’s no easier way to reduce your tax liability than pension fund contributions. In this week’s episode of The Fat Wallet Show, we help Megan correct an assumption about her tax savings on retirement annuity contributions. We use the opportunity to talk about offshore allocation and prescribed assets. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Megan I listened to your "To RA or Not" episode today, and one of the questions (about RA contributions vs paying off a bond) reminded me of a dilemma I've been wondering about for a while. I'm 25 and working as a junior engineer. My marginal tax rate is at 26%. I'm currently putting R3000/month into my TFSA (Satrix MSCI World ETF with Easy Equities) and R2000/month into a Sygnia RA with decent fees. I save R1000/month in a TymeBank goalsaver for holidays. After that I can't really afford more savings at the moment, which means I'm not adding anything to my long-term discretionary investments. (I have an emergency fund and enough short-term investments for my needs and goals.) My question is this: Considering  1) The Regulation 28 requirement on the RA which limits global diversification,  2) My low tax bracket, and 3) The fact that Rand devalues around 4% per year to the dollar,  is the RA really worth it?  Putting money into an RA saves me 26% now. But what if I were, instead, to put that R2000 into a discretionary investment (e.g. MSCI World ETF)? If the MSCI World outperforms the local 70% of my RA by 4% a year (which seems likely imo), then surely the discretionary fund would be "outperforming" the RA in the long term?  For arguments' sake, with the assumption that global returns outperform Rand returns by 4%, then after 10 years, R2000 in the RA + 26% (assuming I could magically reinvest the tax return instantly) would be worth (2520 x 0.3 x 1.04^10) + (2520 x 0.7) = R2883.  While R2000 in the discretionary global ETF would be worth: (2000 x 1.04^10) = R2960.  (I mean this in relative terms, I don't really expect 0%).  This difference would only get greater over time due to compounding.  The other thing is that the RA money will all get taxed in future. And that the RA fees, although low, are higher than the discretionary fees.  So while I fully understand the tax benefits of an RA for people earning at 45%, I'm not as convinced for those of us in some of the lower brackets. What do you think? Is my assumption wrong about global markets showing better returns? Is it normal to feel this uncertain about putting so many eggs in the SA basket, or am I being silly? Is an RA worth it for me now, and if not, when does it become worth it? 

2020 gave us all a new appreciation for the humble emergency fund. In this episode of The Fat Wallet Show we think about some steps you can take to prepare your money for the year ahead. Win of the week: Celma I turned 55 and had to visit my bank (Nedbank) a few months later. I asked them if there is any reduction in bank fees when you turn 55 and to my surprise my bank fees got waived provided I make a R10 000 deposit. I only get 2.5% on the deposit, but save about R300 in monthly bank fees. The facility is probably available to everybody but seems like you must ask about it - it is not as though they tell you or advertise it. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Zee I've been listening to you guys like a fiend for the past 3 months and I have managed to follow your instructions of having insurance, reducing living expenses etc. Now I'm at that stage of forming my retirement strategy. Annnnnddd I'm pretty much having a bit of a breakdown as to whether I'm going in the right direction. So I'm 28 and working in South Korea. I've never had any debt, I don't pay rent, car, I have no kids or financial dependents. This allows me to save about 54% of my pay, which is split between my RA 16% and about 4% Unit trust (which I top up with my annual bonus) both with 10X .  Then 30% in a ZAR Easy Equities monthly (I just opened my TFSA which I will max out on the 1st of March as I have already saved the R36K). Ohhh I have saved 3 months salary as an emergency fund. Should I keep the UT as a means of saving a year's worth of salary for when I am old and wrinkled and the medical costs are eye wateringly high or to supplement my income when the market falls apart. Orrrrr should I just leave that and go beast mode into EasyEquities and the RA. I also wanted to know if I should push to save up to a 6 months salary even if it takes me more than a year? And put it into a money market or savings account cause the prospect of going back to being unemployed for a long period of time scares me to death!

If nothing else, 2020 was humbling. There were many things we thought we knew about the market, about gold, about interest rates and about predicting the future that just turned out to be not so. In this year-end episode of The Fat Wallet Show we share some thoughts and insights, as well as a nice bottle of bubbles.  Here’s to a happier 2021. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Tayo One thing I do however is set up separate scheduled transfers with different references if I have a more specific goal. So instead of transferring R100 every month into my EM, I'll have a transfer with reference UPGRADE_KITCHEN of R20, another with R10 for UPGRADE_PHONE_FUND and the rest a normal EM dump. This way I can just search for UPGRADE_KITCHEN on 22seven and I can see how much I've saved up for that particular goal. Extra points for using the same UPGRADE_KITCHEN reference when taking out of that 'fund' so I know how much I've spent and how much I have left. I make sure to keep it simple: Keep those goals as broad and few as possible (I only have 3 at the moment) Don't overthink it. 1 bank account (also 1 banking charge), no excel admin

In honour of Christmas this Friday, this week’s episode is the first ever Fat Wallet fairytale, written by Suzanne for her daughter Nina.  Happy Holidays, everyone! Win of the week: Suzanne I just want to say thank you for the great work that you are doing. I know that we as a society tend to use the word EMPOWERING quite loosely, but there is no better way to describe how I personally have experienced this whole journey into personal finance. I also feel it has made me a better parent to my kids – that can now guide and empower them on their own road to financial independence.  I attach a little Christmas Fairytale I wrote for my daughter,  that I hope you will enjoy – and as a little ode to a Fairy Godmother that you may recognize…… A CHRISTMAS FAIRYTALE FOR MY DAUGHTER As smart as a whip, and with a feisty personality to match, Princess Nina was considered by all to be quite the catch. But frowns of worry have been darkening her day, For on the eve of her sixteenth birthday, she was unsure of her way…….   “OH”, she cried, while munching on her two-minute noodles, “This world has to offer me oodles and oodles, Yet I am unsure of what I need to do! I know I am a Princess, and being one too, Cinderella and Rapunzel I should probably like you, And don’t forget Snow White, she is in the mix too.”   “But, being rescued has never really been my vibe, I think I am more part of the Katniss Everdeen tribe. I wear my hair in a bob, and can really whack a hockey ball, I don’t really mind people, but love dogs more than all.”   “I have no desire to be rescued by a prince, To me that sounds about as appealing as a bowl of pets mince! I don’t want to toil away my days in some remote castle tower, I want to learn Korean, travel the world and find my own Power!”   It was then that it happened, in a flash she appeared, The extremely tall fairy godmother, all mothers-in-law feared… She was known through the land from north to south, For her sensible advice ….and her potty mouth.   “Girl”she exclaimed, ”I heard your pleas, And I think you are cooler than the fucking bee’s knees, So in your future there will be no dwarfs, prince’s or even a count….. What you get is a Tax Free Savings Account.   With the whip of her wand, she quickly set about, to set up an Easy Equities TFSA account…. “That is it”, she cried,” my magic is done!” “Now, my dear princess, starts all the fun.”   “You will go out into the world, and chase those dreams!, But you will also be smart, and live within your means. You will graft at your craft, and your joy will be astounding, You will also be saving a shitload, and experience the magic of compounding.”   “This blessing and wisdom I bestow upon you, Is not one to be horded, but for you to share with other princesses too. So should Cinderella come crying about her boring days, Or Rapunzel curse about her man’s whoring ways…….”   “You can exclaim: “Girl, I hear you cries, so let me sort for you, the truth from the lies….. You don’t need to live your life as prescribed, Where fate is fate, and choice is denied.   You don’t need a blesser, or a large inheritance amount, You need a Tax Free Savings Account!”

Investing history teaches us success is all about asset allocation, as Grant Locke explains in this presentation. History is unfortunately annoyingly silent on what precisely the best asset allocation would be. Where does that leave those of us investing for the long haul? Should we pick a mix and stick to it? Should we adapt our asset allocation mix to suit the current market conditions? While Ash asks this important question in relation to a retirement product, it’s a question each DIY investor would have to answer for themselves. This is an excellent way to end our Fat Wallet year, because we’re once again reminded that intentionality and mindfulness matter when it comes to money management.  2020 gave us all a lesson in having high expectations of a new year, so this year I won’t toast 2021. Instead, let’s all raise a glass to the end of 2020 and have that be that. Thanks for listening! Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Ash I get that you partner with Outvest and their Coreshares offering based on their incredibly low fees. I have since been looking at the passive balanced funds available in the market and have picked up that they are not all the same. Could you possibly comment on what is termed a "hard-passive product" which invests in ETFs like the Coreshares OUTmoderate Fund that has a Fixed Asset Allocation? vs a "soft-passive fund" like the Sygnia Skeleton Balanced 70 that is able to adjust its asset allocation on a regular basis however it still uses ETFs and low cost passives in its portfolio. When reading multiple articles online it's seems asset allocation brings in the bulk of your returns over stock picking, so wouldn't it be beneficial being in the Sygnia portfolio that is able to adjust its asset allocation to market risks over time? A prime example being that Sygnia currently doesn't hold any property in its portfolio vs Outvest with 15% exposure to Property (Domestic and Local). When looking at their returns it seems that Sygnia may be more expensive by roughly 0.2% per annum but has managed to deliver far better performance because of its flexibility over the last few years making the 0.2% difference probably worth it. Win of the week: AN I started a Stanlib Unit trust when I was 23 and had stable employment. I injected approximately R100k p.a averaged over the 8 year period. The average returns have been about 7%. However, I suspect that I am being too risk averse and losing out on many opportunities. Please can you help me decide how to progress from this into more diversification. I have opened a TFSA with EE and I will be purchasing ETFS. What amount of my current unit trust should I move over to ETFs as a guideline and what would be the best 2 or 3 ETFS for me to start with? Pascal When you guys mention Interactive Brokers, you imply that it's totally off limits to anyone with less than 100,000 USD. There is no minimum account balance with interactive brokers. Only a small monthly "inactivity" fee if your balance is less than 100K. It costs 10 dollars a month, minus the cost of each trade made in that month (at 1 dollar a trade). So if you buy shares of 2 ETF's each month as I do, your monthly fee is 8 USD (excluding the trades). In other words, aside from the 10 dollars a month, you can buy and sell ETFs for free, up to 10 trades a month, so you're never paying more than ~R160 (at current rates) a month. R160 does not seem like that much for access to global markets though such a feature-rich platform. To put that in perspective, that's less than the fee for some current accounts in SA. When you consider EasyEquites USD fee is 0.56% of each trade value, a 10 dollar fee equates to a trade value of (I think) ~1785 USD. So, IBKR actually becomes cheaper than EasyEquities anytime you invest more than 1785 USD a month. (if my math is correct? Please feel free to check this). Magan If one passes on with a living annuity, can the spouse transfer the amount that is due to her to her own living annuity? What will the tax consequences be, if any? Andy I would like to believe that I was listening before the famous Wilhelm stole the limelight. I was also on the ships and scratched my head on similar issues faced by some of your doctor listeners. I’ve made so many of the mistakes you have spoken about in your show, but I can certainly say I have learnt some lessons and am getting better. From a horrid financial advisor who had never even heard of ETPs, to being invested in some kak expensive funds on Alan Gray. (Said advisor had also not heard about TFSAs). A lot has transpired since then. I now run my own portfolio except a minimal amount for my RA with GEPF (which I can’t control) and 10x, which I am kind of okay with. I’m now 5 years into TFSA. The majority of my other investments are in ETFs and I’ve had some success (read luck) and some failures (read Woolies) in single stocks. I’m also teaching interns who want to listen about the pitfalls of getting a good starting salary with little financial background and I find this really rewarding. What is the difference between dividends and distributions. What are the tax implications? Which products would be better to hold in the tax free space, one that reinvests distributions or one that pays the dividend?  On a similar vein- if an etf like satrix world reinvests distributions, what are the tax liabilities? Santosh I understand the argument on fees, but one has to also acknowledge that service is worth paying for. When I sold the last lot of my Satrix Property, I experienced the same as most ie. no response to emails, ineffective and incompetent staff on the other side of the telephone, when one could actually speak to an individual. Ask practically any question unrelated to that day's share price and you're greeted with a stunned silence. Then there's the JSE process and it's associated fees and processing times I decided never again!  The level of service, competence and responsiveness of Allan Gray and Coronation, for example, is stupendous to the point where I'm willing to pay a premium. When I have had questions, I've directed it to the individual fund managers themselves and have received detailed, well thought-out responses. Before I invested with Prescient, one of the fund managers actually took the time to meet me over coffee and today still answers my questions directly. Would an ETF provider do this ? Never - not in a million years. The funds are expensive, but the service by the asset managers is worth paying for that is if that is important to you. In 2018 after I met with 10X and he was "blown away" with my interaction with Allan Gray and how professionally and attentive Allan Gray was. Any transaction—irrespective of complexity, local or international—is handled either on the day or 24hrs and really, they respond to EVERY email.  Furthermore, the level of staff knowledge at any of the Asset Managers is incredible! Irrespective of who answers the phone, the competence is assured. I really don't know how these asset managers are able to find and train staff to this level. It seems to be something unique to the asset management industry. Even performance-wise, the Ash1200 is not without its competitors. The 1-year performance of the Ash 1200 against the Coronation Optimum growth fund is practically identical after fees and in this case, the Optimum Growth fared marginally better. Taya I have been contributing to an RA since 2014 through one of the dreaded 'old school' companies. I blame this on a younger, stupider version of me. I am investigating the fees I am paying and will most likely move this to another provider such as 10X / Outvest.  My employer is dead set against RAs. He knows his way around tax (he has a Masters in Tax law and worked for SARS for some time), so I am inclined to give his advice some thought. His view is that by the time I am of retirement age, the government would've gotten their hands on RAs through prescribed assets. In addition, RAs don't typically perform very well. His advice is to take the tax knock and invest your money elsewhere. What are your thoughts on this? If I am going to continue investing in an RA I need to seriously figure out how to contribute more to it monthly, but I am questioning whether this is something I should even be figuring out in the first place.  Laurence We're on the bus to Portugal, due to roles that allow remote working and passports for EU access. I have a question around CGT on offshore funds (e.g the Vanguard.VT USD fund) when becoming a non-tax resident in South Africa.  We plan to become non-tax residents in South Africa, and not financially emigrate (even though we assume we won't return to the country).  I currently own the Vanguard USD fund through Easy Equities. I plan to do a position transfer from EE to Interactive Brokers. I would sell up any remaining South African funds (e.g. Ashburton 1200) and convert to Irish domiciled Vanguard funds. I know that Vanguard is US domiciled and there's some concerns about Estate Tax above $60K without tax treaties, but I'd like to think I can manage it based on the fact that Portugal may not be our final destination.  I've (somewhat) come to terms on taking the CGT hit on the SA funds when leaving, but what happens to the offshore funds (e.g. USD VT) from a CGT perspective when becoming non-tax resident of South Africa? Do you have any insights around the need to pay the CGT on the VT gains (to date) in South Africa when becoming non-tax resident, or would the double taxation agreement with another country mean you only pay CGT in Portugal/EU when selling off the fund in e.g. 15 years time?   Alternatively, am I just complicating the hell out of it and should I sell the VT fund whilst it's of moderate size and take the CGT hit now?  Garry  I am in my early fifties, married and dad to two high-school kids. My wife doesn’t earn an income.   I have a good pension fund through work. I have also been contributing to an RA since 2005.   The RA with Momentum is offshore denominated, which avoids over-exposure to section 28 regulations. I have stopped the 10% annual escalation on this so will now pay a fixed amount until my 55th birthday.  We have an additional discretionary investment into unit trusts.  We also have an emergency fund in a USD account. I think by and large we have been doing the right sort of things.  Here are a few things I would like to correct: We have been investing in Unit Trusts rather than Tax Free investments first!   On my older Unit Trusts I have a financial adviser associated with them and I am annoyed that he is getting free money without adding value.  The Unit Trusts are in my name rather than my wife’s. She is a stay at home mom, so it seems sensible from a tax perspective that these investments should be in her name.  The Momentum RA is USD denominated. 2 years ago I stopped the annual automatic increase and paid a penalty for that.   I also have a few small paid up RAs from back in the day when I was young,  naïve and exploited. Can you please comment on my proposed corrections: Open tax free investment accounts for my children, my wife and myself (last) before further funding other discretionary investments.  Sell off my unit trusts in annual tranches, keeping the capital gains below the R40k annual limit and use this money to fund the TFIAs. This will have the additional benefit of reducing the free money to my financial adviser. Top up the TFIAs on a monthly basis, keeping below the annual limit.  Put any additional funds into an ETF like an MSCI World fund from one of the providers Do you have a recommendation for what to do with my Momentum RA?  When I reach 55 it seems best to take my various RAs as lump sums and add them to my discretionary savings.  Any thoughts on that?  Mary I wonder if there is such a thing as tax free converting, where you take R36,000 from your retirement annuity to deposit in the tax free account without being penalized. I read this is possible in the US with their version of tax free accounts they call Roths accounts. You transfer money from a 401K to a Roth IRA or Roth401k. It all sounded very interesting. I wondered if you two knew something similar existed here at home.

Although they’ve fallen out of fashion, we like retirement products. In addition to a generous tax break, retirement funds prevent us from cheating our future selves out of money to do luxurious things like live indoors and eat food.  That said, if you’re prioritising investments, retirement products might not be the best place to start, as Dylan points out this week. At the beginning of your career, your tax bracket is quite low. Much as we like tax breaks, it might not be the best use of your investment money. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Stella Thanks so much for your absolutely fantastic show – I have learned SO much from you and Simon. I think of it as The Gospel According to Bubbles and Chuckles. I’m learning slowly and not there yet, but doing oh so much better with my money. My mother is 89 and has just sold the life rights to her cottage in a retirement village she was living in (she moved to another establishment where she pays a very low monthly rent of R5,900 – can you believe that?? We were so lucky to get this – it’s a fabulous place in a small town and working out well). She will receive R451,000 from the sale and I am wondering what she should do with this money to avoid taxes and fees. She really doesn’t have much money and her income is very low, between her pension and an annuity she gets just under R10,000/month, so my brother and I supplement her expenses – we split her rent in 3, covering various expenses. Her medical bills are a nightmare – her medical aid and gap cover sets her back R4100/month, and she has just been prescribed heart medication which costs R2,200/month, that the medical aid won’t cover. That’s R6,300/month on medical shit. Anyhow – she will need to draw on this money to cover said expenses, but it would be great to identify an investment option that allows the money to earn interest, but not have it tied up for years. Dylan If I am responsible enough to not use it for living costs it seems like a good place for my money:  It is saving me on a guaranteed interest rate which (even at this stage where the repo rate is so low) is higher than inflation My understanding is that I will never have any tax implications on these savings since it is not actually interest that I am "earning". The only negative I can see is the whole "don't have all your eggs in one basket" saying, which also seems like it is not exactly applicable in this case. Even if something bad happens to my house or the property market, I would still be liable for the amount owed to the bank. So whether I have big savings in my home loan or in other investments, the loss would be the same. Since I am at the early stage of my career, I benefit the least in terms of tax. I only expect my salary to grow from here on, so later in my career I would benefit much more. So should I not be prioritizing TFSAs? My very basic understanding would explain that RAs let you reap the reward now and pay tax later, where TFSA let you pay now and reap the reward later.  My current idea is to contribute the max of R6k per month between myself and my wife to TFSA. After that we can consider RAs and other investments. Then this ties up with my first question: would it not be a good idea to then take what's left after TFSA and contribute that to my home loan? This way, I could really quickly pay off my home loan and only after that start contributing to an RA again. At that point, I would need a new place for my emergency fund, but cash investments should be fine? If I stop contributing to a RA and rather contribute to a TFSA and my home loan (or any other investment), do I need to tell my employer that? Currently they pay me my salary and I contribute to my RA, but they do specify my RA contribution on my PAYE. Can I leave them and just save the tax I should pay and give the money to SARS at the end of the tax year or is that not legal? Herman I have been contributing to my TFSA the max amount for 5years now.  This has been my only savings after my emergency fund. My student debt was low and I managed to pay it off in 3years. I have recently been approached to work in New Zealand, and now have too many options to consider - please help: What happens to my TSFA monies if i only work overseas, but plan to return to SA some point in the future? Am i still eligible for a TSFA, and can i continue to make my yearly contribution? Is there any advantage for me to file for tax emigration? Relating to above - I understand NZ and SA have a double tax agreement - Does this mean no SA tax? or just SA tax where the NZ tax 'stops'? (So the difference between my SA tax% and NZ% would still be payable in SA?) Tsebang I was invited to a presentation about Bitcoin Mining, the company that is mining the Bitcoin is Mining City I'm not sure if it is a scam or not. Could you please check and advise? I have a bad feeling about this. They are promising huge returns after 3 years. Candice  What I can tell you is that they are not a platform, so there is no option of selecting external funds when you are not happy with performance. They offer only tracker funds which in general are 0.95% and they only have one actively managed unit trust fund. So the potential EAC would be 0.95 for AMF and if there is an advisor you can add a further 0 – 1.15% so potentially they would be very cheap. So it is extremely important to understand what your selected fund is tracking, currently the 1 yr return on their medium equity fund is 0.2% and they do not have any funds that offer guarantees. If you are looking for a similar product from Old Mutual it would be our OM Funds only option through wealth which also does not have an admin fee and our tracker funds come in slightly cheaper than 10x at between 0.55 and 0.9 and with a far superior actively managed fund range including offshore. When you are looking at the optimal plan, you are not buying it because it is cheap, you are buying for possibly the underlying guarantee that your fund may have and then for the future bonuses from year five until maturity. I would think very carefully before considering moving retirement funds to 10X for the reasons given above…in view of NO GUARANTEESand NO BONUSES paid going forward.Shane Thank you for a great show and for making me laugh at least N+1 times during each podcast.  Please share your thoughts on trading with a Tax-free account.  I've dumped R15k in mine a few weeks ago and opened several ETFs, (S&P500, NASDAQ 100, etc.), and split it evenly.  I am a daily trader using equities. I’m wondering if the same can be done with Tax-free ETFs, while staying below the annual contribution limit but maximizing profits?  What implications are there that you are aware of? Tim I’m 43 and my wife and I are debt free since the beginning of this year. House access bond is basically paid off, R10k left to keep the facility open, but it also is my emergency fund. I maxed my TFIA at Standard Bank with a couple of ETFs, I moved my 20 year old RA’s from Sanlam and Old Mutual to Outvest – boy did I get shafted in 20 years! I still have a Policy with Sanlam. I want to cash it in, but want to use it to my maximum long term benefit. Should I put it as a lump sum in my RA or rather buy ETFs with it?Ross  I realize it's a massive double up and need to streamline the portfolio, I just can't decide what to hold onto and what to sell.  I have also been quite interested in the SYG4IR. I just can't help but think this is the way of the future: clean tech, autonomous vehicles, drones, solar, space the list goes on. If I put a bit of money into it now and let that grow for 30 years who knows what the value of it might be by then, which brings me to my questions: Is there a way of telling if an index is a value buy? I know that indices trade at "fair value" but is that really the case? Take the S&P 500 right now as an example. There are four or five Tec stocks that are keeping the whole thing afloat, and making new highs, while the Russell 2000 has bearly even touched the March highs. I know your advice is always "time in the market beats trying to time the market" but I'm sitting on my money at the moment and haven't been buying as I just can't help but think the market is way overvalued at the moment?  How have all these massive stimulus packages by governments worldwide affected the markets? Particularly the major indices. Are we now just in a massive debt euphoria pretending that everything is awesome and another crash is inevitable? Could there possibly be a better buying opportunity not far down the road? I'm just a country peasant but even I can see that there's much more to this than meets the eye.Jaco I only recently discovered that I am completely undercooked in terms of retirement. I had some investments, a bad RA, and some unit trusts for my kids with Allan Gray. (expensive AF) But was never aware of TFSA's and ETFs, etc... So I discovered Easy Equities, discovered your podcasts, through advice from my brother in law. Since then I have devised an aggressive plan to get back on track. Paid off my huge credit card debt and now only left with 2 vehicles. So, a couple of questions / thoughts. Priority 1: Max out TFSA for myself and my wife each year. Priority 2: Invest long term for my kids (2) - TFSA and other Priority 3: Save for deposit on my first home Thereafter invest what I can into the market. What would be a highly aggressive 1 year investment to save for a deposit? And what would the TAX implications be on that investment? Prineshen I am 26 and a budding young investor who started around 3 years ago. My strategy is mainly focused on ETFs in my TFSA  with the rest into individual stocks picks and bitcoin for a bit of fun/speculation. I understand the importance of diversification in a portfolio. However given South Africa's history of fraud scandals such as Steinhoff etc, I have tried to implement a further layer of diversification across brokers and therefore tried to diversify my investments across Easy Equites, Satrix and Sygnia, although I know Easy and Satrix are owned by the Purple Group.  What are the chances of one day waking up and seeing all our accounts at 0?  

In our second Fast Fatty, we spoke about Suzanne’s PPS account. PPS felt our assessment of their product was inaccurate. We offered them a right of reply. Read their reply here. Pru has had a rough start to her investment career. She had a financial advisor she was struggling to shake off. Just as she worked up the courage to let them go, the advisor got fired for committing fraud. This shocking news encouraged Pru to take a closer look at her investments. She was not happy with what she found. Many of you have expressed your frustration at the returns you’re getting from your investments this year. In this episode we help you and Pru figure out exactly what happened. As always, we explain how a high fee puts you at a disadvantage from the outset. Next, we discuss asset allocation, diversification and the general madness of the market.  Being able to read investment documents is an important skill to develop. We wrote three articles to help you make sense of these documents. You can find them here, here and here.  Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Pru  Discovery gave me a call and told me they were doing a forensic investigation into my financial advisor. It turns out they forged my signature on a policy document, as such Discovery did the heavy lifting for me and took them off my policies.  The rage regarding the forgery forced me into action. I started the process of moving my TFSA from Sanlam to Easy. This led to me scrutinising my TFSA portfolio and you two won't believe this! (Or maybe you will) My portfolio has done FUCK ALL (Sorry Sean) since I started it in 2017!!!! I have actually lost R 20 000 of my contributions!!! I am so upset!  Where I have gone wrong and what the FUCK happened????!!! Meanwhile, back at the ranch, my demo portfolio on Easy Equities has made a profit of R5000... There are not enough exclamation marks and expletives in this email to describe how I feel right now.  Thank you again for all the help. The two of you are doing the Lord's work, literally.   Dirk How can I determine how safe my investment is with respect to the investment issuer/provider/platform? Many investments are for the longer term. What guarantee can an investor have that the investment provider will still be around in the future? There seems to be an increasing number of issuers, platforms and providers. How can I determine the risk associated with them? What is the situation in the case where I buy an UT or ETF via a platform (e.g. AG/ABSAStockbrokers/EasyEquities/etc/etc/etc) that is issued by another issuer, for example, AG/Satrix/Sygnia? Rudzani Given that cash is no longer king, what is the implication for people like me who have significant equity in our bonds? Should we looking to invest it elsewhere in the meantime? The bond has served as a mechanism to reduce interest rate expense, bond term and easily accessible large sums of savings.  I have ETFs and max out my TFSAs each year. I sadly hold some unit trusts but I got those before I knew about ETFs and have just left them. What are some strategies with the cash currently sitting in the bond? Do I just leave it? Christiaan is intrigued by the new ESG ETFs from Satrix, but he’s not convinced that the money will follow the ethics. He wants to know if we have any strong opinions about it. Brent I am investing in ETFs for the long haul. I’m maxing out tax free first, but I’m referring to non-tax free and non RA investments.  Say I buy shares monthly for the next 30 years and then I want to sell some, how is tax worked out on that? I will have been buying shares at different prices over time and now I’m selling them at whatever the price is at the time of sale. Will SARS tell me how much tax I should pay? Will Easy Equities? If I bought shares in Ashburton 1200 for R50 in 2020, then R300 ten years later, then R1000 another few years after that. If I sell them for R1200 the tax on the first shares I bought would be huge, but not so much on the last shares I bought. Sarel I follow the one ETF strategy, buying the world, bought Asburton 1200 and MSCI world. I have resources to add some spice to the mix. Any opinions regarding Sygnia ISO and 4th IR. Suzanne is wondering whether she should continue investing in ETFs once she’s maxed out her R500,000 tax-free allowance? Guy I invest using EasyEquities and focus on ETFs primarily (I’ve been listening to your guidance). My main investments were Satrix Nasdaq, Emerging Markets and recently the Ashburton 1200 (you mention it so often I couldn’t ignore). I invest in shares through my USD account on EE but was wondering if it would be best to move the ZAR to USD and buy the MSCI World ETF from iShares / Blackrock. Jason My question is regarding index fund platform offerings in SA. As you know, this would be different to ETFs - not trading live on the exchange - but trading like unit trusts that have updated NAV daily. The Vanguard Index funds are the prime example, having the same constituents as the ETFs but not trading live. This allows one to purchase these passive instruments on auto instruction, without worrying about losing out a spread due to the product not being live on an exchange, like an ETF would.  I have an account with EE and the recurring investment option often sees this spread resulting in some low volume ETFs being bought at a premium, which puts me off and spoils the opportunity of letting my portfolio function truly passively. Anyway, I hope you guys can help with suggestions or at least expand on the conversation about the recurring auto-invest instructions getting spreads horribly wrong from time to time.

We use my long-awaited holiday to catch up to some user questions for the next three weeks. We hope you enjoy the shorter episodes as much as I plan on enjoying my break! IM I have an Old Mutual Endowment policy that matures in November 2020.. I also have a lump sum in a TymeBank account in various GoalSaves, which I don't need to use any time soon. I have another lump sum in an African Bank account.  I'm not sure whether I should pool all the money and put it into a fixed deposit account with African Bank for 5 years (the interest rate is very attractive at 10.01% annual interest payout) and have the interest payout annually, so that it doesn't go over the R23,800 tax exemption. Or should I take the money and invest it into ETFs, split 50/50 into local and international. With the idea of investing for dividends and growth. I know that I won't be sheltered from taxes if I do this. I was thinking of splitting it between the following ETFs (I use the same ETFs for my TFSA): Coreshares Preftrax Coreshares DivTrax Satrix Divi Coreshares Top 50 Coreshares Property Income Coreshares Global DivTrax 1nvest Global REIT Satrix MCSI World Satrix S&P500 Sygnia 4IR If I decide to do the fixed deposit, then I was thinking of using the interest payout each year and invest it in ETFs (and be subjected to taxes). My wife doesn't know anything about RA/TFSA tax benefits or investing, and has absolutely no interest in using her TFSA. I even helped create and set up one for her on Easy Equities. I could use the fixed deposit interest payout and then fund her TFSA each year and then top it up to max it out as well. However, the disadvantage is that on death, then the TFSA will form part of her estate. And then lastly, I could also put it into my RA, which I currently have with Sygnia (Sygnia Skeleton Balanced 70). I won't benefit from a tax return, but will possibly benefit from CGT, DWT and tax on interest earned. I'm finding it difficult to make a decision on what would be most beneficial. Any suggestions on what I could do with this lump sum? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Ash I switched the Sygnia MSCI USA to their new Health Innovation fund. This is an active fund (with performance fees 😱) that uses the MSCI World Health index as a benchmark and applies an ESG filter.  My reasoning was that new developments in health care (including a COVID-19 vaccine) are likely going to play an outsized role in the world economy and I wanted a piece of that action.  Unfortunately, there are no local ETFs which track any health-related indices, so this seemed the only available option for someone who wanted global exposure to this sector. I’ve attached the factsheet and I’d be interested to know your and Simon’s thoughts on this fund. Guillym thinks he knows why Anne’s Liberty fees are 12% of her monthly contribution.  This is probably because these sort of products also can give one cover for illness and disability. Not that they not screwing you over, they probably are so fuck em, just this may explain away a bit of why its to high.  Stephen Give Edwin a Bells! I have invested in some Thematic US ETFs and was worried about overlaps as I have ARKK (Ark Innovation (Active ETF)) and BOTZ (Global X Robotics and Artificial Intelligence). The comparison highlighted no overlaps whereas I was expecting a few. I should have done the due diligence via vlookups etc but the anchor equity for ARKK is Tesla whereas BOTZ anchor equity is NVidia. I like both equities and I also like the fact that both these funds consist of between 30 and 50 equities so are not over diversified. My 3rd ETF is iShares Global Clean Energy. Tania You guys often discuss the Ashburton 1200 ETF.  I am considering cashing in my young kids’ Unit Trusts and rather investing it here.  You once mentioned the Ashburton Global 1200 isn’t like a ‘normal’ feeder fund and that one actually owns the underlying shares. Is this still the case and it seems to have read somewhere that this might have changed recently? I would prefer to own the underlying shares as this as it feels ‘safer’ that the investment is then not under SA jurisdiction (even though it is Rand denominated.) I have called Ashburton but they couldn’t help me and said someone from The First Rand Group would fall me back and no one has... Adam https://theirrelevantinvestor.com/2020/09/25/how-much-money-should-you-have-saved-for-retirement/ By 30 you should have saved 1x your salary - by 40 it's 3x! Scary... Anton How do you choose a living annuity once you get to the stage where you must go on pension? I would prefer low cost/high performance Living annuities. I will not draw more than the 4% rule. I think having 3 years of money in the cash/money market and bonds. (Low risk) 3 to 5 years money in combination with bonds and equity ETFs. (Medium risk). And the rest of the money in offshore ETFs (High risk). I would like to structure and manage my own living annuity in one of the companies. I think you can do it in Alan Grey but I am not sure if they cater for ETFs and it seems they are also more expensive.  It seems that Outvest has no living annuities. etfSa and 10X have living annuities, but it dont seem like you have the option for only offshore.

We use my long-awaited holiday to catch up to some user questions for the next three weeks. We hope you enjoy the shorter episodes as much as I plan on enjoying my break! Suzanne After finding your podcast during hard lockdown, I have been binge listening …..and can honestly say: You have changed my life! Thank you! I have kicked Sanlam and their 5.4% TIC under the arse, and moved my Retirement Annuity to OUTvest.  The buggers charged me a R30,000 exit fee; but thanks to OUTvest’s amazing product – within 5 months I made up the loss; ½ coming from my contributions, and ½ from real returns! Following Nerina Visser’s fantastic presentation, I am also spreadsheeting everything, but have run into a bit of a snag and hope you can help. As a medical professional, I hold a PPS Policy which includes a sickness- and disability benefit, as well as life cover. Thanks to Stealthy Wealth, I now know that ‘PPS is a mutual society, and doesn't operate like a normal company. They distribute any profit they make back to the policyholders’. These profits are linked to the above policy, and deposited annually into my PPS Profit Share Account. Annually, PPS provides me with a current Rand value, for the value of my PPS Profit Share Account – and I am happy to say it has been growing steadily. On my policy statement it further states that ‘These accounts do not vest until the policy holder reaches 60 years;….and on this date the Profit Share Account can be taken TAX FREE as a cash lump sum’. Can I safely count this Rand value, and the projected growth, towards my retirement planning? And if so, any suggestions on what would be the best (tax efficient) way to do it? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Brett If you take out a life policy of a R1 000 000 and nominate a beneficiary. -Then SARS assesses you and says you owe them R800 000. -You don't pay the debt due to SARS. -Can SARS nominate the Insurance Agency as a 3rd party in terms of the Tax Administration Act to collect the outstanding debt from the Insurance provider? -In other words whose money is it/The beneficiary or the policyholder. -I have looked into this a bit and it seems that creditors cannot access life policies which would indicate it belongs to the beneficiary and not the policyholder. Kobus I have offshore funds in a Bank account earning nothing at the moment. I am considering  investing this in the Sanlam Glacier Global Life plan and will do this without a FA to save on costs. What other reputable companies in SA offer this service where you can invest directly without the help of an intermediary? Rudolph I have a decision to make that I am a little confused about. I am wondering about the order that I should give preference to. I am currently first trying to max out my RA for the Tax benefit, but keeping myself from accessing the funds till I am 65. Then I try to max out my TFSA and Finally I allocate the remainder of my extra money to my house bond to pay it off quicker. I am not sure if this is the best order to give preference to. Ken We used to contribute to Little Eden and St Bernhards Hospice as part of our monthly tithe. But with our aging parents, and their lack of retirement savings, we are anticipating needing to help them out in the years to come. So we are diverting our tithe savings into a Allan Gray money market account (lowest fees on the market from what I can tell). But I often have a pang of regret when I think that we are no longer supporting these companies that are working so hard to help others. I wonder. if by no longer supporting them, we have resulted in them having to turn somebody away. My idea is a Charity "ETF". like the "top 40" of non profit worthy (researched and vetted) organisations that are helping others. The Charity "ETF" fact sheet will look a little bit different, with links to all of the top 40 organisations websites and a brief description of what they do. I was daydreaming about it popping up as an option when you are submitting a trade on Easy Equities (like the R2 KFC thing). There would be a management fee for whoever was running the "ETF" I suppose, but ideally all of the contributions go directly to the top 40 organisations.  The main thought behind having the Charity "ETF" is that it may seem silly wanting to send, a once off, R100 to one of these organisations. And even sillier to try and split that R100 up into smaller amounts to spread the contribution to multiple companies. But that is what an ETF does best! take a little bit of everybodies money, combines it into one big pot and distributes it to the top 40 organisations. What would really be nice is if Easy Equities could provide you with a section 18A receipt at the end of the financial year as part of all the other tax certificates they provide. Greta Having recently been paid a lump sum (divorce agreement), and needing to live off the yield of my investments for the rest of my life, I have educated myself on personal wealth. I have a pretty sound understanding of my options and how I would like to invest - again based on sound investing principles that you and Simon live by. My question now is a completely practical one: I have the investment pots - one for growth, one for emergencies, one for income. But how do I give myself a monthly income drawdown (I am not a retiree or of retiree age - still 13 years to go).  What investment vehicles are my options to hold my three years of expenses in from which I will draw my monthly income - is it a bank account? Or is there some other investment vehicle I can use to invest my 3-year-expenses money in and get a monthly income drawdown from?  Robin I'm interested to understand how Bonds work as an investment vehicle.  Can you and Simon dive into when and why one should invest in bonds? Should they be SA or Int. Bonds, and which Bonds should one consider?  In the next month, I will have a maturing fixed investment, where I was getting a reasonable 7.58% compounded return. I want to re-invest these funds. However, with the decline in interest rates this year the bank will now only provide 4% compounded return, which doesn't help my cause at all.  I have Tax Free savings in place, I have a Living Annuity that I recently moved from an RA as I can allocate the full investment to offshore equities rather than on 30% as per Reg 28, where the 2.5% compulsory payout of which I re-allocate to my TFS.  I have a diversified SA ETF portfolio (SYGUK; STXNDQ, STXCHN, GLODIV, ETFPLD, ETFGRE, ETFIT, CSPROP, CSP500, STXEMG, STXRES, STXWDM, SYG4IR SYGEU, all in equal allocations) which I am building on (waiting for lower prices to allocate more funds). I also have an offshore Investment portfolio that I actively manage in both Offshore Equities and ETFs.  My goal is to increase growth over the next three years, therefore I have taken an active investment approach. (I am 57 years old and I live abroad, therefore having both an SA and Overseas Investment Portfolios serves me well) Any pearls of wisdom where I can invest the funds that will be freed up next month? Taking all of the above into consideration.

We use my long-awaited holiday to catch up to some user questions for the next three weeks. We hope you enjoy the shorter episodes as much as I plan on enjoying my break! Willem  I have an endowment in my portfolio which was a five year investment which started in July 2003 with the last payment in July 2007 which matured July 2008.  Tax was deducted on all these investments for this endowment at ACSIS/OLD MUTUAL as per quarterly reports, as well as capital gains tax. When inquiring at Old Mutual recently, they presented me with a figure for CGT if the investment is drawn upon. The investment was 4 payments of R30,000 and the the last one R36,000. The value as at February 2020 was R572,089. Would you be kind enough to let me know how else can I get this investment to work for me in the light of being able to access this investment like a conventional discretionary investment without tax complications. I have a discretionary investment, as well as a living annuity in the same portfolio. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. Veronica You guys seem to be big fans of ETFs but when I looked into buying one they all recommend an investment period of at least 5 years or more (i.e. they're high-risk and therefore long term investments).  My husband and I are looking to potentially emigrate in about 4-5 years from now. In light of that, where would the best place be for us to invest our savings? I currently have a money market emergency fund and am putting away a bit into an Allan Gray Balanced Fund (both recommended by a financial advisor, although the more I listen to your podcast the more I'm thinking to start handling investments on my own ☺).  ETFs sound like the best place to invest but are suited for way long term, in which case we might be out of the country before the product matures. Is the solution then to keep the savings in something like the money market? Is it still worth opening a tax-free savings account for 5 years? James is wondering about Zambezi preference shares. Can you please discuss the place of this product in a portfolio for someone that is on pension.   Will it help with cash flow during pension? Pieter  The thing people miss about the 4% rule is that the study didn’t work on the principle that your money should last forever. Success was measured on the fact that you would have more than $0 after 30 years at a 50:50 equity:bond allocation. That might also mean you have $1 left for year 31 which accounts for the 95% success rate. Another caveat is the study was run during a high interest period in America.  Also just on a correction how the 4% rule worked in the study. You withdraw 4% in year one. After that, you withdraw what you did the year before plus inflation, not 4% of your asset base. Josh I plan to emigrate to the UK at the end of the year.  I have been maxing out my TFSA and contributing to a Provident fund. When I maxed out my TFSA for this year, I started setting aside that cash monthly that was going to the TFSA, and reduced the amount going into my Provident fund monthly with a view of investing it when I got to the UK (after having converted it to pounds obviously). The UK equivalent of a TFSA allows contributions of a max of £20,000 per year (with single shares allowed). I plan to liquidate my TFSA when I move, cash out my Provident fund when I resign (and take the tax hit), and chuck all of that cash into a stocks and shares ISA, probably a Vanguard all world ETF. Also, I'll be using a broker called Trading 212 if anyone is interested. Do you think this is a silly idea? Cashing out of a TFSA and Provident fund is a big decision. And just something separate: I wish I hadn't bought a property now that I'm immigrating. I just want to sell the stupid place but am struggling. Wish I just rented a place.  Conrad  I’ve requested  information on the OUTvest investment options for a preservation fund. I am not happy with these just by looking at the top 10 holdings in most of these options. I agree with your view on simplified broad-based ETF investments and wondered if these are the only options that Outvest offers or if I can structure a more simplified ETF based combination that will be Regulation 28 compliant. Sean I WAS one of those people who has religiously put monthly money away with a broker who was smiling all the way to the bank from the tender age of 15. I am now 29. In the past three years I have been paying a lot more attention to where my money goes. Thanks to you guys, I had that awkward conversation with said broker and have taken all of my funds away from them and reinvested in a much cheaper, passive investment group. Although this new firm is cheaper, it’s not as cheap as Easy Equities, so I have been splitting my monthly contributions for the past year with EE. Things have been going so well that I recently started looking into the TFSA on the EE platform. I have been able to max it out for the last three years. If I had known about it earlier it would have been longer but it turns out they aren’t very profitable for high rolling fund managers. With this being said, I did some deeper research on EasyEquities, and I was shocked! I have had a great experience with them so far, however I have not tried to withdraw any of my money yet.  This seems to be a huge problem on the platform, if you have a look at Hello Peter.  It’s a scary prospect to have your hard-earned money on such a platform that “doesn’t pay out withdrawals and doesn’t answer any emails or phone calls” the dreaded word “scam” is even mentioned by one of the disgruntled users. I know Purple Group is a legitimate, listed company that has legal obligations in place but other people’s VERY poor experiences are something I cannot look past. It has been an amazing platform for me so far, but there is a big BUT in the back of my mind now.  Is there anything from your side that could put an innocent investor's mind at ease?

With Simon celebrating his birthday on the beach, this week’s episode is a tax bonanza. De Wet de Villiers, King of the Tax Elves and Great Guy finally shares with all of you what he shares with me for free every Monday. I love talking about tax, which is why this week’s episode is much longer than usual, and much shorter than it could have been. He gives us a useful checklist of things all of us should do when we submit our tax returns, among them:  If you earn less than R500,000 per year, you don’t need to file a tax return. You can ask your HR department to factor in your medical aid and retirement contributions, even if you signed up for those services privately.  You should check your details annually, including address, SMS number, email and bank details. Keep a record and declare all income streams available, including directorships and side hustles. Make sure all your investments and bank accounts are included. Provisional taxpayers should keep track of the following expenses: Expenses: Rental property magazine, conferences Side-hustle: Phone calls, data costs,  Business travel: fuel, vehicle expenses Home office: Fibre at home, cleaning costs Don’t accept the auto-assessment. It doesn’t work yet. Check your prior-year tax return to look for things you may have forgotten. This is especially true if your circumstances haven’t changed much. Get a statement of account from SARS from e-filing. Don’t do everything in one go - do a tax recon every quarter so it’s not so overwhelming. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Jess Let me start by saying that the Fat Wallet Show and Just One Lap have completely revolutionised the way I think about my personal finances. In fact, I used to avoid thinking about it at all because I found it so overwhelming and confusing. But since listening to your show I actually understand words like "equities" and "diversification" and "All Share Index". I feel like a brand new person, so thank you for that. I was working on cruise ships and earning USD but thanks to Covid I had to come home. I am currently working in the public sector but might go back on board for another contract.  Since listening to your podcast I have corrected some financial errors that the ignorant past-Jess made. Luckily, keeping expenses low and saving money comes naturally to me so I was doing that anyway - but my mistake was saving a lot of cash and being afraid of equities. I have an RA to which I am currently contributing 10% of my income, but other than that all my savings are in cash. Thanks to you, I am now moving my TFSA (currently at max) from cash to ETFs (which I did via EasyEquities much to my financial advisor's annoyance - now she won't reap the benefits of my investment). I also have a home loan on a house that I am renting out. The rest of my savings is in cash (32 day account for emergencies, standard savings account, extra payments into my bond and a USD global account) - I know, really silly!  I want to move more cash to equities but I have a few questions and would like to hear what you think? Should I contribute even more to my RA (which has high fees and a financial advisor fee) first to get the tax benefits or should I rather buy a discretionary investment with lower fees? I stopped paying extra into my bond because of the low interest rates at the moment (in order to keep my rental income profits low and reduce my income tax). Is this wise? Or should I rather continue to put extra into the bond and just pay the income tax but get rid of the debt quicker? Since I have USD I want to open an EasyEquities USD account too. For someone who has no idea where she might live one day, what is a good balance between local and offshore investments? And this might be a stupid one, but what is the difference between investing in global ETFs in ZAR vs buying ETFs via the USD account?  Gerard Can you possibly spend a bit of time on Physical Offshore investment accounts and how these things should be declared to SARS. I have an EasyEquities USD account, and they withhold 15% of  Div tax, so do I get a credit for that or should I apply for a credit? 

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? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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: 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.) 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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 Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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.

When you’ve gotten your debt and spending under control, it can be comforting to hold on to your free cash for a while. Taking the leap from that safe pile of money to the Big Bad Market is not easy. However, as we’ve discussed before, cash is not a risk-free investment. The longer you sit on a lump sum of cash, the more risky it becomes. This is because of inflation. The effects of inflation are difficult to internalise because the rand value of your money stays the same. Let’s say you put R100,000 in a low interest cash account today. The interest you earn is enough to cover the annual cost of the account, but nothing more. At an inflation rate of 5.5%, in 10 years you’d only be able to buy what R58,543 can buy you today. The rand amount is still R100,000 so it seems like you haven’t lost anything, but you can afford half of what R100,000 can buy you today. In 20 years your bank statement would still reflect R100,000, but you’d be able to buy what R34,272 can buy today. As you can see, the inflation risk increases every year. This week we help three listeners figure out how to put their cash lump sums to use. The checklist we managed to come up with for a cash lump sum is as follows: Fund your tax-free investment vehicle: Commonly referred to as tax-free savings accounts or TFSAs, these products should be every South African’s first investment. As an investor you are liable for dividend withholding tax, tax on interest and capital gains tax outside of a tax-free account. As we discuss in this week’s episode, these accounts are not meant for cash savings. Don’t speculate unless you can afford to lose the money: While cash makes it easier to capitalise on investment opportunities as they present themselves, cash can also make it easier to hop on a bandwagon that’s not suitable. Don’t invest your cash into a speculative investment (think alternative asset classes, sub-indices or individual companies) unless you can afford to lose that money. Lump sum vs average: While the math shows us investing an entire lump sum in one go makes more financial sense in terms of potential future earnings, going into the market one small investment at a time is a legitimate option if you’re scared. If this is your first investment, think of it as a teaching tool initially. Once you feel more confident, you can add the rest. Work out the future value: If cash is giving you a feeling of safety, find an online calculator to work out the future value of your lump sum using a 5.5% inflation rate. Now play around with higher or lower inflation rates. Hopefully seeing the value of your investment deplete will be the motivation you need to get going. Diversify: If you’re holding on to a large amount of cash, you are not diversified. Make sure to put your money to work. Subscribe to our RSS feed here. Subscribe or rate us in iTunes Win of the week: Matt: If I earn a salary from a foreign company and then decide to do the nomad thing and travel around low cost of living countries for, say, a year but remain a tax resident in SA. My understanding is the first R1m earned will be tax exempt- is that the case? “Tax residents in South Africa will be taxed on their worldwide income. But that is dependent that they’re still SA tax residents. Offshore salary earned is taken into account. R1.25m ito the latest tax amendments will be exempt from tax in SA.” Harry This was mainly due to the fact that I did not know what the best option was, and my new employer only offered a provident fund.. I've been maximizing my tax benefit with my new employer provident fund. I'm also sitting on cash in a savings vehicle with my bank, currently returning around 3-3.5% interest. I'm living rather small (renting only, no debt of any sort) and have quite a bit of money to invest/save every month. What would you advise I do with my portfolio? The preservation fund? Should I keep maximising my provident fund contribution? What about my cash savings account? Should I consider taking money out of the country? Investing offshore? Joe I know we may have missed the boat both with gold and Tesla, would you suggest we go for an ETF with some gold in them? We don’t mind going moderately aggressive. Steven I currently have free cash in my TFSA with ABSA Stockbrokers. Besides the fact that its not earning that much in the way of interest, they also charge a 1% service fee annually, which I believe is based on the value of the funds in the account? I’m reluctant to invest in the market right now as I feel there’s no value and would prefer to wait for a correction, when it eventually comes? Although I have no previous experience investing in bonds I am thinking this could be a suitable option at this time. Looking specifically at the Stanlib Global Government Bond (ETFGGB), it seems to be doing very well so far but is this mainly due to the Rand’s weakness over the past few years as opposed to any other factors? Considering that this is a reasonably low risk product, is it currently a better option than investing in a regular cash instrument which is offering such low yields at the moment? According to the fact sheet the time frame for this ETF is 3 years so assuming my investment period was 1 year or less, would you say that this is not going to be suitable? Santosh Based on FIRE (my FIRE btw is Fuck It, Retire Early) the rule is to have around 250 - 300x monthly income. So Kris, I know your FIRE number is R7M as you've stated this. so assume you have the R7M already and are still work and assume is sort of split into Cash, Bonds, Stocks and Property. If this portfolio yields you a modest 6% PA it amounts to your investments paying you R420,000 PA - Gross. Now this is gonna have a major impact on the tax you'll pay as there's no way that you can "hide" this from SARS and there's no way your PAYE accounts for this. You're gonna have to pay SARS either way. I know one of the solutions is to dump it all into an RA but then you are not liquid and you'll pay the tax in the future anyway. I'm sure the other FIRE guys like Patrick, Stealthy face this. What's the solution ? Does on just lap it up & pay the tax comforted in the knowledge that they're paying tax cause they've made money This tax liability is quite substantial as if you're an average earner, it pushes you 2-3 tax brackets higher and if you're a HNWI, even an increase of 0.2% of your taxable income can add R20000-R50000 to your tax bill for that year. Leon For the inflation linked option, the capital balance would increase by the cpi calculated rate at payment dates and interest is fixed at 5% of capital. The website mentions an index ratio calculated by cpi divided by base ratio or value, do you know where this base value(divisor) is obtained from? It only mentions that the cpi (numerator) is obtained from Stats SA. The fixed rate on the inflation linked 10 year bond is at an all-time high of 5%? Is this an opportunity to lock in a great rate or are the fixed rate bonds still the better option? It seems like there is more upside potential on the inflation linked bonds as it is unlikely cpi will remain at current lows over the 10 year period. I may be incorrect but it seems both options offer the roll over or restart option so you could capture any improvement on the fixed rates either way. Ross There is an awesome book by Andrew Hallam - "Millionaire expat" that details expat investing (He details options for people all around the world) He also has a blog. Another is Bogle heads investing advice and info based on Singaporean expat investing.

Often the fear of making a mistake keeps us from starting our investment journey. It feels like everything is on the line when we make our first investment, but missteps can be corrected fairly easily. Even the mistake of waiting too long and starting too late can be corrected. This week we think through some of the mistakes new investors fear most and how they can be corrected. Hopefully this episode will give you the courage you need to take the plunge. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Rory I started learning about the investing world about two months ago and stumbled upon your website within the first week.  Most of the things you discussed in your podcast just flew over my head, but it did direct me to the things I had to go read up about. Two months later I realized I am able to follow your podcasts without any problems. I want to thank you both for that. If I didn't stumble upon your website it would have taken me much longer to actually understand the investing world. I have a friend, he is 25 and about to get married. His plan is to move to New Zealand in the next ten years. I told him he should look at starting to put money away in his TFSA, then the question came up about what happens to that money when he emigrates? I see EasyEquities opened a properties platform, where you can buy shares in buildings and earn your share of the rent. What are your opinions on this? Do you think it would be a good idea to invest some money there and what would the tax implications be? Travis I recently made my first attempt to begin investing using my TFSA. I have been listening to the Fat Wallet show whenever I can.  I decided to invest in the Satrix NASDAQ 100 and the Satrix S&P 500 hoping to acquire some international exposure. I did not realise the NASDAQ has some S&P 500 companies. Now I am wondering whether I have begun on the wrong note, making a mistake and overinvesting or spreading myself too thin in some of these companies in the indices. Is there any way that way that I can correct this "imbalance" in my TFSA or should I even bother? Have I made a blunder in choosing both the NASDAQ and S&P 500?  Ash Like many of my colleagues, I was hopeless with my finances for most of my working life. I had 2 RAs with my insurance broker that were fee- and penalty-laced products that underperformed my cash savings account. Four years ago, I started a tax-free and a discretionary investment with my bank which were both heavy on fees (2-3%) and did not perform as expected (annualized return of A year later, I took a two-year private scholarship, which meant leaving my government job after 10 years and my pension fund (GEPF) paying out. The scholarship only paid about 60% of my usual salary & I would have had a hard time keeping up with my bond repayments, instead of moving the pension payout into a preservation fund or my RA, I used it to settle most of my bond and reduce my monthly payments. Needless to say, this 2 year gap left a big dent in my finances overall as I had no other source of income & relied heavily on my savings. Earlier this year, when I was looking at investment options for my toddler’s education, I started reading up on personal finance & investing, discovered your blog and podcast, and realized all my missteps along the way. This set off a series of changes in rapid succession: I switched banks to a bank with a single, lower fee, and better cash investment options. This meant closing my access bond. With my biggest debts paid off, I cut down aggressively on unnecessary expenses, brought my expense:income ratio to about 40% and focused on saving and investing the balance. I started 2 new money market accounts with the new bank - 1 immediate access for my emergency fund (now have 3x monthly expenses covered), and a 90-day notice account with a higher interest rate (between 6.5-7%). I transferred both my insurance-based RAs (despite the protests and threats of penalties from my broker) to a low-fee new generation RA (10X) and started a new one with Sygnia (Skeleton Balanced 70). I increased my contributions from 5% to 10% of my income, and plan to increase further to 15%. I repurchased the poorly performing discretionary investment with my bank and reinvested this in an Allan Gray unit trust (High Equity Fund) - lower fees but still in the range of 1.6%. This was just at the start of the current crash so it has nosedived, but I am planning to hold rather than sell low. I began investing in a range of ETFs in quick succession:  a) Satrix (50%): initially Top 40 (12.5%) and MSCI World (12.5%) - later added Emerging Markets (6.25%), NASDAQ 100 (6.25%) and most recently, the new SA Bond ETF (12.5%). b) Sygnia (25%): 4th Global IR ETF (12.5%) and S&P500 (12.5%) (initially also had MSCI USA but stopped the recurring contributions when I realized the huge overlap with the S&P) c) CoreShares (25%): S&P Global Property (12.5%) & SA Property Income (12.5%). I switched my tax-free investment from the ‘multi-managed growth fund of funds’ with my bank to the NewFunds MAPPS Growth ETF (using the same platform), and split my maximum contribution between this ETF (50%) & the Sygnia Skeleton International Equity FoFs (50%) (*factsheets attached). I would like to know your take on my financial moves and if there was anything I could have done better? My concerns are: Was it a mistake to close my old bank account just to save on fees, since this was my oldest and most diversified line of credit (home loan + first ever credit card)? Will this damage my credit score, especially when I apply for a new home loan? Am I overexposed to global (especially US) markets in my choice of ETFs & is there too much overlap in the holdings of the global ETFs (MSCI World, S&P500, NASDAQ 100 and the Sygnia International Equity FoFs, not to mention the 30% international equity in my RA’s)? My discretionary investments currently outweigh my RA contributions by about 40% & both RAs still only represent 10% of my income. I wanted to gain more equity and global exposure than a Reg28 product would allow (and have access to the funds if needed before age 55), but is this short-sighted and should I rather aim to maximize my tax deductions?  The listed property ETFs are the worst performing products so far & I understand this reflects the poor performance of property markets in general - would reducing my exposure to this sector be wise at this stage since recovery is very likely to be sluggish given the current crisis?  How do you feel about holding the NewFunds MAPPS Growth ETF in a tax-free investment? This is 70% local equity (SWIX) and also holds a significant proportion in SA bonds or cash (30%). Is this kind of ‘balanced’ ETF not ideal for a tax-free investment (TFI) since we are looking at long-term growth and equity-only would give higher returns? After listening to your podcasts, I understand the Ashburton 1200 to be one of the best choices for a diversified equity-only ETF. I am thinking of transferring my TFI to the ASHGEQ via Easy Equities, however this overlaps quite a bit with the Sygnia Skeleton International Equity FoFs (*fund breakdown attached), including emerging market exposure. Would I be better off consolidating my TFI into one ‘global’ ETF or is there any benefit to splitting between the ASHGEQ and the Sygnia International Equity FoFs (*not sure if this is really a ‘passive’ fund since it seeks to ‘outperform’ the MSCI ACWI)? Should I rather split the TFI between the ASHGEQ and a local equity ETF like the CoreShares Top50 since the SA market is not represented in the ASHGEQ? How do you and Simon feel about the Ashburton World Government Bond ETF (TER 0.51%), particularly as a part of ‘balanced’ ETF portfolio? I see from their factsheet that their returns have exceeded even the ASHGEQ (>20%), but I understand that this may change with interest rates over time, and may not reflect future performance. Would the combination below in a TFSA wrapper be the best long-term bet? Ashburton Global 1200 Equity ETF (1/3) Ashburton World Government Bond ETF (1/3) CoreShares S&P SA Top 50 ETF (1/3) I have been looking at the RAs offered by EtfSA & their Wealth Enhancer RA seems quite attractive - it includes more commodities (gold in particular), local mid-cap and Africa ex-SA exposure than my current RA holdings. The fees though stand at 1%, similar to 10X. What are your thoughts on this RA & would you recommend adding this to diversify my RA portfolio?  Matt  With many companies transitioning to remote work and deciding to stay that way, it's becoming easier to find a location independent job for a foreign company. If I earn a salary from a foreign company and then decide to do the nomad thing and travel around low cost of living countries for, say, a year but remain a tax resident in SA. My understanding is the first R1m earned will be tax exempt- is that the cae? Am I missing anything and does this seem like a feasible thing to pull off? Access the ETF comparison tool Edwin shared here: https://www.etfrc.com/funds/overlap.php Anne My employer pays into a Liberty Provident Fund on my behalf. For the first time this month I requested my Provident Fund statement.  I saw, with disbelief, that Liberty is taking 12% of my contribution each month in fees! Given what I have learned about fees from your website and podcasts I am dumbfounded.  I queried this with Liberty and they said it’s because their fees are based on 0.02% of ‘payroll’ i.e my salary, rather than my contribution. I checked with our company CFO and she said these fees are in keeping with what is charged by other companies and I can’t go to another provider.    What do other reputable SA companies charge to administer Provident Funds? Why is it so hard (for me, anyway) to find this out? Do you know if my company can compel me to stick with Liberty under SA law? Why can’t I leave the company provident fund to go to another provident fund or RA of my choosing? If not, Liberty can just make up a number (as they seem to have done) and charge me what they like and there is nothing I can do about it except leave my job. 

I’ve been avoiding talking about endowment policies, because what even are they? I haven’t come across one in my own investment life. This week, a question from Sandile sent me down the endowment road. I had fun with it. I got the Tax Elves involved. They had fun with it. Fun was had by all. Endowments are the love child of insurance and investments. They have a five-year lock-in period, a tax rate of 30%, a life assured and a beneficiary. If you are in a higher tax bracket and looking for a long-term investment vehicle, endowments are worth investigating. They can also play a role in estate planning. It pays out directly to the beneficiary, which is great if you are leaving someone behind who is financially dependent on you. As De Wet de Villiers pointed out, the fact that they pay out tax-free doesn’t mean they’re not taxed in the estate. It simply means the estate is liable for the tax, not the beneficiary.  In addition to teaching me a thing or two about endowments, Sandile’s question could serve as a template if you’re hoping to add new holdings to your portfolio. His clear reasoning and systematic approach to adding this investment is worthy of emulation. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Pru I’ve tried to break up with my advisor for the last year, but it has been difficult! Everytime I say to him, we need to talk and I want to move my investments, he takes me out on a nice date, listens to me and then goes on to scare me into staying with him. He tells me EasyEquities is not the right platform for me and I should be careful of companies like 10X. It does not help that he also butters me up and tells me how great I am, while also telling me about his life, so I end up feeling I can’t leave him because he confides in me. My people-pleasing self feels bad for wanting to break up with him. It's the perfect emotionally manipulative relationship and I JUST CAN'T LEAVE!  How does one amicably break up with their financial advisor? More importantly, how do you leave them when you have a fear of managing your money independently?  I have listened to your podcast, and some episodes more than once. I read Sam Beckbessinger's book and Vicki Robin's book called Your Money or Your Life. I aspire to be a Patrick Mckay and I have a financial strategy to reach FIRE, but my greatest hurdle is letting my financial advisor go and trusting myself that I can manage my investments myself.  When he is not around I feel as though I can manage my money independently and I do not need him, but after meeting with him, I leave with a great sense of fear about moving my TFSA from Sanlam to Easy and moving my RA from Discovery to TenEx or Outvest. All the financial aspects that do not involve him I have managed relatively well, like my emergency fund. I know I can manage my money, I just fear that if I move my investments to the "big bad world of ETFs" (which is how he makes it sound), I will lose everything! I know he may be playing Jedi mind tricks on me, but how do I stop myself from being tricked! Also, he is not a bad person, he is a very nice guy, but I think this is part of my problem, I am making this whole relationship too personal! I feel defeated!  Sandile I stumbled on this product by Sygnia where you can get direct exposure to Berkshire Hathaway.   Here is why I’m looking into buying into this fund: I believe that Berkshire is going to have ample opportunity to buy really decent businesses at decent prices as Covid continues to decimate some much needed industries.  I believe Berkshire is one of those great businesses that one can buy at a decent price, thanks to Covid; I bought a few units in late Jan through EasyEquities and the costs to transfer funds and transact in USD was rather hefty, so I think I’ll leave that to a local fund to handle that; I have looked at the S&P500 (which I hold) and in my view, the Berkshire allocation there is rather small and I’d like more exposure; Sygnia offers this fund for “discretionary savings into a 5-year endowment, a retirement annuity or a living annuity”. I would like to avoid setting up an RA with yet another service provider at the moment and I have no need for a living annuity, which leaves me with the endowment fund option. From the little that I could read up on endowment funds: I am fairly comfortable with the idea of leaving the cash invested for at least five years (if not more); My marginal income tax rate exceeds 41% so at 30% tax, the fund is saving me some element of tax; I have set up an emergency fund (around 6 months’ salary) so I think the risk of cancelling the endowment before 5 years is low; TFSA has been maxed for 2021 year of assessment. I contribute far less than the allowed 27.5% into my RA (I am busy assessing contributing into an RA vs increasing my employer-pension fund contributions); I am just uncertain if I’m opening myself up to more unknown risks/complications/costs by using this structure. Kimberley  I am a shareholder for a company who has moved operations to Mauritius. If our company is lucky enough to declare dividends, this will now be paid in USD.  How does this affect my tax?   Is there a way I can get it in ZAR without losing so much to tax or is it better I keep it offshore ?  I like the idea of keeping it offshore for emergencies or as a “life insurance” for me when I pass away to leave to my daughter. Is this possible with only holding a SA passport?   Perhaps I could open an offshore trust and list her as the beneficiary and the dividends get paid into that?  Could I open a USD trading account on EE and get the dividends paid directly to that?  Is what I’m wanting to do by not bringing it into SA even legal?     I feel there are not enough bubbles, chuckles, coffee and chai tea to get me through the questions I have and the changes I need to implement to get my financial ducks in a row.  Right now these ducks have ADHD and when they seem to be in a row, they decide to go off on a fucking tangent.   Anton  I inherited a farm in 1994 and sold it in 2019. I have the value of it when I got it and when I sold it. I did not get a valuation in 2001 when CGT started. I would like to know how to work out the CGT on this transaction.  Download the calculator here.   Moore I am 27 and have a pension/provident plan with my employer. I would like to have an RA for a top up. I would also like to invest in shares. I don't know how to go about doing any of those. I have an EasyEquities account but I don't really know which shares to target, and for which amount every month. I have a R1000 that I can divide for those two financial goals. With that amount of money and my age, I am not even sure if that will be enough to contribute. I’ve only been exposed recently to this saving and investing movement. I was so ignorant.  Thanks to the Fat wallet Community on Facebook I have managed to put some savings for Emergencies with Tyme bank. Catherine I’ve tried the Interactive Brokers demo account and find it a little intimidating. I don't know what options or margins are, and I don't want to enact them by mistake by clicking the wrong button. I also imagine their customer service is not catered for noobs like me. Having said that, the platform is becoming less intimidating the more I play with the demo account. Another option is to buy the shares through a Standard Bank Webtrader account, which has broker fees of 0.345% and annual account fees of 0.26%, and then transfer the amount across to my EasyEquities USD account to avoid paying ongoing annual fees. Do you have any thoughts on each of these options, considering that my goal is to pay the lowest fees possible over the next 20 years, but also have a relatively user-friendly experience.  I don’t have a credit card. The only time this has ever been a problem is when a hotel or car rental company requires a credit card for a booking or deposit. It is pretty frustrating being at an airport and unable to rent a car. And are there any ways to get around this booking/deposit problem without having a credit card? And do you know of any reasons to have a credit card aside from this (assuming I don't need the credit)? Are credit cards generally better than debit cards for general spending while travelling? Melisha I have two kids in grade 4 and grade 0. I usually save up the school fee money to pay once off and get a 5% discount in December of the previous year. I anticipate a 10% increase in school fees. So essentially I need to save R20k a month for both kids' school fees for the 2021 school year. We usually put the money into a savings account but now the interest rates are so low. At the moment the money is in a Tyme bank account goal save but i was wondering if there was something better out there? Something with low risk, short term and potentially to beat money market type accounts.  Our friend Walter made a site called Rate Compare https://www.ratecompare.co.za/.  Tristan Lately I have been seeing ads on YouTube for a financial service app called Franc. It has 4 stars on the Google Play Store but I was wondering if you had heard of it, seen it or tried it? Lastly, can we trust Franc? Ken  What is all the hype over Mexem Africa about? I have gone to their website but, quite frankly, it looks like a scamsters website (although I thought the same about Easy Equities' website too, before I started using it).  I don't see any info on tax free accounts, and they mention all sorts of foreign currencies but not much about how you convert your rands to Dollars/Euros/etc...  The little section on fees is as clear as mud.  As an ETF investor (tax free and discretionary) should I be looking into it in a bit more detail? Would really appreciate a chat between you and Simon on this. Brian I've been with etfSA since 2012. I am busy updating my etf portfolio and want to know if I should shift some funds or all to Easy Equities. I've already bought MSCI China through my Easy Equities account that I registered a few weeks ago. What is your suggestion? 

Most of us kick our 20-year-old selves for spending all our money making poor decisions in Melville instead of taking full advantage of compounding. The financial independence, retire early (FIRE) movement has given us valuable tools to reach our financial goals despite those late nights in Melville. I discussed that with FIRE-man Patrick McKay here. Since regret over lost investment time is something so many investors grapple with, we wondered whether we could quantify exactly how much we missed out on in order to make it up. It’s a simple question, but the solution is hella complicated. I tried to do this for my own situation like this: First I worked out how much money I would have needed today so I could stop contributing to my savings and still reach financial independence in 10 years. I never considered this before, but it’s basically the baby version of financial independence. To do this, I multiplied my current expenses by 300 to get to my FIRE number. (I always do this, even though I know that number by heart.) Then, using an average growth rate of 8%, I worked out what that amount would be in today’s money. 8% is slightly below the 9.4% annual return the JSE ALSI achieved over the last 10 years. (You can use a future value calculator online to do this.)  Next, I subtracted what I managed to save so far.  I divided the difference by 120 months—10 years—to get to the monthly rand amount. The bad news is it’s a lot of money. To add that to my current investments to reach my FIRE-goal, I’d have to take on another job. The good news is, I don’t have to stop investing now. Remember, that’s the amount of money I would have needed to stop contributing to my investments today. I wanted to arrive at a simple rule of thumb to help us think about making up for lost time. It turned out to be far more complicated than that, but hopefully this discussion gives you something to chew over. I’m excited to hear your thoughts. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Stippled  I recently listened to your perfect money month podcast.  I for the last 20, and my wife and I for the last 10  years, have followed a very simple "perfect money month" template. We are both 43 now and have recently become financially independent based upon the 4% rule (we are actually aiming for the 3% rule which will probably take another 3 years to achieve). The monthly template has been as follows: Give 10% of after tax income. Save 15% into a Pension, Provident or RA. Budget discretionary spend at the beginning of each month. [We use 22seven] Initially pay down debt, then Invest, the extra money [after we became debt free 7 years ago redirected to global broad based ETF . .  no individual shares]. One great dinner out each month . . .  but only one :-) General rules No debt except for housing [This means we still driving "student" cars] Automate as much as we possibly can Review insurance, cell phone and medical aid annually [In November for us] Review wills annually [In June for us] Balance investments evenly between each other to maximise tax benefits later on. Married out of community of property with accrual This has really been an unsexy and boring process to follow month in and month out.  However the results have astounded us.   They are: My wife was able to resign from her job when our first child was born seven years ago to be at home with our kids (we now have 2) which was always a dream of hers. We are now financially independent and we have made more money from our investments over the last three years than from my full time employment! We are able to afford to send our kids to any school of our choice which was always an important goal for us [Not that we automatically chose the most expensive, we just never wanted money to dictate the choice]. We are able to support friends and family financially if and when the need arises [Never a loan, always a gift] We also recognise how luck and privilege have played a very large part in our journey.  We both have tertiary education and have never been unemployed unwillingly.  But we have not wasted that good fortune and rather used it to create stability and choices for us and our family. Just in case I give the impression of all work and no fun . . .  I took a year off work in my mid to late twenties and spent it backpacking from Cape Town to Addis Ababa and climbing mountains in South America.  We take regular holidays locally to the beach and have taken 4 great international holidays in the last 10 years [We were even able to take my mom inlaw to Venice - It was her first trip out of SA]. We can honestly not recommend more strongly the boring "Perfect money month" idea.  It has benefits far in excess of what you can imagine when you start.  Approximately 240 months in, and we can say that without any hesitation.  Mike  The TERs of our global index trackers are extremely high compared with for example Vanguard. Is it not better to purchase them directly through the USD Account rather than purchasing a global tracker from one of our local providers at more than 6 times the fees? Eg. Vanguard VOO is 0.03% and the cheapest S&P500 tracker in SA is I think Sygnia @ 0.2%. I wonder why our RA providers use global trackers from local providers if the fees so much are higher? Maybe it is just easier for them cause they don’t have to move any money offshore but surely it would be worth their while to do it? Edwin I have been wondering if you or Simon have some tips or observations regarding the income side. I have been a salaried employee for most of my 15 year career and have spent a total of 6 weeks in my working life unemployed. I am currently employed.  My question, therefore, is what else can you advise me to do in the area of increasing income, besides simply starting a side gig. I have tried a few side gig ventures before. Some are still going, but could never replace my income. It's a lot of work and I’m wondering if it’s worth giving up on this and just focus on being indispensable to my employer. Should I be job hopping multiple times maybe? Is increasing your income supposed to be this hard? Is it a worthy goal to actively chase? Hans If Jared is doing contract work in Kuwait and spends some of the year in SA, he might owe SARS tax on his foreign earnings over R1m. This is a change in the tax code as of March this year. Satrix has an ALSI Unit trust. Given that Satrix and Easy Equities (same platform) already treat ETFs as Unit trusts, i.e. aggregate buys and execute them in bulk, how would this be any different? Terence  Many companies will be taking on that strategy in the future instead of paying bonusses etc. In fact retainer shares, bonus shares & even shares relating to ROCE (return on capital employed), BEE scorecard achievements etc are included in share awards these days. We are probably going to get to a position in SA where inflationary  increases will be negligible (like Europe as an eg) and there will have to be creative ways to retain good staff.  If your friend is working for a good company and believes that the potential can be achieved during his tenure, why should he not participate in a share scheme? Many employees are in the pound seats when the company lists on the JSE as they potentially make buckets of cash at vesting. Agree, many don't as well, but you should rather encourage that thorough homework prior to participating and or limiting the amount you purchase. Normally they discounted shares anyway and Management knows the upside on vesting or buyout occurs. Marielle  My grandmother was drawing her dividends from Ecsponent on a monthly basis to sustain herself. She does not have a lot of money. I believe she has around 300k. She is 68 years old and in good health. What would be the best way forward? Any ideas on where to invest so that she can draw an income and have funds available for a rainy day. Nico decided to move his RA from Momentum, where he pays 3.2% per year, to OUTvest because he qualifies for the R4,500 fixed fee. Momentum want to charge 15% of this lump sum to move his RA. It’s double the growth he achieved over the past 10 years. I know you went through this process recently and I really need help.

There’s more guesswork involved in retirement planning than we’d like to admit. If you’ve ever gone through the retirement planning process with a financial advisor, you know what I mean. To calculate how much money you’ll need for retirement, you need to factor in the expected inflation rate as well as the expected growth rate of your investments. If you had the ability to know those things with any degree of certainty, you wouldn’t need to do any retirement planning because you’d be psychic.  One of the most crucial guesses you have to make is how much money you’ll need in retirement. It’s hard for us to imagine our lives a week from now, much less decades into the future. How do we tackle this dilemma? The Financial Independence, Retire Early (FIRE) movement offers a useful rule of thumb to help here. To ensure you have enough money to retire and never run out of money, you need 300 times your monthly expenses. This is an excellent shorthand, because it forces you to put as much effort as possible towards controlling what leaves your account every month. However, using your current expenses would be to over-prepare. Some of your current expenses go towards preparing for your retirement. Your long-term savings and your long-term insurance products exist solely for this purpose. Once you reach financial independence, you go from having to look to others for an income to paying yourself.  That means your cost of living will automatically reduce by the amount of money you put towards retirement the minute you reach financial independence. Once you’ve accumulated enough assets, self-insurance becomes a reality. Stealthy Wealth does an excellent job of explaining how that works in this post. That’s another expense you can take off the list. But what about the hobbies you plan to take up once you have more time? How should you plan on paying for those? What if you wanted to take a holiday? In this week’s episode, we talk through how you can think about your expenses in retirement when you’re working out your financial independence number.  We are once again so grateful to OUTvest for funding this week’s episode. If you’re looking for a place to save towards your retirement goals, have a look at their excellent product here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Joy I think another example of upside risk is in studying. It is possible to work so hard at school and university to get top grades which give you a suite of distinctions and awards, but at what cost to friendships, hobbies, physical and mental health?  I know many adults who because of the sacrifices they made to achieve those things have always had that as a huge part of their identity. I’m sure you know, for example, middle aged men who are still called by their nickname from school or are part of the old boys club. Really?  Your qualifications are only important so far as you can actually make practical use of them. Who cares if you qualified as a doctor cum laude from Cambridge university if you are unprofessional, unkind and thoughtless? Or if you can’t even balance your personal finances 😂  My dad's idol was to retire early. He achieved that well. He never thought much about what he would do after that and as a result has really had (to my thinking) a pretty poor quality of life wandering aimlessly through this supposedly amazing thing called “early retirement”. When the idol shows itself as gold plated outside but hollow and empty on the inside 😢 Rafi  The number you get when you multiply your expenses by 300 does it include your Pension/RA, paid off house? Lyzelle I have Old Mutual Unit trusts. I would like to get out of there. I suppose I already know the reply for this one, since you have said numerous times that you cannot time the market, but here goes... do you think now is an exceptionally bad time to move money from the Unit trusts elsewhere?  Melanie I don't understand half these fees. Are these fees normal or should i run for the hills and move my RA. 1.Yearly marketing and administration charge % of fund value  First R500 000 4.20% Next R500 000 3.75% Excess above R1 000 000 3.50% Guarantee charge (Yearly guarantee charge % of fund value=1%) Deductions made by the asset managers: Sanlam Escalating - Coronation Balanced Plus Fund P (TIC 1.15%) SATRIX Dynamic Balanced Fund B Fixed (TIC 0.30%). Herman  I moved to Belgium recently (for how long I don't know). I thought I'd share some interesting personal finance observations from here. Not really applicable to SA, although it did help me to rethink some assumptions about "the way things just are" in SA: First I have to say that I pay a hell of a lot of tax on everything else - like 50% on any income above €37000, plus a lot of VAT, plus municipal taxes. So this is not to say that SA is bad and Belgium is good, but: - My bank account is free. I also get a Mastercard debit card with it. All transactions, withdrawals (internationally as well) are free. Also 0% interest, so in that sense you pay for it. But still cheaper than in SA (perhaps the newer banks are better). - Savings accounts: interest rates of 0.1% p.a. are standard. That is lower than inflation here, just as interest rates on savings accounts in SA. You can do better in special accounts, but you really want to go for ETFs for saving. - The only capital gains tax here is attracted if you flip a house within 5 years of buying it. No CGT on sales of shares... - No dividends withholding tax if you reinvest the dividends. - DeGiro is a Dutch broker where you can open a free account and make 1 free purchase per month of an ETF. Like, zero deposit and withdrawal fees, zero monthly fees. etc. - ETFs domiciled in Ireland attract no taxes in Ireland. Many ETFs are domiciled there for that reason. - Hence, investing through DeGiro in some ETFs in Ireland attracts zero taxes - CGT or DWT, and zero fees. It is like a TFSA in SA, but with no cap! - They also have things like RAs here. They suck as much here (if not more) and for the same reasons as in SA. High fees, prescribed asset percentages leading to low growth, exit taxes (only 8%), etc. Also smaller tax breaks initially. I think the SA financial services sector is more advanced and competitive in their offerings than the Belgian sector, although Europe is much more focussed on ethics etc, which I really appreciate. Nevertheless, I find it amazing that in SA a TFSA is this special thing, but here it assumed in the FIRE etc. communities. Neville wanted us to look at this ETF holdings. Catch Nerina Visser's presentation on how to think through your holdings. Mary  I received my IRP5 as a non-provisional taxpayer. Currently I contribute 23.5% of my base salary to two annuities. I realized that this percentage is calculated on my basic salary, but on the IRP5 there's an income code portraying gross income received and this amount is much higher than the base salary.  Could this higher amount be used to calculate higher contributions without it rolling over to the next year  so long as it's still under R350k as capped by the government? Or is it better to stick to base salary limits? Molekoa I've been working for 26 years and decided to resign as a civil servant. What is the best option for investment. 

What is diversification? Should you care about it? If you do care about it, how do you do it? In this week’s episode of The Fat Wallet Show, we spend some time at the intersection between risk and diversification. We help you think through the role of cash in a portfolio and once again reject the idea that your portfolio should start de-risking in your fifties. Coronavirus or no, modern humans live for a long time. Very few people can afford a multi-decade low-growth portfolio. We spend a little more time than usual on inflation risk. Inflation is the silent wealth killer. It’s so stealthy, those risk-tolerance questionnaires financial companies make you fill out don’t even ask about it. Just like shares held in the short-term introduces a lot of risk, cash held for a long time introduces risk to your portfolio. We play with the idea of diversifying into other currencies as an inflation hedge. We even have a little section for those who want to build their wealth with blueberries. For alternative investments, ask yourself: Who is the price maker? How liquid is the investment? How likely is it to beat inflation? We hope this episode gives you some tools to think through some of these issues in your own portfolio. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Nokuthula After discovering the podcast, I went through a phase of being giddy and hysterical for two weeks catching up on all the episodes. I started my savings journey late. I am not paying extra into my home loan and rather choosing to invest, I still have upcoming university fees for my niece and nephew who I’m partially supporting and will continue to support until they are independent. I can only do that from my salary as I am not putting any money away for them for future expenses. It is not a watertight plan, but I had to be realistic. There are many holes to plug but I had to be decisive. Being able to fund my own retirement is paramount. I am continuously working to change things for the better and nothing is off the table, including selling the house and working beyond age 55, but this is where I am now. Most of my money is saved in Reg. 28 accounts. I only started my TFSA in 2018 and I have been contributing the maximum allowed. I will only start contributing to my USD account in July so it is at zero right now. The breakdown as a percentage of my total monthly contributions is: Pension fund: 43% RA: 32% TFSA: 13% EE USD: 13%. Provident preservation: 0% Considering that the TFSA is the last to spend I think the preservation fund will be first, the current legislation allows that I can withdraw the full amount at retirement, but it will only last me a few years. That means my Reg. 28 accounts will have a bit of time to grow outside of the Reg. 28 restrictions. Then I guess it will be EE USD next. In a South African context, what should one think about in terms of a retirement drawdown strategy? What accounts should one have set up whether it is for FIRE or just FI? Should one also consider a South African discretionary account? I am also wondering if an endowment plan can also be part of the retirement mix. The ones I have seen are being marketed as being good for tax planning for people with a marginal tax rate of 30% or more. I would only go for one that is passively managed with low fees and if such does not exist then I will pass.

What is diversification? Should you care about it? If you do care about it, how do you do it? In this week’s episode of The Fat Wallet Show, we spend some time at the intersection between risk and diversification. We help you think through the role of cash in a portfolio and once again reject the idea that your portfolio should start de-risking in your fifties. Coronavirus or no, modern humans live for a long time. Very few people can afford a multi-decade low-growth portfolio. We spend a little more time than usual on inflation risk. Inflation is the silent wealth killer. It’s so stealthy, those risk-tolerance questionnaires financial companies make you fill out don’t even ask about it. Just like shares held in the short-term introduces a lot of risk, cash held for a long time introduces risk to your portfolio. We play with the idea of diversifying into other currencies as an inflation hedge. We even have a little section for those who want to build their wealth with blueberries. For alternative investments, ask yourself: Who is the price maker? How liquid is the investment? How likely is it to beat inflation? We hope this episode gives you some tools to think through some of these issues in your own portfolio. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Nokuthula After discovering the podcast, I went through a phase of being giddy and hysterical for two weeks catching up on all the episodes. I started my savings journey late. I am not paying extra into my home loan and rather choosing to invest, I still have upcoming university fees for my niece and nephew who I’m partially supporting and will continue to support until they are independent. I can only do that from my salary as I am not putting any money away for them for future expenses. It is not a watertight plan, but I had to be realistic. There are many holes to plug but I had to be decisive. Being able to fund my own retirement is paramount. I am continuously working to change things for the better and nothing is off the table, including selling the house and working beyond age 55, but this is where I am now. Most of my money is saved in Reg. 28 accounts. I only started my TFSA in 2018 and I have been contributing the maximum allowed. I will only start contributing to my USD account in July so it is at zero right now. The breakdown as a percentage of my total monthly contributions is: Pension fund: 43% RA: 32% TFSA: 13% EE USD: 13%. Provident preservation: 0% Considering that the TFSA is the last to spend I think the preservation fund will be first, the current legislation allows that I can withdraw the full amount at retirement, but it will only last me a few years. That means my Reg. 28 accounts will have a bit of time to grow outside of the Reg. 28 restrictions. Then I guess it will be EE USD next. In a South African context, what should one think about in terms of a retirement drawdown strategy? What accounts should one have set up whether it is for FIRE or just FI? Should one also consider a South African discretionary account? I am also wondering if an endowment plan can also be part of the retirement mix. The ones I have seen are being marketed as being good for tax planning for people with a marginal tax rate of 30% or more. I would only go for one that is passively managed with low fees and if such does not exist then I will pass.

Not all investment products are created equal. This week, listener JP was struggling to understand why his RA was performing so poorly while his tax-free account was making money. The answer is important for everyone who holds more than one investment product.  This week we help you (and JP) work out what exactly you should be looking at to ensure you’re comparing apples with apples. We discuss the role of Regulation 28 in the performance of retirement products, how different asset classes behave, the role of active managers and what the rand/dollar exchange rate has to do with it all. Subscribe to our RSS feed here. Subscribe or rate us in iTunes JP  I need some clarity on how an RA can perform so poorly when an ETF does so well.  Firstly rate of returns: Investec is -17.58 where my Satrix is +6.4 percent over this troubling period. That's a difference of almost 24% in the same market.  The one with Investec is with a financial advisor who charges 2.8% fees (that includes Investec platform, admin, etc) and is supposed to be a Inflation + 6% growth portfolio. My Satrix platform charges less than 1% fees. He holds the following Satrix ETFs: Divi, property, 40, World and S&P 500. How is it that financial institutions and professionally trained people can't get investment right but an index investor does?   Win of the week: Alida When are dividend distributions assigned? I've noticed that most ETFs will only distribute the dividends for a financial quarter a few weeks after the end of the quarter and it has me wondering: If I own some ASH 1200 at the end of the quarter, but then sell that before the dividends are distributed, do I still get the dividends for that quarter or not? Do I have to hold the shares until the dividends are distributed a month or so after the end of the quarter? Similarly, let's say I buy after the end of the 1st quarter, but before the distributions, would I then get the dividends for the 1st quarter? Pascal  I've spent time reading as much as I can find about all three of our global property ETFs to make a decision on which one to hold. Even though it will form a small part of my overall portfolio, this will be one of only 3 ETFs I ever hold, and plan to hold it forever, so it's important for me to make the right choice now.  The 1nvest product seems like the clear winner and I'm buying it currently. They simply chuck your funds directly into the iShares Global Property REIT ETF in the US, which seems like one of the best and most widely used ETFs in its class. It tracks the FTSE EPRA/NAREIT Global REIT Index. The index is used by a ton of other ETFs around the world. The CoreShares and Sygnia products track some other arbitrary thing: The S&P Global Property 40, which sounds super official until you google it and the rest of the world is like.. "nah dude, that's not a real thing" It seems that these are the only two products on the globe that I can find that actually track this 'global index'.  If you look into ASHGEQ's S&P1200, you get charts, factsheets, methodology documents, everything. But there's almost no information online on this one. It's basically a ghost index. Something about this just makes me feel uneasy, but maybe I'm being too pedantic? What are your thoughts?  Also, and this was the final kicker for me, they pay dividends bi-annually instead of quarterly like the 1nvest product or any other self-respecting, well-to-do fund.  If the 1nvest product is basically just rolling up my funds and passing it to the US iShares ETF, is that hefty US withholding tax already baked into all my dividends before they come full circle into my account?  If that's the case: Am I being a dumbass holding this thing in my TFSA instead of one of the fully locally-crafted products like the Sygnia? Now, I understand that any global ETF has a certain amount of baked-in withholding tax from other countries, but if the 1nvest fund is basically a middle-man for a totally foreign ETF, am I needlessly adding an entire second layer of unavoidable withholding tax into my supposedly tax-free portfolio? Or perhaps is this all pretty negligible in the grand scheme of things? It's okay (in fact preferable) to tell me that all of this is literally a non-issue and it's just my lock-down brain overthinking literally everything. You guys mention the CoreShares one a lot, but... its more than twice as expensive as the Sygnia (in terms of TER). Why would I go for something that does the same thing for more than double the price? What am I missing here? Bea I have only recently started earning a relatively large amount of money abroad. At 61 I have to make sound investment decisions - there is very little margin for error at this stage!  The kind folks over at the Fat Wallet FB group have assisted, but I still feel the need of some more practical pointers to guide me. My situation is as follows: * I have around R38k monthly to invest * My Emergency Fund is available and will most likely use Tyme Bank. * I am going to choose Brightrock for disability and dread disease cover - heard about them on the Fat Wallet FB group. Are there other providers which you could suggest I try for the cover mentioned?  * I have no debt...however: * ...I pay R2 500.00 monthly for storage of my things in South Africa and shuddered when I heard Kristia's definition of an asset. It's a nightmare cost and really don't know what else to do with beloved items of furniture. * I plan to open TFSA and have R36k available for tax year 2020/21 deposit as soon as I can. I have no idea what to invest in. ETFs sound good since in this case I will hopefully have no need to touch this money, hopefully not for a  long time. * I have around R300k ready to invest at present - the foundation for the house savings.  I have opened a Sygnia Money Market Fund to invest this. However, I am concerned that I could do better in terms of interest elsewhere! Would I be keeping abreast of inflation etc?  * I would like to buy house in around 4 years in SA, hopefully cash - with the money I hope to have saved from now until this point. In this case,  I wil need to work until age 70 to save in order to cover my living expenses ( age 65 - 70). This is the reason I have been advised to use a money market vehicle - safety and availability, but could I not do better elsewhere? Do you think that this is the best course of action in my case? There is a need to both grow and protect my funds. However, I have heard Kristia talk about Index Funds and wondered if these applied in my case. They sound wonderful. Someone mentioned that I should be careful of my asset allocation - specifically stocks because of the time factor? * I have heard Simon mention that he has an RA. Should I have one?  * What are your thoughts on a living annuity in my case and how does this product work? * I have been advise to rather place the salary I earn in the Gulf country into a USD account and not bring it into ZAR. I haven't a clue on how to do this and wonder how safe this is? Interactive Brokers and Degiro not applicable - the former's fees are too expensive and I don't feel confident about Degiro. I get paid in a Gulf currency and most likely have the option to transfer funds to another account  in any of the major currencies. John Are European joint accounts included in your estate upon death? Also are they subject to SITUS tax from foreign jurisdictions? Santosh  Do we invest as much as possible and never enjoy it? Presumably most people want to leave a fortune to their heirs, thus amassing a stash and never actually drawing down for purchases - yes like a car, holiday or some other significant purchase.  At what point does one reach a "number" and after this anything more, whether you actively add or it grows via its own momentum, do you start just taking out ? I suppose this is really relevant for those without dependents and singles where there really is no one to leave it to.

Those of us slowly building a portfolio every month accept our investments will be determined by our overall strategy. This strategy would include our ultimate financial goal, plans around asset allocation, diversification, tax planning and future drawdown management. We understand we have to consider these variables throughout our portfolio, including our retirement products. New money coming in goes towards old strategies. It’s boring, but effective. Those who just came into a large amount of money are subjected to a terror to which the rest of us are immune. Where is this money supposed to go? The bigger the amount of money, the more flimsy former investment strategies seem. Oddly, new investors with only tiny amounts of money to invest seem to experience a lot of the same anxieties. At the extremes these decisions feel very large indeed. The one difference between making a choice about your first investment and the biggest investment lies in tax planning. Your first challenge is to hang on to as much of that money as possible. From there we’re sad to say it all comes down to your strategy. What do you want this money to achieve? Which products are most likely to get you there? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Jacques  I sold shares in a small private company.  I now have to decide what to do with it and to invest it wisely for the future. I am 50 years old and married with two 8 year old twin daughters (having waited for kids for 20 years!).  I have current income streams and do not have to use any of the capital to supplement income.  We are renting and own a plot hat has been paid for in full.  I need to decide to build a house now on the plot or invest the share money in a diversified portfolio for strong capital growth in the 15 years to come before retirement at say 65. I have an RA currently invested in a portfolio of shares.  I looked at Simon’s portfolio. I like his allocation of shares to “Death do us Part”, Second Tier, ETF and Tax Free groupings.  I read about the “Ashburton Global 1200 ETF” (ASHGEQ) fund that Simon proposes and the low fees of Outvest.   I need to decide how to structure the capital as the current levels of some share prices may present a once in life-time opportunity for me to buy low PEs (e.g Firstrand, etc.). I am willing to move the RA from Sanlam Private Wealth to Outvest.  I need to get Tax Free Investment accounts for the kids, my wife (perhaps all 4 of us) and also invest more into my wife’s RA (very small and also willing to move that to Outvest). I can afford to be aggressive and have no debts. I am however scared of my own emotions whilst trading so I want to follow a long-term passive strategy and not trade for the short term (speculate).  I have opened a brokerage account, but have not purchased any shares or instruments yet. Win of the week: Albert In podcast episode number 169, I had asked whether you would set up a Patreon. The rationale given for not having one seemed sensible at the time. Nonetheless, since August last year, following your sound advice regarding financial planning and cost management in general, I have saved quite a bit more than I would have otherwise.  For the most part, this means I do contribute more to my savings and investments, but I have also been growing a side savings account, for your benefit. Attached to this email is a Takealot Voucher, spend however you wish. I would recommend allocating it towards chuckles and bubbles, because I enjoy the somewhat more chaotic tipsy episodes, but you know it’s a free world, I know there may well be more pressing matters at hand. I am glad to have an emergency fund, and am currently parking my Covid-19 shut in lifestyle savings into a Tyme bank account. I currently have just over 8 months’ worth of expenses in cash, but perhaps it would be prudent to be in a similar situation to Simon, by having the maximum allowable tax-free amount on the balance sheet. Ordinarily I would like to carry on contributing to Tyme, but their savings limit per customer sits at R100 000, a number I will reach shortly if WFH continues. It seems that the ultra-competitive bank savings account offerings from last year have all but shriveled up. The most competitive 32-day account is African Bank’s with a 5.85% per annum. This bothered me, as I know that the New Funds Traci ETF yields about 7.4%.  I would like to know what the cost implications would be for the ETF, as it would sit in my discretionary brokerage account. I know I would be paying Brokerage commission, the Investor Protection Levy and VAT on costs every time I increase my savings or cash out, but what are the tax implications? As this is a total return ETF, I would not get paid the interest into my account as this would be re-invested into the ETF. Presumably I would have to sit down and spreadsheet the actual interest earned for that tax year.  Should an emergency arise, and I need to sell some units, would I be required to pay SARS capital gains tax on the interest earned as well? Your 2019 article about it on J1L also pondered the same question, so I wondered whether you had already received a response from one of the magical tax elves. Old Mutual offers the ability to save in one of its money market unit trusts which also tracks the STeFI, it comes linked to a transactional bank account. It is a unit trust, so it has a higher TER, but if it eliminates capital gains tax, the other exchange costs and the added admin around tax year end by giving me an account statement for the unit trust, I would be willing to give up 0.1% of the yield difference between it and the Traci. I would like to travel overseas after I get jabbed with a Covid vaccine. I have put money aside in a separate goal save. I get quite queasy when looking at ZAR exchange rates and what they may do between now and when I wish to travel, so I looked into SA based dollar/euro denominated accounts. Their interest rates on these are about as exciting as a finding a fly in one's soup. Would it be better to save for travel expenditure in dollars/euros in a hedge against a rand drop, or is it better to save in rands and suck up the volatility for the next 12 - 18 months for this purpose? I’m thinking of splitting the difference 50/50. Marco So question on Market Value Adjusters: Are they bullshit? I suspect that they are. My wife is moving her RA from the big mean green machine to Sygnia. She received a notification that an MVA has been applied to her RA to transfer and that it will reduce the amount that she is expecting by 5%. Is this just a way to keep people from transferring, or another penalty that's added on top? I sort of understand what an MVA is: save from the good years to prop up the bad--but why add this extra "bonus" to a financial asset? To me it sounds like a turd wrapped in a sparkly bonus wrapper that just hides how bad active managers treat customers. Mark I have 20% of my Tax free investment and ETF portfolios dedicated to CSPROP and STXPRO, but every month when I buy these, I feel I might be throwing my money down the drain. Should I keep buying property ETFs as part of my TFIA and ETF portfolios or am I better to just hold what I have for a few years and not buy more every month? Should I drop my 20% allocation to 10% or less? Alexander  Having just opened a Tax Free account, I’m ready to jump in with my entire 36k.  I know Simon’s advocated in the past for putting it all in at once, but has the current situation changed that approach at all? With my RA pretty much maxed out for last tax year, and this year looking to do the same, should I still be weighting my TF more to international markets? Or is it the case that since the rand is very weak against these markets that I’ll be doing myself a disservice in buying now?  I am 25 so as an investment I plan to leave (probably till retirement) it may not be do or die, either way I would like to make an informed decision. Is perhaps this year the year to focus locally with my investment and then return to my international focus with my TFSA at a later stage? Uncertain of how to proceed during this shaky and tumultuous moment. What do you recommend one does with an emergency lump sum of around 250k? I was surprised to see my Depositor Plus account with Absa having lowered interest rates as of April 2020. I was wondering whether you can recommend a few accounts or platforms to look at during this time now that interest rates are fluctuating? How would one start investing in the UK/&/Europe if one has a bank account in the UK, but no national insurance number? I occasionally get paid into that account by European clients and was thinking of using that channel to invest offshore, paying any applicable tax through my local accounts. Let me know if you have service providers you would recommend for something like this as well please. Shailesh I listened to "Five concepts that will make you rich". Simon mentioned in passing if you committed to your R33k annually (at that time) one could have as much as R25 million in 25 year's time.  How is this possible? My understanding is that your earnings are calculated on the amount it was initially bought and hence it is not really compounded except for the dividends that will be reinvested.  Should one sell their ETFs and re-buy them annually to compound it? This is a question about how shares make money. We wrote an article about that here. 

The financial services industry has done nobody any favours. Not only were many of our parents sold retirement products with exorbitant fees, they are also offered the same awful choices now they’ve reached retirement age. They have learned the hard way you can spend your life doing everything right and still lose because of bad products with high fees. This week we received five different questions from listeners who are trying to help their parents navigate the terrifying world of retirement money. For many of us, this is the biggest financial decision we would ever have to make. If you’ve been told you aren’t qualified or equipped to make these decisions your whole life, odds are you’re not going to start trying at 65.  Our parents need our help navigating this terrain. Hopefully this episode also helps us help each other. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Emma I am a proudly SA opera singer with a penchant to be a financially stable artist. I started my finance journey properly from last year, and was educated about Just One Lap by my mother, who was your winner of the week a while back. I wrote a blog post this month, hoping to encourage a culture of saving and financial savviness amongst my followers, and thought perhaps you might want to feature it in your podcast. Kenya My mom has recently left her job to take a few months off. Her pension fund (currently held with Old Mutual) needs to be transferred to a preservation fund until she retires in two years. A financial advisor offered her a once-off fee of 1.7% to give advice on which preservation fund to choose (and to help her complete the forms- which according to her are actually very simple). Initially it didn't sound like much, but I was shocked when I calculated the rand value of this fee. The fund he’s recommending still falls within the Old Mutual stable and has these costs:   Total investment charge: 0.63% p.a  Fund access: 0.18% p.a  Admin fee: 0.31% p.a  Totalling: 1.12% p.a  Alternatively, he has suggested a fund with Coronation with fees not dissimilar to the above.  Is this a fair offer? Are either of you aware of a better lower- cost preservation fund that she can choose? Bearing in mind she has two years before she will be required to access it and it is required to go to a preservation fund.  Jenna I started listening to your show this year and have become completely addicted. I went back to your old podcasts and have listened to about 50 hours already. My mother has never been great with money. However, she has somehow managed to pull through. She will run out of money soon and may need to go into debt. I'd like to help in any way I can, so I've helped her reduce her costs and get a better overview of her finances. She is 63 years old. She has no retirement fund or any savings aside from R100k in cash in a money market account. She has a brand new car, so her expenses shouldn't be too high for a few years.  She has a home loan that she can access at any time. She has a house valued at about R2.5 - R3m, paid off.  The house has a back section that, if she renovated it, she could possibly rent out, however this would be expensive.  Asset-wise she seems to be in a ok position, but her expenses are more than her income and she'd like to retire soon. I don't think that she would be able to manage a large amount of money (if she were to sell her house.)  How can she continue generating income for the rest of her life while losing money each month? What's the best strategy for this situation? Brendt I recently had a look at my parents' financial situation. They already have a RA that has been converted to a living annuity.  When I inquired as to the fees that are charged on the living annuity, I almost fell off my chair. This got me thinking: we are so focussed on getting a low fee RA going that we totally forget that the RA forces you into a living annuity. When choosing to invest in a RA one must also consider the fees that will eventually be charged on the living annuity. The current high fees on living annuities (the cheapest I could find was Sygnia at 0.86%) makes RAs less palatable. Nicole My mom's money is currently with old mutual but she's retiring at the end of July. The living annuity they suggest will cost 2.2% per year and encompasses funds like Allan gray, coronation, ninety one etc.  I'm tempted to recommend that she rather go with 10x/etfsa or sygnia /the new retirement solution platform by Nedgroup (brand new so not a lot of info there but more choice than the other 2). With one of the first pair she just needs to choose a path and thereafter it's very little input from her side which makes her more at ease but I'm not sure there's enough diversification and control. With the others there might be too many options and the wrong funds chosen. Is it sufficient to take the same approach as I would in my regular investments but lean slightly towards the conservative side? Like a world etf and then one that has more cash and bonds? Ross  I am 35. My dad has a farm and a will that is so out of date it's frightening. He's unfortunately really bad with his own finances and paperwork. I'm trying to find out what the best options are to safeguard against all the legal fees, estate duty etc etc in the event of his death and not to have to sell off pieces of the farm in order to cover all the fees and taxes involved.  I am looking at life insurance policies but at my dad's age (70) they are not cheap. I suppose it’s better than trying to find that liquidity out of your own pocket or selling off assets to pay all the legal fees and bullshit when the time comes. There's a company called Capital Legacy that my insurer put me in touch with that deal with all the above mentioned woes. They draft the will, have a legal team, executors etc and cover all the legal fees and taxes in your monthly premium. It sounds all well and good I just wanted to find out if you guys know the company at all, and how legit they are? And if you have any better suggestions? I have listened to the "what happens when I die" podcast, but living in the Corona era maybe things have changed since then?    Richard Now that we've entered unprecedented times, including the exponential use of the word 'unprecedented' how much of the old rules are still completely relevant. Is renting still better than buying, considering interest rate cuts?  Is a broad ETF still the best option? Or should we focus on post-COVID winners in tech? How big should our emergency fund be, when the entire country is in a state of emergency? Marco I am looking to move my R.A to Outvest.  According to my latest investment summary: My value on 1st of January 2019 was R228 797.72 and 16 months later on 1st of May 2020 is R297 692.17. In that period my administration and advice fees were R6510.21. With my current R.A invested in the Coronation Balanced Plus A fund from June 2005 , are the fees of the fund (which is 1.25% excl VAT) included in that admin and advice fees? Or am I paying that 1.25% excl VAT on top of the R6510.21? Are there any other fees I am paying that I am missing? The Coronation Balanced Fund appears to have done well, I think? Not really sure how to read the performance well, taking everything into account. Ie fees etc Would you recommend I pull my chute with the above mentioned R.A? Also , Outvest have four funds that are available for their R.A They are: Coreshares OUTcautious Index Fund Coreshares OUTstable Index Fund Coreshares OUTmoderate Index Fund Granate Money Market Fund Can you shed any light on these? Which would you recommend? 

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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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  Been meaning to request the move my RA from Liberty somewhere else for a while now, so I requested a quote. They quoted me on moving to their new Agile platform after I specifically asked for a section 14 transfer quote. Anyways, these are the fees quoted for their new platform.   Best part: it's 2.8% all the way to maturity. Pretty sure it doesn't matter what the penalty will be, I will move it. 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 Besides buying shares, what other assets can one accumulate with a budget of less than R2000p/m.  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 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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?

You can find the Satrix webinar we mention at the top of the show here. Isn’t it odd how few money conversations centre around mundane financial choices? Surely our net worth is a reflection of the small financial decisions we make every day. A rather typical experience with a contractor has me questioning my decision-making this week. Do I need to think differently about the intersection between price and quality? I asked your help and got some really excellent ideas. Simon and I think through many of them in this week’s episode of The Fat Wallet Show.  I loved all the feedback we got. Unfortunately my favourite new way of thinking came in after we recorded the show, but here it is: Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Your feedback: Figure out the average price and look 10-20% above that and compare features/requirements. I usually end up with something on the upper end of mid range, with the reliability of the higher end, but none of the "its the best" tax. Cost per use is the other dominant factor. — z3llin (@z3llin) June 25, 2020   Oscar: If the price difference is marginal, I'd go for convenience, or for good service, or both. If the price difference is sizable, there is bound to be third party published material where this difference is explained [in detail]. Tamara: Depends on the thing. Some things are worth paying more for because they yield a better experience or last longer than cheap alternatives (e.g. decent tools, leather boots). Other things, I take the best price I can get (e.g. refill on my gas bottle, cat scratching block)... There's also an element of risk that gets factored in to value equations on some stuff. I'm not going to go hunting for cut-rate medical specialists or the cheapest backyard mechanic. I'll willingly pay more if I believe it translates to better care. Duke of Prunes: Generally the cheapest thing with the most favourable reviews possible. Manus: My problem is to figure out if I really do need the thing, if I do need the thing I have to figure out how important the quality is. If quality is important I will overpay if need be. Overpaying because it is pretty isn’t reason enough to overpay. Daniel: How much I will be using it will also determine how much Im willing to spend. The more I will use something the more Im willing to pay for better quality versions. Rudi: If it separates you from the ground, go for quality (shoes, bed, tyres) Facebook: Sheila: Depends .. may buy cheapest item, find it is inefficient, and revert to an expensive product. For instance - dishwashing tablets. Wilhelm: Some brands offer amazing quality products but also at a increased price. If I know the product will last a lifetime, I don’t mind paying extra (Stanley Flasks, LED lenser headlamps). Greg: I generally go for quality, my big exception is cell phones, in my mind they do the same job, so I just buy the cheaper Chinese brands for cash; I just can't justify shelling out 15k plus for a cellphone. Wynand: Here I actually differ. I feel I interact with this device for HOURS everyday so I soend money to make that experience a pleasant one. Shane: in the kitchen i can tell the difference between a R1000 pan and R90 pan. the latter is so wobbly it barely touches the stove. no more skimping on kitchenware for me , no matter what the cost 😉 i skimp on phones (R200 nokia), cars (none) Andrew: Cost per Use is my go to metric to guide those decisions When I was poor was the king of cheap for a long time and it didn't work. But then I started looking at the Cost per use. Now I am well off- by no means ready to retire. But comfortable- now I try to look for high quality stuff but usually second hand - like GPS watches, Baby stuff - prams, cots etc. Sometimes on certain products I buy new.  Down jackets for winter - super expensive when I got them (I have two). But I wear them just about everyday in winter for the last 6 years and they are going to last at least another 6 years or so. My wife will be sick of them - but much better investments than the R300 fleeces and jackets I was buying before almost every year or so. So a R900 down jacket (price 7 or 8 years ago) over 10 years works out to about R1 a use (90 days a year). If I had bought my regular jackets I would have spent R4000 over the same time period (with inflation) and not been as warm. Same goes with a good cast iron pan. Knives, I buy good quality and I sharpen them regularly and have a magnetic knife rack. My grandkids will probably use my knives and cast iron pan. Max: Certain important items I spend on especially if I know it will last based on experience ie. shoes, tyres, laptop. Other things I'll buy the cheapest I can get. I hate buying the same thing twice 🙈 Win of the week: Jaco and Hester Been bingeing the Fat Wallet Show for over a year, and it's been a major force in how I think about my money.  I've even started doing a tiny bit of financial education myself - just around my own sphere of influence :-) Something which struck me hard when starting to take control of my money is exactly this concept: nobody is coming to save me.  For example, I used to play the lotto and dream fantastical dreams of what I will do with the money. But your podcast and Sam's book (where she makes you add up all your future paychecks) made me realize I'm in this by myself.  What I can't achieve on my salary alone can not be achieved. And it's made a massive difference to how I spend (or don't spend) my money. I did a small money workshop with my friends last year, and I had to confront them with this concept early on, and see how something shattered behind their eyes - something they didn't even know was there: the deeply rooted belief that "one day I'm gonna be rich - by some magic". I also saw what you've been espousing for a while: when someone is not ready to hear it, nothing I say matters. Anyway, thanks for a great show, and a great job you guys are doing. You've got a Fattie in me!

A while back my smart and handsome co-host Simon Brown did a presentation about the perfect trade. Even though I don’t trade myself, I found the presentation inspiring. As we often advocate, when it comes to this money business it’s best to focus only on what you can control. A conversation with Cash Club writer Njabulo Nsibande made me realise we can apply the idea of a perfect trade to our investments too. As Simon and I flesh out that idea in this podcast, we realise you can aim for a perfect month in your own finances, regardless of what you’re currently focusing on.  Here’s the template for the perfect money month we came up with: The first money that leaves your account after every pay cheque goes towards your future. Look at your money: A broad overview of your whole portfolio, as well as your individual expenses every month.  Don’t use the money you set aside. Every month you do all three of these things is a perfect month. Your challenge is to see how many months you can get in a row. Who’s game? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Linka I found "Just one lap podcasts" via Stealthy's blog where I ended up after not agreeing with a financial adviser about an investment strategy and deciding if other people can understand this stuff, I can too.  Vigorous amounts of googling and reading showed that as I guessed, none of this stuff is rocket science, its just the way that the information is presented that precludes the general public from accessing it. Thanks for all you and Simon's contribution to unraveling the unnecessary verbose complexity the industry uses. In short, just want to say, I really enjoy the podcasts. Have started to listen to the JSE direct one as well and surprisingly, I can understand most of it! I recently started working for myself and registered a company. Mainly to enable future tax deductions and to keep company and personal equity separate.  I opened a business account with FNB. At the time it made sense to me since I was already with them. I wanted a 7 days fixed deposit account to stash the incoming payments to keep this money from being lazy money. However - After looking at the bank fees for the gold account (personal) + business account I am starting to dislike the numbers. Also the extra charges I missed somewhere in the fine print is really starting to annoy me. If I don’t need to have a business account, I can open two accounts at Capitec, which would probably be much cheaper. If this is not contrary to SARS' requirements - Capitec does not do business accounts yet. While being employed I was able to cover my bank charges with Ebucks, but with an irregular income, I doubt whether I will be able to maintain that level. Brendon My wife and I purchase the Ashburton World Government Bond ETF. The initial thinking was simply to get exposure to bonds. But I've been trying to figure out if we should rather purchase SA retail bonds instead of a bond ETF. Could you go through some differences and pros and cons of SA retail bonds versus bond ETFs. I understand that retail bonds provide you with a fixed interest rate (coupon), but I'm interested to know in what situations you would purchase one over the other. Marina We recently had a baby and decided to start saving for her immediately. The purpose of saving is mainly for her tertiary education.  We decided to go 50/50 into Discretionary and her TFSA. She can choose where to draw the money from when she starts University. It will be a good learning opportunity for her.  For the discretionary investment we want to do cash. FNB has a “my first savings” product at 5.75% interest and no monthly or transactional fees. However, our broker also pays interest on money not invested at a rate of around 6%, but Simons says it is illegal to do this. Why is it illegal? Can I invest the money into a cash ETF with similar returns? The main concern is whether she will be paying tax (in any form) as a minor. If the money was invested into a money market she would only need to pay tax on interest received when she starts earning and declaring an income. Would she be paying tax on interest received as a minor inside a cash ETF without a means to claim it back? And if she sells off the ETF would she be paying capital gains (even if it is a cash ETF)? Gregg  When you draw up your will, include a clause that if your children or spouse are to receive your inheritance, it cannot be taken by their respective spouses (in your children’s case) and your wife’s new spouse should she remarry.  You spoke of a separate will to manage your offshore assets. I have a US Equities Portfolio through EasyEquities. Would this qualify as offshore assets and require a separate will? You spoke of a life policy paid directly to my estate and/or directly to my beneficiaries. And that one should have a policy that takes care of the debt, duties, taxes and executor/legal fees in your estate. If I owe 500 000 on my house when I die, and my wife (not the estate) receives a life policy for 700 000. Is the estate going to sell/liquidate my assets in order to pay the 500 000 on the bond, or can my wife pay the 500 000 into the estate to settle the bond?  I’m trying to figure out if I need a separate life policy made out to the estate as beneficiary to cater for the debt in the estate? I don’t want the estate to sell the assets to pay off the estate debt if I have left my wife sufficient funds to settle any debts. If I don’t pay estate duties etc. on an estate less than R3M, does it mean if my estate is worth R3,1M, will I pay estate duty on the full R3,1M or only on the portion over and above the R3M limit, in this example 100k? If I own a second property, can I specify in my will that said property is not to be part of my estate but is ceded directly to my beneficiaries? If I wanted it not to form part of my estate, what would I need to do?

When you buy a locally-listed ETF based in another currency, two transactions happen in the background. First, your rands are converted to the other currency. The new currency is then used to buy the ETF units. Buying an ETF based in a different currency is therefore an easy way to introduce currency diversification into your portfolio.  In this episode we help you understand the impact of these two transactions on your portfolio when there’s currency movement. If, for example, you bought a dollar-based ETF and the rand weakens against the dollar, do you have more money or less money? We explore hedging and why this strategy might be seen as a currency hedge. If you’re looking at offshore ETFs for your portfolio, you don’t want to miss this episode. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Tony  If you invest in an ETF like the SP500, does this give you protection against the value of the rand? Does the value of the ETF adjust along with the value of the rand? If yes, how does this process work? Are there any dollar based ETFs in SA that can be used in a tax free account? Win of the week: Boitomelo Thank you so much for your good content that has allowed most of us to make life-changing financial decisions. I cannot thank you enough.  Are you guys not able to have a Patreon account where those who wish to contribute to your content can do so?  Carel  I guess it goes without saying that any negative credit events would be tied to each of our names. If we get the bond in our own names, we (and not the business) would own the property. If we try to have the business receive the rent as income on a property we own in our own names (if such a thing is in any way even possible), SARS could see this as some kind of attempt at tax evasion? As I mentioned before - only completely above-board practices would suffice.  If we purchase the property in our own names, we could each be held fully liable for the full amount, then it would be up to the person held liable to take the other to court to recoup the balance. Brendan If I were to start now, with mayhem in the market, are ETFs cheaper / a great price right now, or is there anticipation of an even bigger dip, creating even better buying power? I’m specifically looking at Satrix MSCI / Top 40, Asburton Global 1200 and Sygnia MSCI World. To confuse the question even more, is there some kind of daily / weekly 'tracking number’ - to gauge if ETFs are getting more affordable? Gerhard I discovered dividends aren’t taxed at all when shares are held in a company. However, capital gains tax is 28% on 80% of your capital gains, which is quite high.  I have a small company from which I pay myself a salary. From time to time I have a bit of extra money in this company. I’ve been buying ETFs in the company: 40% local equity (Coreshares top 50), 40% world equity (MSCI World); 10% Global property and 10% local property. This was before I knew about the free dividends. Now I’m thinking I should buy whatever pays the highest possible dividend - without undue capital risk and definitely not property because the distributions are taxed as income. In my mind, I should probably be buying the: PREFTRAX Do you think I should sell the above ETFs and move it all over to PrefTrax or whatever else might be better?  Jarrett I am 31 and based in Kuwait, which offers great earning and saving potential.  How do I best use this money? My first investment was in property back in South Africa, which is paying for itself. I was looking to invest in a second property this year. However, some friends in the finance game suggested this was not such a great idea. They recommended I diversify investments and look into ETFs specifically. Would you suggest trying to open up an account with an international broker, such as interactive brokers, or rather stay with a South African-based company? I have bank accounts in both SA and Kuwait, does that have any impact?  I have a fair amount of money saved up, just sitting there (I know, not great). Honestly, I don't really have the knowledge to know what to do with it. Apart from ETFs, what other options should I be looking at?  Ben Like you, I’ve been investing in the Ashburton 1200. With the rand weakening quite a bit in the last while, and the S&P not really weakening that much, I was wondering if there might be other investment opportunities that are more opportunistic?  If my thinking is correct, a stronger rand or weakening economy is good for buying (with potentially more growth), but it feels like buying 1200 now is a bit meh because the rand should strengthen and the 1200’s price will go up, which would leave me not really winning.  Hans The fund tracks the S&P South Africa Composite Property Capped index, which is described as tracking all funds in the S&P South Africa Composite index that are classed as property.  This means that if one REIT in this fund goes bust, there’s nothing replacing it. What happens to the fund?  Does the NAV drop and the fund price drop accordingly?  Do the investors just eat the loss? Jonathan I have an under-performing unit trust which has only gained 3.7% after fees with momentum since 2012 before the crash. It's now -12%. It's not my RA, but it's invested into a lot of RA-like products ie. only 30% international equity. Conversely, I have an EE account with SYG500. Before the crash it was returning 7-8%, including currency movement. Its maximum before the crash was 12% but it's currently -10%. (This was on 24 March. 23 March was the bottom for the SP500). I'm currently 36 so I can deal with the volatility. I would like to increase my offshore exposure. I already have a fairly-sized RA to give me more than enough local or EM exposure. During this downturn, should one consider accepting losses in loss-making accounts, sell and transfer them to another account that has future growth prospects far healthier? In other words, move from balanced funds to ETFs? From expensive 2.4% to cheaper 0.2%? I’ll take a heavy hit at -12% on momentum, but the pros are that I buy SYG500 at -10% and pay less CGT on selling the momentum as well. Plus of course, I pay less ongoing fees (2.5% versus 0.9%). Stiaan I’ve been investing in a tax free savings account the past three years at Investec (managed by Anchor Capital). The growth was extremely low! After listening to your show I wanted to move that TFSA to ETFs.  I made the move in January, but struggled a lot with moving the money. It transferred in the beginning of March just before the crash. I see this as a great opportunity to buy. I moved the money to the Satrix platform and I am curious what would be the best ETFs to buy at this time? My other investments include: * A retirement annuity with Alan Gray * A property I rent out (financed with a home loan) Jessica wants to know how Patrick managed to invest in the Vanguard World ETF. Tafadzwa I finally started investing in US ETFs on the 9th of March 2020, just as the bottom was falling out of global markets. I was tempted to wait for a further drop but later decided that it's a fool's game.  Like you guys said, the moment when you place your first buy order was scary. Having a couple of demo accounts in the past few months helped a lot.  I plan on investing in: Vanguard Dividend Appreciation ETF VIG 20%,  Vanguard Growth ETF VUG 30%,  Vanguard Information Technology ETF VGT 30%,  Prime Mobile Payments ETF IPAY 8%,  VanEck Vectors Semiconductors ETF SMH 8%, and  iShares MSCI Real Estate Index ETF FREL 4%.  I started with VIG 20%, VUG 30%,VGT 40%, and IPAY 10%.  I am aware of the overlap and concentration risk between some of the ETFs and can live with that. It's great investing with TD Ameritrade because ETF trades have zero commission! I’ve been thinking about complexity vs simplicity vs chasing returns. Is this portfolio too complex? Is it still truly a passive strategy or am I making active decisions in a passive space?  I have also been considering having this core of ETFs complemented by single stocks capped at 20% of total portfolio value. I have about 10 single stocks in my watch list which I really like but am hesitant to take the plunge. I have the stocks already in my ETFs in small percentages but would like more exposure to them. This would make my portfolio a strange mix of passive and active, which would require me to rewrite my initial financial plan.  What do you guys think? Is investing in single stocks evil? I am considering breaking the rules and trying to beat the market, but from a foundation of ETFs. 

Under normal circumstances we would strongly caution against withdrawing from your pension fund. The reason is quite simple: the tax will make your eyes water. One decision can slash your hard-earned net worth by hundreds of thousands of rands. That’s not even factoring for opportunity cost. However, since we’re currently living through the apocalypse, we might have to soften our stance on this. Some members of the financial services industry are lobbying for access to pension funds during this crisis. If you’re no longer able to earn an income, you might have to make a smart decision about this.  In this week’s episode, we give you a sense of the different factors you have to consider before withdrawing from your pension fund. Naturally, we start with tax. We also consider the opportunity cost of the withdrawal, as well as the opportunity cost of taking on debt instead of withdrawing.  We also spend some time making sense of the benefits of share incentive schemes. At the beginning of the episode, we mention emergency loans. These are the conditions you have to meet to qualify, and these are credit providers registered with the National Credit Regulator. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Clara I am currently in my notice month. I’ve worked in local government for 13 years. I'm quite in a spin as to whether I should cash out my pension before 55, leave it or move to a provident fund.  After long deliberation and getting some financial advice, I have decided to take the plunge and withdraw the cash, pay the tax, cut my losses and move on.   Firstly I wanted to ensure that my pension will not be used to fund our government-owned companies, the possibility of junk status, the weakening rand after junk status and the management /administration fees that will be due to my portfolio manager for my provident fund if I choose to go that route.  I wanted to "do the right thing" - to give my 30days notice as required by employment act, but this honorable decision has bitten me in the back and I have lost R200,000 in my pension fund in the last 30 days.  I don't want to make hasty decisions in ‘’panic mode’’ and withdraw as quickly as possible. The withdrawal will only happen in 2 -3 weeks, so I’ll lose much more, pay taxes on the little I have left after our market dropped.  At this stage I am thinking of not withdrawing the funds, moving it to a provident fund, letting it recover as much as it can for a year or so, monitor the Rand/CAD$ exchange rate and take it from there. But I’m afraid all the current negative elements such as junk status etc will have a much more negative impact.  If I pay my pension fund into a provident fund it will still be affected by the markets, but maybe it will recover a bit before withdrawing the funds. I don’t need the funds and thought to put it in a pension fund in Canada. Although I am aware that all markets are affected, growth will probably not be better in Canada. Win of the week: Kerry Also Serena You can do a transfer of the units held in your Allan Gray fund to an Allan Gray fund held on the  Sygnia platform. Sygnia offers a number of Allan Gray Funds on their alchemy platform.  I did a section 14 transfer in September 2019 of the units held in my Allan Gray Balanced fund. Allan Gray need to convert it from a Class A to a Class C first before transfer.  I did this for two reasons . I held this balanced fund in Allan Gray for over 15 years and did not want to lock in lack of performance of the last five years. I was also concerned about the volatility of the market during the time of the transfer process. Over the following 7 months, I’ve switched out of the Allan Gray Balanced fund on the Sygnia platform when the price was appropriate. I switched into a combination of ETFs and the Skeleton 70 fund, according to my Long term Asset allocation strategy. Now everything has gone to hell in a basket, but at least I am in the passive ETFs and a fund I want to be in for the next at least 10 years at a fraction of the cost . With regard to interest earned on cash kept in overseas brokerage accounts: I have a Degiro brokerage account and they don't hold the cash themselves. Euros are held in a Morgan Stanley money market fund and the interest rate is -0.54%.  Gary  I'm in my early 40s. Until two years ago I was a financial newbie. I made all the classic big mistakes. High fees, head in the ground investing. Between your podcast and Sam Beckbessinger's book I'm busy with a big turn-around. I moved everything to broad low fee ETFs, maxing RA and TFSA, I am aiming for a 50% save/investing rate. My question is on a potential TFSA hack : Putting the full R500K lifetime limit into your TFSA in one go, and accepting the 40% tax hit from SARS. I have a medical condition that will only allow me to work for another 10 years. I was thinking this would be a great way to max out my TFSA and give it the longest amount of time to grow.  Jon From 1966 for 25 years, the SP500 was ultimately flat.  From 1954 for 28 years, the SP500 was also flat. From 1969 for just over 10 years, the SP500 lost almost 2rds of its value. From 1929, over about 20 years, the SP500 lost about 2/3rds of its value. These are long enough periods that it brings into question how risky a long term equity investment actually is. I am diversified across regions, but it would be really interesting to hear you guys really engage with this on the pod. The black and white rules about average gains over long periods aren't really bulletproof.

Many of you come to us fresh as daisies. You start listening in anticipation of your first pay cheque. A clean slate means you can set your financial situation up in a way that makes sense to you at the outset. Those of us who aren’t so lucky have to turn our financial patchwork into a structure of some integrity. This episode is about that. Inspired by 39-year-old Dunga, we help you figure out what might be missing from the financial setup you already have. We cover everything from debt as a risk to protecting your assets to how to analyse your ETF portfolio.  Amazingly, we don’t touch on fees. Since that’s most of what we talk about most of the time, why we miss it in this episode I can’t say. We do, however, cover the amount at which you should consider moving your retirement annuity to OUTvest, who is our preferred partner in all things retirement. (Because we’re cheap and they’re cheap.) Cheers! Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Dunga My biggest fear isn’t the markets or that my portfolio isn’t balanced enough, but that I may be stuck in the habit of withdrawing my investments every 3-5 years.  The temptation is to withdraw my investments and use them for short-term needs. I've never had or received twenty, thirty or forty thousand rand. The longer my investment grows, the bigger my temptation becomes. What I feel I really need are ways to avoid this temptation because I think it will only become bigger as my investments grow. He has disability cover, a hospital plan and he’s taking out critical illness cover in July. He has 8 ETFs and 1 ETN, an RA with iTransact which is made up of 8 different ETFs. He holds Satrix Indi, CSSP500 and 1nvest SP infotech in both.  He also has three long-term savings products with Old Mutual. One is to save for a house deposit, one is to save for his kids’ education and one is to save for a wedding.  My motivation for still buying Old Mutual is that it gives me the discipline to save because of the penalties for early withdrawals. The etfs are a welcome distraction so I end up forgetting about the old mutual products. In August he wants to start a new portfolio with an additional 10 ETF products, which includes gold, palladium, rhodium, Africa and Global property, the Nasdaq 100 and world government bonds. If he implements this strategy, he will hold 27 different ETFs. My reasoning for buying so many ETFs is first diversification and secondly to see for myself those which will perform better than others. in 3-5 years I may weed those which I feel are not doing good. Win of the week: Zola I was listening to the latest podcast episode and I was shocked to hear Javid wanting to invest in defence stocks, because of the war that could have taken place between the US and Iran. I know that by listening to this podcast we are all capitalists trying to make money but goodness, surely, we shouldn’t be trying to make money off people being bombed. Which brings me to my question: how does one try to invest in ETFs that are in line with one’s beliefs? Is there a way of finding a collection of stocks for example that invest in renewables or even companies owned by women? Something like Shariah-compliant funds? Gregg So I have an RA with 10x. Recently Outvest have released an interesting product in the RA space. Can you possibly do the number crunching for me, by virtue of an example, and tell me at what minimum value should my RA with 10x be before I switch it over to Outvest? What I’m implying is that up until a certain value, my RA will do better with 10x. But then when it surpasses that value, it will do better with OUTvest. Rudolph I bought a property last week. I’ll have to put down a big deposit within the next 2 months. In order to pay my deposit I will have to sell my ETFs and unit trusts. Because of the Market crash I lost a big chunk of my Investment that is needed for my deposit.  Would you recommend I sell my investments ASAP because markets might get worse or do I wait it out for another month and a half with the hopes that the market might kick back? Robert My sister has fallen on hard times. She attempted to emigrate but things didn't work out. She quit her job and rented out her two properties, which still have substantial debt outstanding.  Because of the long period of unemployment with costs in foreign currency her emergency fund has run out. She now has a shortfall every month. Her rental income doesn’t cover all the costs of owning the properties.  She has no other savings or retirement funds to draw from and is unemployed.  I suggested that she sell at least one of her properties and reduce her debt exposure, but she is adamant that with no pension plan, owning these properties is her retirement plan. We don’t think she will be able to clear all her debt with the sale, however, the outstanding amount will be much smaller (and less scary).   She says that her unemployment situation is temporary and when she does get a job she will easily be able to cover off the shortfall. She has been job hunting for a year unsuccessfully. In the meantime she is living cost free with friends and family. She plays cat and mouse with the banks every month and is currently negotiating to either pause her installments for some time or get the period extended so she pays less every month.  My question is, therefore, is it better to live cash positive today with zero debt (sell the properties) or is it better to go through the pain today with huge debt, in the hope that one day in the future everything will work out? I’m so passionate about getting out of debt myself, but I do wonder if my sister’s short term pain view has any merit at all. 

Financial planning isn’t just for people who earn money. In single-income households, it’s the responsibility of everyone in the household to work towards financial goals. It’s also everyone’s responsibility to protect those not earning an income. Naturally, dread disease and disability cover and life insurance are critical in these situations. A question from Denzil had us considering the benefits of taking out a retirement annuity in the name of the non-working partner. It means the growth of the investment is tax-free, even though there’s no short-term tax benefit. It also means drawdown in retirement will be taxed at a lower rate, as Denzil predicted. As an added benefit, a retirement product protects the assets from creditors and contributes to the financial security of the non-working partner in retirement. As our friends at OUTvest pointed out, it’s an employment benefit to partners not earning an income.  Financial independence is certainly within the reach of those in single-income partnerships. It might require more time and careful planning, but it can be done. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Denzil My wife is a Home Executive and therefore has no income. Are we able to open an RA for her that I can contribute to even though she has no income?  Would it be better for me to contribute the MAX to my RA and get the tax benefit now? Is there any way come retirement age we are able to split my RA funds, be it a Guaranteed Annuity, or Living Annuity etc between my wife and myself to limit the tax implications? Would we be able to pay no tax to SARS on RA withdrawals up to the threshold (based on new 2021 Tables) of R128,650 for the wife once over 65 or R83,100 between 55 and 65?  This would drastically lower the Tax Implications, especially if we add in the R23,800 for interest income. This equates to over R12k per month after 65 and almost R9k per month between 55 & 65 that would be Tax free...This will drastically lower the Tax Implication and therefore amount required to reach financial independence.  We are nowhere near Retirement / FI yet, but i'm just thinking about this now and what Tax implications there will be later on when we do eventually hit the age for retirement or the amount to be FI. Win of the week: Reno I just wanted to share with you how you saved me R162 000. A few months ago I was looking to trade in my old car as it had some mechanical issues. After looking at some cars online I felt that I “deserved” a nice car with a touchscreen and reverse camera with all the nice features, as I had driven a not so lekker car for a while.  I finally settled on a car that I would have financed over 72 months at a cost of R4500 p/m.  Then I was scrolling on YouTube and stumbled upon an interview you did with Tim Modise some years ago. In the interview you were speaking about your money journey and how you got into and out of debt.  That video shook something inside of me.   I decided I do not want to pay a car off over 6 years. When I went to the car dealer I saw the nice car I initially wanted, walked past it and asked if I could have a cheaper car which I financed over 36 months at a cost of R4500 p/m.   After the first few months of driving this car I am very satisfied with it and glad that I did not finance the other car over 6 years. So I have saved R4500 p/m over three years equating to R162 000.   Even though I have financed this cheaper car over 36 months I am paying extra onto it every month to pay it off even sooner. All this came from an interview you did years ago in which you shared your money journey. Thank you for speaking about a topic which no one in my family speaks about. You have changed my perspective on money and debt. Leonora Babies, due to high growth hormones, easily double their weight and increase the number of teeth in no time. Everyone is delighted, but growth slows down eventually. If a mature person (company) doubles in weight, it could potentially be very bad for its health. Better to only pick up weight by working out, flexing those same muscles to make it stronger and more efficient. Radhini I was hoping that you would be able to share some information on the transfers of TFSA accounts. I am trying to transfer my account from FNB to Easy Equities. From my understanding, I can transfer my account with the shares between service providers, or is my understanding incorrect? According to FNB, I first have to sell the shares in my account before I can transfer my account, is this correct? Rudolph I am currently 27 years old I am looking for an ETF that will be suitable for us, maybe high equity and more aggressive since we are young and are looking to invest for the Long term.  Is there any ETF that you guys like that matches my profile?  JJ I’ve been investing in my TFSA for the last 2 years. I've been buying ETFs in big chunks, mostly the MSCI World ETF.  I wanted to add another R10k onto my current 30k and thought if I buy again now I'll be moving up my average price quite significantly. When do you stop adding on?  If I'm planning on investing in the same ETF for 25 years, does it make sense to keep adding monthly (or however) for 25 years? Surely at some point you have to stop and think that adding monthly will always carry on increasing my average buy price and is slowing down growth. At what point do I just stop and let it grow?  If it was normal trading I would be piling on shares when I think it's right and offloading accordingly, but for a long term investment that doesn’t make sense to me. Santosh Thanks to Coronavirus, global markets tanked on a daily basis and are still sinking - which is similar to the global sell-off in Q418 and just shy of 2008 GFC. This was not only in South Africa - but internationally (Local stocks, local stocks that track the USD and hard currency stocks). I'm in all ! On paper, I'm about $40,000 or R600,000 poorer ! Even currency diversification didn't help. The takeout for me, in a financial crisis, I'd rather weather the storm "at home". Wim  I have received dividends into the tax-free account since it does not get re-invested automatically. My question is if I now re-invest the odd R800 in the holding account, my contribution will be an additional R800. I will not be taxed because I exceeded the R2750 a month contribution. Nic The way I understand total return ETFs, the dividends are reinvested back into the ETF, saving on brokerage but the dividend withholding tax still gets deducted. For a tax free account how does this work - there are not two versions of the total ETF, one for tax free and one for non tax free accounts? In my mind it's not worth having total return ETFs in a tax free account - am I missing something. Gregg I currently put my full monthly TFSA allocation of 3000 into my bond. At the end of the tax year I draw out my full allocation of what was R33000 and is now R36000 and pay this lump sum into my TFSA. This way I save mega interest on my bond and the term also reduces. But, my bond is at  9.25% interest (which means by putting extra money in, I am saving 9,25%), whereas I can get 10% interest from TYME bank. So it kinda seems that I save more in TYME, but psychologically I like seeing my bond interest and term come down. Will I really be saving more by putting my R3,000 into TYME bank each month at 10% or is it still more beneficial to put it into my bond because of the  compounding effect of the interest coming down?

As we mentioned at the top of the show, today’s episode was made possible by a new financial education initiative by Momentum-Metropolitan. You can play the FinEazy game here and register for the story-driven educational programme called FunDza here.  This is the 200th time Simon Chuckles Brown and I sit down to record a Fat Wallet Show (more or less). Every episode is a privilege because every episode is made possible by your engagement and contributions. We are eternally grateful for the support, encouragement and enthusiasm you have for this work.  As of 13 May 2020, you have contributed to 542,433 hours of listening time. 365 of you have emailed ask@justonelap.com. This excludes mails sent to us directly and questions submitted via social channels.  [adrotate banner="9"] Subscribe to our RSS feed here. Subscribe or rate us in iTunes. The shows that have helped you the most are: #46: Five concepts that will make you rich FIRE at any age (#156) How to set portfolio up for financial freedom (#144) #58: How to structure your pay cheque Keeping your living expenses low (#166) Based on the Fat Wallet Survey we conducted last year, you guys moved between R78m and R400m between providers as a result of the information you received in this show.  What I’ve learned in 200 episodes is that we help most by helping you think through your decisions.  Here’s to the next 200!             View this post on Instagram                     200 Fat Wallets! This is also the longest we’ve gone without seeing each other in five years. Today was a Good Day. #thefatwalletshow #justonelap #bubblesandchuckles A post shared by Kristia Van Heerden (@fatwalletkris) on May 14, 2020 at 5:58am PDT   Garth Chad Sparkle Is there a Cheat Sheet when working for a bank? I don't think I've been fully exploiting all the benefits, if any, that I have working for an FSP. The more I think about it the more I get excited at the fact that there is a way to game the system and set myself up financially whilst working here.  What did Simon do to take advantage of the benefits? How wise is it to buy a house and car whilst working here to take advantage of the staff rates? Surely by using the benefits at my disposal as an employee and diligently managing my finances I should come out the better when all is said and done? Taahir wants to invest in a Shariah-compliant RA.  Nihaad: I’m a medical doctor working in an emergency centre during these pandemic times. These last few weeks, and all the uncertainty associated with the lockdown and our futures, have made me really think about getting my financial state in order.  I know very little about finances but I am trying to learn through your show. I am looking into investing, but as I am muslim, I would like more information on Shari’ah compliant ETFs available to South Africans as these are technically the only ETFs I am allowed to invest in due to my religion.  These ETFs do not include equities that are linked to banking, alcohol, or gambling, to name a few, and I am sure that affects the performance of these types of ETFs compared to its top 40 or global counterparts. Would you be able to chat a bit about these types of ETFs, which ones you’d recommend, how they perform in the market and how to maximize my returns on these types of investments? Thank you for your knowledge and help, I really look forward to your show every week! Joy I was listening to your #159 podcast.  Simon said you should never invest into a single asset or share beyond 5% of your portfolio. He said when one thing starts growing too much he sells down to below the 5%.  I understand that this is to minimize risk of being heavily invested in just one thing. I looked at my portfolio. I’ve got a house-sized question sitting right there. I do consider my home an investment and part of my portfolio.  It has gone up nicely in value following much elbow grease and fixing up... but... sadly... according to 5% portfolio risk rules... not only is a home 100% in the one asset class (property), it is also 100% in one property micro market (my suburb) and worse still 100% in only one property (my home).  Surely that means (unless your investment portfolio is cruising around R50 mill) buying your own property as an investment just blows all sensible, unbiased, risk management thinking out the window? What’s the alternative? A person has to live somewhere. Pamela There is a lot of pressure in buying a house and paying off the bond, but I am honestly not very sold on the idea. It sounds like it will be more expensive for me and is the housing market as lucrative as it was some 20 years back? Is buying a property worth it for me and paying off the bond? Would it be better to invest money in funds that take advantage of compound interest? What other investment vehicles can l use that will be beneficial in the long run? I am single and do not have any kids. l’d like to make great financial decisions now and set the foundation for when I have a family. I have tried to really reduce my expenses and it’s still work in progress to get to only the basics. My car is probably my worst purchase, I did not need it and now I have to pay it off. Other than that I have refrained from making any other large purchases. Do you have any advice on how I can reduce my expenses, or something I can incorporate to reduce my expenses even further? Listen to our homeownership podcast and the follow-up.  Rudi The premise of the product is for every transaction on your account they take "the change," rounding up to the nearest R10 and invest it in a Liberty Top 40 ETF, which I can find no MDD for anywhere, through a tax free savings account. They also have some gimmicky feature that deposits extra money if the weather is good, seemingly meaning that it is extra savings for a rainy-day fund.  I do not think a tax free savings account should ever be considered a rainy day fund, considering the lifetime deposit limits and the major impact withdrawing can have on compounding. Fees are mentioned twice on the website: "Stash is absolutely FREE! You will see ‘Hello Stash’ transactions on your bank statement, but these are just transfers to and from your Stash" on the Help page A zero TER, on the Past Performance page. Besides only being able to have one product in your TFSA and having that TFSA handled by Liberty, I feel there must be some additional catch? How else could they offer a TER of zero? Watch the presentation on fees, as mentioned in the show.

After two brutal years of obsessive debt repayments and a year of hard saving I finally made my first investment in March 2014. Six years of watching paint dry was followed, finally, by a stock market crash so brutal I’m still suffering a nosebleed. In my short investment career I’ve experienced every market condition but growth. As a result of this less-than-illustrious track record, it’s probably not surprising that the growth I’m currently seeing in my portfolio is freaking me out completely. My CoreShares S&P500 ETF is 70% up and I don’t know what to do with myself. I want desperately to lock in this growth, which is what Simon’s trying to talk me out of in this week’s episode. Watch the presentation Simon did last week. It's really good! We’ve been blessed by the tech fairies since we started recording remotely on 19 March. However, the gremlins found us this week, cutting short our usual recording time. Forgive us, please! If we’re lucky we can record Episode 200 together. We hope you are excited too. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Philip.  Every Monday morning we send out a newsletter and every Monday morning Philip sends me an encouraging email or compliment about the newsletter. I’ve come to look forward to it every Monday, so I think Philip deserves to win for making me happy on a weekly basis.

We’ve all had a few weeks to come to terms with Reality: Version 2020. Those of us who had our sights set on financial independence have watched our independence day creep a few years further down the line.  The uncertainty we are currently facing has surely also made converts of those who didn’t know financial independence was something worth striving for. Imagine how differently you would have approached this crisis if you knew you could continue to support yourself if you lost your day job.  Life is happening to us in shouty capital letters at the moment, but a good financial plan is an adaptable financial plan precisely because life tends to happen to us all the time. If you had your sights set on a financial target that is no longer viable, now is the time to regroup and think of another plan. In this week’s episode we help you think through some strategies to get back on track once the crisis is over. We help you with some of the maths, but also offer some guidance on how to be adaptable if maths alone won’t help. P.S. We are very happy to announce that this week’s episode was made possible by our preferred partner, OUTvest. To read more about our preferred partner programme, click here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Dee-dee  My parents’ investments aren't looking so lekker at this point.  They just got access to their RAs. They have no emergency fund. They own their own company, that is very volatile and heavily based on tourism.  I am finishing my honours. I have younger siblings who will remain dependent on them for at least another six years. They are spending about R300,000 in bank fees, interest on credit card debt, bond and car payments to the bank per year. This is crazy!  My dad mentioned the idea of using some (all that they can take out with the 1/3 cash withdrawal option) of their RA, as well as using the contributions they would be making to their RAs to attack their debt.  The idea of taking money out of their RAs does not sit well with me at all, but if it means paying off the house quicker, they would have that as an investment property. The house is definitely worth more than they can get with their RA investments in 15 years. But this would be INCREDIBLE concentration risk!  What worries me the most is their debt. It keeps accumulating and only minimums are being paid.  The business is also not easily convertible, as it depends on my dad's skill. They still have about 10/15 years to go. There will be a bit of money from my grandparents going their way, but this is definitely a story of lifestyle creep and a few unfortunate business moves that may bite them hard if they don't look at this aggressively now.  Given the great big market drop and my plan to move their RA to Sygnia (OUTvest isn't the cheapest since they aren't in that bracket yet), I am now thinking that I probably should not move the money at the moment, because I'd be selling and then re-buying, which would mean I'd be selling low....on the other hand I'd also be buying lowish... But I'd imagine now is just not a great time to move, which is sad, since that RA with Investec is not doing them any favours! Keegan Please explain a practical example of how somebody can transfer their RA if they are unhappy with their fees. Some of the things that would guide me greatly: - finding out if your RA is screwing you - How to go about stopping and transferring the RA - What are the penalties included I have been contributing per month to my annuity for almost a year now and am 28, so feel young enough to make changes, but old enough to make bad mistakes and errors in this all.  Reeve I would like to start investing with OUTvest, it will be my first retirement annuity. I understand the fees are R4500 for the year if your investment is under 300k.  Does it make sense for me to start investing with them immediately, or would the fees be lower if I start investing with other retirement annuities initially, and then move over the OUTvest after I’ve reached 300K?  From what I understand, fees only start getting steep the greater the value of your investment. Since my investment value will be low initially, the R4500 fees applied every year by OUTvest is a bit much. For example: I want to contribute R2000 a month to OUTvest, by December I would have contributed R24 000, if we minus the R4500 fees from that, it’s quite a big chunk that’s going towards fees? Jorge wants to know if it’s worth moving his RA from 10X to OUTvest or if he should wait and see if other providers also rise to challenge.

With the markets in a flat spin, even the bond market is looking a bit peaky. How can it be when bonds are supposed to give us stability and predictable income? It turns out not all bonds are created equal. In this week’s episode we revisit how bonds work and what they’re supposed to do in your portfolio.  If you are as intrigued by retail bonds as I am, you can buy some here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Tee I am happy to report that the only debt I currently have is my monthly car payment. I still have 2 years to pay off my car, but would like to try and push in more every month to bring the time period down (as well as the interest). Because of this approach I have taken, I now have no RA funds yet and no other savings to my name. I would like to build up an emergency fund, start an RA and open a TFSA account within the next year or two. Would you still recommend 10x for an RA? Or someplace else? 10X and Sygnia to start off, OUTvest once you have upwards of R500k. How do I go about knowing which TFSA is best for me and where is the best to open up a TFSA account in your opinion? Should I start doing all three these steps at once so they overlap, or take it one by one? Matthew I was listening to the latest video from Just One Lap on "Creating Wealth in a Low Growth World"  and was once again reminded by a finance expert that I require bonds in my portfolio. I identify as a DIY investor and Simon did cover this topic in an article of Fin24 where he recommends that DIY investors stay away from bonds due to the tax implications. My understanding is that bonds can complicate your tax return as the interest (or coupons) are added to your income for the year and taxed at your marginal tax rate. This occurs even if the ETF reinvest the funds.[6] Then when you sell the ETF, you realize a capital gain and pay tax on that [6]. This means you can pay tax twice. So as a DIY investor who is no where near retirement, what should I do with regards to bonds? Possible ideas are: Substitute bonds requirement with cash in a bank savings account. Find bonds that do not incur this tax problem. (I do not believe there are ETFs in SA that can do that.) Take bonds and manage the tax implications. (any advice?) Leonora Momentum replied to say that Nedgroup are reviewing fees and I should get an answer (I asked for lower fees) in the next 2-6 weeks.  My LA is with Momentum. They were the only provider we could find four years ago that would allow our own choice of funds.  If I transfer to Sygnia admin is 0.4% if I leave it in Coreshares, 0.2% if I have it moved to Sygnia’s own S&P 500 ETF.   I am planning for the next 30 years (if I die sooner, so be it). From all accounts it seems the route to take. Anything I have missed in this 2-step process?  (I have contacted Momentum to ask for reduction in fees, waiting for an answer. Their person did not sound hopeful. For interest: I take minimal withdrawal of 2.5%. Admin monthly is equivalent to 12% of what I receive after PAYE!  And this for the next 30 years!!!!) Wesley I was under the impression that if there was a written agreement in place, it can be structured so that the interest on the loan when not paid, is deemed interest. That deemed interest can be attributed to your annual donation allowance, and the balance of the allowance can be written off against the capital amount of the loan.

It’s going to take more than a good plan and discipline to cope with the financial impact of this lockdown. Some of us are lucky to retain all or some of our income, but for many of us this period is a financial catastrophe. There is no good news, no upside, no silver lining. We are in crisis mode and the goal is survival.  In this week’s episode we think through some lesser-of-two-evils scenarios. Should you take a loan repayment holiday? Should you sell an investment or take on debt? Should you borrow money from the bank or your family? I wish we could offer some hope or some solutions, but for the moment all we can offer is how to make the best of a bad situation. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Pieter I have all my cash in my access bond, with the exclusion of about a week's worth of expenses. I realized with ABSA, every time there is a rate adjustment they recalculate the payment to the same term. That’s the outstanding balance, including the money you stored in your access bond.  I’ve been calculating what I should have been paying all along. I pay that over to an investment account. The idea is once that’s enough to clear the bond, we’ll do that. In the meantime we’ll see when that happens if we'll do it or continue to grow the investment. When a debt collection agency purchases all your debt from the original company at a few cents to the rand. And at that stage you sometimes can get up to 90% off your debt depending on the type and how close it is to prescription. From your first default, your interest and costs may not be more than the amount at default. If you defaulted at R2,000, the max debt may be R4,000. If you pay back say R500 they are still not allowed to add additional cost and interest.  Celma I have a little flat that I rent out.  I declare that and I claim a portion of my electricity, services etc and give SARS what is due to SARS.   I also have a few investments and pay fees on the administration thereof.  This is a substantial amount of money. Just as me paying for electricity, water, providing wi-fi enables me to make the money on the little flat,  paying the admin fees on the investment enables me to grow my savings. I want to deduct the fees as a taxable expense and I am hitting a concrete wall.  I really don't see the difference in the expenses as it both has the same result. Will really appreciate it if you could assist by explaining this to me or tell me who I need to contact to try and rectify what I view as double standards. Henk My parents (64 & 72) have been advised that they shouldn't open a TFSA because they are too old and it won't help them. Is this correct?  Combined they have a portfolio of property, share portfolios with various finance houses and trusts which they obviously don't want to donate to the tax man.  Could they each contribute to a TFSA for the next 15 years, and when they are no longer with us, will that investment become part of their estate and therefore be liable for estate duties or will the accounts just cede to whoever they decide to leave them to, and continue being TFSAs? We kinda want to know before the end of Feb so we can open one this year.  How best can they distribute their wealth before they die so that their estate doesn't take forever to be wound up and pay a huge amount in estate duties?

Isn’t it fascinating how quickly we adapt? When the market first started its epic nose dive, we were all ready to jump with it. However, over the past month or so we’ve become so accustomed to a crisis environment that we can almost forget about our investment accounts. The last lockdown challenge was initially scheduled for the last week of lockdown. The lockdown extension happened after I recorded the podcast. To be honest, I don’t have the emotional energy to engage with the extension at the moment. As a result, we’re looking at our investments this week. Like our previous two challenges, we are using this time to go through our investments with a fine-tooth comb. Aside from padding your emergency fund, this challenge is not about taking action. It’s about reviewing the choices you made now that you can compare your portfolio before the crash to your portfolio after the crash. You’ve really earned your stripes this month. How did you do? Win of the week: Nomusa I bought a car in 2014 without a deposit. I never read the fine print or informed myself about the process. Never again! The car almost got repossessed when I was living hand to mouth. I am back on track now. In process to get back my peace, I opted for a debt review. I soon discovered this was a rip off 3 months into the trap. There was no agreement with my creditor as they had agreed to do. She ended up cancelling this. We talk about debt review in our Debt series, which you can find at justonelap.com/debt I have applied the snowball method to pay off debt and its working, I should be off the hook in December 2020. You pay the smallest amount first, add that to the second-smallest. Also find our article on the DIY debt repayment plan. I opened a Tyme Bank account for an emergency fund. I want this amount to not just sit but grow —even if it’s just by 1%. I looove rewards programmes., I know I need to heal from the financial trauma I suffered back in the years. I used to get R200 worth of UCount when it started, which I would be getting because I was using my credit card a lot, and I would then buy lunch and food from fresh stop and KFC when I ran out of money mid-month. I have since stopped using the credit card (because I was handed over really, for non-payment). I am not planning to carry on with standard bank because their fees are ridiculous—R105 cheque card and let alone debits and all extras. I have since opened a Capitec account which is reasonable (R30-35) as I have moved some debits orders to them for insurance, funeral, tracker and the likes. I have these reward programs -Ucount -Freshstop -Clicks -PnP smart shopper -My School days -ThankU -All garage outlets reward trust me and use associated stores for others as I travel a lot.  I have noted all further useful hints on credit cards like having a virgin money one because of fewer fees, but  my ucount rewards make me wanna go back and this time, use my credit to my benefit, deposit to spend in it, etc, I know rewards are just there to keep us loyal and I am the culprit. Are they really worth it, do you and Chuckles even care about them? I also love the affiliation things and referring people on stash, easy equities and all? Will this really buy me bubbles later? Sorry for the long email am just excited.  Guillym  With regards to people saving for their kids, time in the market is the best, right? So why put money into the market for your kids if you are going to take it out? Rather save more for yourself now, and lower your saving rate when the kid comes to needing money age.  As an example, my wife and I have disposable income that all goes into paying off the bond. When that is done in about 5 years, it will go into something else for us.  When any monthly expense comes along (for Sadie) we can save less, rather than draw from savings, to cover school fees or whatnot. If Sadie becomes more expsensive, we can give ourselves a raise. We are super lucky to be able to put away more than 40%. We certainly don't take this for granted. This won't work for everyone, but I feel it's a better option than saving for children just to take it out of the market later. Joy I listened to your podcast about first investments. You recommended Ashburton 1200. Because this is a foreign product investing in foreign stocks, surely it is not tax free in the real sense of the word?  I will still be paying taxes and fees into that product? Considering the 40+ years that I hope this account will be running the small 0.1% fees/taxes here and there do need to be considered in light of compounding.  Is it not best to do TSFA into SA products and then discretionary into foreign like the Ashburton 1200? I hope to use my annual tax free donations allowance of R100,000 split between my two children so I would do R33,000 TFSA each and R17,000 discretionary each.

Last week we challenged you to take a closer look at your insurance cover. The challenge was an eye-opener for me. I wrote an article about it here. This week it’s time to look at your medical aid. Since many of our incomes are affected by the lockdown, you might be looking at a cheaper medical aid plan. You might be wondering if the one you have is any good. Perhaps a global health crisis finally scared you into getting medical aid if you don’t already have one.  The trouble with making choices about medical aid is the medical aid industry. If you’ve ever tried to compare two medical schemes or even two plans within the same medical scheme, you know what we mean. This week, we hope to help you make sense of this mess. Here’s a summary of the big things you need to pay attention to: The percentage rate cover. Exclusions and sub-limits. Whether your particular chronic condition is covered. Cover for non-prescribed minimum benefits, like oncology, dialysis and HIV.  Let us know if you have any mind-bending insights of your own, and remember to catch our live interviews with our community members on the Fat Wallet community group. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Jennifer I just want to let you know that Sunday night is the highlight of my weekend because that's when I receive the phone notification that the latest Fat Wallet episode is available. Thank you for continuing to provide a calm perspective and practical advice during these chaotic times. I hope you and your families are staying safe and healthy. My wife and I are fine, but we have family, friends, and coworkers who are very sick. We have not left our tiny Manhattan apartment since March 13. Fortunately, many restaurants and grocery stores are making deliveries. I count ourselves lucky that we have the option to get food without leaving the safety of our apartment. I have a fear that the next time we go outside, perhaps months from now, the blocks around me will be unrecognizable because so many shops and restaurants will have closed. At night, I look out my windows and see other pondering New Yorkers in high-rises staring out of their windows trying to figure this all out. Sometimes I feel like we make eye contact, but we're so far away that I can't be sure. Lady Kabelo Whenever you and Simon talk about medical aid I feel like it's a high-level overview.  But the really difficult thing is the nitty gritty - when looking at plethora of options how do you make sense of it? Can you and Simon talk about which cover you have and, more importantly, how you landed on that? What did you take into consideration? At this point, I'm thinking Discovery purely because the brand is familiar. I also have my life insurance with them. And then I'm guessing the more expensive the plan, the more benefits it gives you so pick the most expensive one I can afford. I haven't pulled the trigger yet on this plan because it seems like a very bad way to make the decision. Save me Kristia - recommend a company and their best plan and put me out of my misery. Miles Satrix MSCI and other offshore ETFs and unit trusts are "non accumulating" or "roll-up" funds, so don't pay dividends. What happens to the dividends? Am I actually saving on foreign divi tax, but paying more CGT at sale time with these foreign investments? Also, in a TFSA, one pays foreign divi withholding tax. Hendrik You caution against ETFs and Investment products with high fees. You mentioned there are living annuity products on the market where the TERs are 0.5% or lower?   Would you care to elaborate on these please,.., which ones they are? 10X for example indicates a fee of 0.86% and OutVest has got those RA’s for 0.40%,.. but no Living Annuity as yet.  10X’s 0.86% TER had been the lowest I could locate thus far… I am going on Retirement in May of this year at the age of 60. It is crucial to me that I make the right choice of Living Annuity with the best combination of the highest possible return, lowest risk and lowest fees. Michael I get offered almost 3x my salary as straight credit on my FNB credit card (which I personally think is nutzzzz!). I was wondering if I could transfer that full amount to a Tyme bank account and earn 6-9% interest on it for the month and then transfer it back to FNB before the 55 days interest free period is up? It can't be that simple right? otherwise everyone would be doing it? Christian My question is related to a deduction from my SYGWD dividend.  The transaction breakdown is as follows: SYGWD Foreign Dividend  Foreign Dividend Tax And then the weird one: SYGWD - Port Costs I had a look on the internet but cannot find any reference to this cost, would you be able to shed some light on this? Don't know if it matters, but this was in my Share Builder account with FNB. Bradley I have a retirement savings product (that I hate) via my employer. I have investment property (rentals): I’m a property guy (long term debt; short term income; expropriation without compensation risk; what could go wrongJ). I have no TFSA yet. I want to create a R200k fund for high risk, high return investments projects through share trading: “SASOL” to be specific).       What do you think of putting funds aside to just invest in riskier things that have a much higher pay out?       What is the best way to go about buying and selling shares? Will I pay CGT or personal income tax on proceeds?

It’s a nutty time to be alive, isn’t it? A market crash is bad enough. Adding a national lockdown to the mix is bound to provoke some anxiety. Our strategy in this time is not dissimilar from our usual strategy: focus on what you can control.  To that end, our podcast this week is the first of three money challenges. We are starting with wills and estates and then moving on to short-term and long-term insurance. We all know what a drag it is to wade through the fine print of these documents when there are more exciting things to do. Unluckily for the insurance industry, we are all now confined to our homes with nothing but time on our hands. We might as well save some money in the process.  We also think this is a fine time to speak to your family members about your will and segue to money in general. If you’ve been wondering how to broach the topic, the madness in the world has solved this problem for you.  We’ll be doing some live video interviews with members of the Just One Lap community over the next three weeks to get you through the lockdown. These will be broadcast live on our Fat Wallet Community Group. If you’re not a member yet, now’s the time. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Cyril Ramaphosa for being epic at his job. Today we’re only going to deal with your estate and your insurance.  Will and Estate Review your will and make sure it’s still relevant to your life. Make a spreadsheet of documents and passwords your family need to have if something happens to you.  When you die, normally everything goes to your spouse. There’s no taxes payable if that happens.  If you don’t have a spouse, estate duty is 20%, and you have to pay and executor’s fee. Sometimes, to pay this, they have to liquidate some of your assets. If you don’t want this to happen, you can look at a baby life insurance policy that pays out to your estate to cover these fees and the cost of your funeral. Think about whether you want to do that. Insurance: Short-term Start a spreadsheet of all the insurance policies you have, including what is covered, your excesses, as well as when the policy was taken out. You can use this as a starting point every year when you renegotiate your insurance. Check what is covered and ensure that you have proof of ownership for specified items. Make a list of things you no longer have or can self-insure.  Create a spreadsheet of previous claims, including dates and settlement amounts. When you lodge a claim or take out new cover, you have to disclose this as it affects your premiums. If you claim and they find out there’s something you haven’t declared, they can reject your claim on that basis. This is going to save you a lot of time in the future.  Long-term Look at the terms of your dread disease and disability cover. You can decide if you want to reduce cover because your asset base can take care of you if something should happen, or increase cover if your family situation has changed. Make a spreadsheet of the terms of your cover in terms that you can understand. You don’t want to be wading through an insurance document if you should need this. See if you’re covered if you can’t work because you contracted corona. Make sure that you are covered for your own occupation, not own or similar. If you have life insurance, make sure you still need it. Be careful of hanging on to these policies just because you contributed a lot to them over the years. Similarly, if you don’t have life insurance but you have dependents, make sure they are covered if you pass away. Life insurance pays out directly to the beneficiaries in cash. These policies don’t form part of the estate and aren’t taxed. To know how much you need, look at what your dependents would need to survive for about a year until your estate wraps up and cover any shortfall you might have in your current circumstances. Mike has decided to go for five regional ETFs instead of one world-wide ETF in his portfolio. He buys Sygnia S&P 500, Sygnia FTSE100, Sygnia Eurostoxx 50, Sygnia Japan, Satrix Emerging Markets.  He’s comparing his 5 ETF strategy to the single, global ETF strategy across seven areas: Currency spread, dividends, emerging market access, regional exposure, sector exposure, rebalancing and TER. Currency spread:  Regional Amounts other than USD are first converted to USD for the underlying index and then converted again to ZAR for the Tracking index.Do we lose twice on currency spread every time we buy, sell or receive distributions? Dividends Sygnia MSCI World Gross Dividend Yield = 1.11% Ashburton 12 Gross Dividend yield = 1.51% JP + US + UK + EU Average Gross Dividend Yield = 1.81% (I didn't include Emerging Markets  (Satrix automatically re-invest) Emerging market access Since he’s buying the EM ETF, he can control how much exposure he has. Regional exposure +-60% of the global index is exposed to US (which also has the highest foreign dividend witholding tax of 30% compared to Japan/Britain 20%, Europe 26%).  Sector exposure World: Heavily exposed to IT  Japan's no.1 exposure is to Industrials. FTSE, EUROSTOXX and Emerging Markets no 1 Exposure is Financials. Energy is also no.2 on the FTSE but is only no.7 on the MSCI World. Rebalancing World: Done every +-3 months. When you top up account you are topping up both the winners and the losers of all regions Done every +-3 months though you have the opportunity to top up only the regions doing the worst TER Low TER of 0.35% (Satrix MSCI) Low TER of 0.45% (Ashburton 1200)   Average TER is high at 0.63%. It’s looking rather scary considering EU & Uk’s big drop! Portfolio is 16.83% down.   I can still contribute R27k for this year (R36k limit) so was thinking of doing +-R6k per month until limit is used up and sticking to strategy as I don’t know if it has already or when it will bottom out. I do like the idea of Dividend paying ETFs within a TFSA. Once I have reached my lifetime limit I can still use the dividends to purchase new shares without having to sell my current shares. I’m sure better/cheaper ETFs will come out in the future. I also then won’t be forced to sell shares (and pay more fees) should I wish to take a small drawdown in retirement. I can just withdraw the dividends.

Many of us are witnessing a stock market crash for the first time. Like most of you, I’m experiencing a heady mix of excitement and terror. I’m so glad watching my portfolio no longer feels like watching paint dry. Instead, it feels like being dropped off a very high building. It’s not great, but at least it’s not boring. This week we address nothing but crash questions. Drawing on some of the concerns of The Fat Wallet Community Group, we provide some guidance to get you through this process with your net worth protected.  If you’ve been wondering what you should be doing right now, you’ve come to the right place. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Bronwyn I know that TFSA are supposed to be long term investments but I cant wonder if it's not right at the time. I started one with FNB 2 months ago, last year one was with Allan Grey and it did badly so wanted to test a different one plus it helped with the ebucks. Anyway I lost close to R500 in 2 months. My children have cash TFSA and it's growing steadily. What do I do? I cannot afford to lose R500 in 2 months? Can one pause it? I know the markets are volatile but I assume they will be getting worse still. Danielle: What are great and safe buys while markets are cheap? I’ve been watching  the prices hoping to buy low. Any suggestions? Jacques: Any views on buying government bonds? Enesh: FNB has just taken R3000 out of my share investor account. No record of it in transactions. They state this is a precaution given the volatility of the market. Is this legal? There absolutely not record of the transaction besides the email sent to me. I don’t this is kosher. Any advice? Sizwe: Hi everyone, seeing some opportunities for buying. Am seriously considering 75% of my emergency fund to buy more etfs. Note sure of the risk though. What are your thoughts? Minnaar: I would love to “buy the dip” now, but the rand weakening has me worried. Those of you who are buying now, what ETFs are you going for? K:  I just want to enquire on the market share or stock marketing shares... How do you buy shares of a certain public company And where do i start? Shaun: I have my full TFSA allocation for the year ready to invest. Do I spend it all on ETFs now as they are on discount or does the math say rand cost average it out because the market may go lower? Sarit:  If we buy our favorite global ETF at a dip, R42 and 16.6 ZAR/USD. Then the ETF goes up but at the same time the ZAR usually strengthens... Is it the opposite movement nullifying each other at exactly the same rate? It seems that the crash always comes with a weaker ZAR, if we are buying at a dip are we really making money when markets go up but ZAR strengthen? Runyararo In a crisis like we have there is no well diversified portfolio because systematic risk cannot be diversified away. The Shamases The money still sits with us because something has now occurred to us that we hadn't considered before. We were going to just open a brokerage account and let time do its magic. But what if we make a poor selection when putting together a basket of ETFs? If we get a retirement annuity or a managed tax free fund, that concern is removed from us. However it would come with the expense of fees, which eat into growth. How do we select between managed and unmanaged? And how do we select a good basket?

While the rest of the world is getting in supermarket fights over toilet paper, life at Just One Lap carries on. Lesego, who is only 24, is ready to start their investment journey. This week we hold their hand through their first tax-free purchase. We explain what tax-free accounts are, what ETFs are and why we like to go for a diverse, global investment.  If the investment world is new to you, you don’t want to miss this episode. The video below is a deep-dive into tax-free investments, presented by Chuckles himself.  If you’re buying ETFs at the moment, enjoy the sale. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Lesego I am completely clueless regarding tax free savings accounts. I went onto the easy equities app but I have no idea which ETF so even select or how everything actually works because I would like to invest before the end of the financial year. I listened to the podcast and they mentioned it won’t be enough having just a tax free account so I would like to open a retirement annuity fund as well but have no cooking clue how to even delete a company for that. Jaco  Let's assume you are 35, earning R240,000 and have R33,000 pa to contribute to a TFSA or RA. Assuming fees and growth are the same, there’s no difference between the two, since both funds grow tax-free until withdrawal.  If you reinvest the tax saving from the RA back into the RA, the RA value will naturally be higher at the end of the term due to the additional contributions. The higher amount will give you a bigger savings pot to draw an income from.  Is the higher savings amount available at retirement offset by the income tax payable in retirement on income? You need to look at the tax saving on the contributions and the tax payable on the income. Tax saving on contributions: A 35-year-old earning R240 000 pa will have a marginal tax rate of 26%. The tax saving/deduction on the R33 000 contribution is R8 580 (tax saving = contribution*marginal tax rate). The tax saving is 26%, which is equal to the marginal tax rate of 26%. So on contributions, your return on the saving of R33 000 is R8 580 (26%)  Income tax payable: At retirement age 60, if you keep your income at R240 000, your marginal tax rate will still be 26%. But the tax you pay on your retirement income will be taxed at your effective tax rate. A marginal tax rate of 26% is equal to an effective tax rate of 13.55% (the rate at which you pay tax). The effective tax rate is lower than the marginal tax rate due to the rebates and sliding tax scales. So the "cost" on your retirement income of R240 000 is R32 512 or 13.55% (R32 512/R240000). Based on the above, the tax saving on RA contributions is 26% or R41 580 (R33000+R8 580), and the tax payable on retirement income is 13.55% or R32 512. Because the tax saving is > the tax payable, contributing to an RA is net-net positive. I recommend if your marginal tax rate is above the tax-free threshold, and you are happy with Regulation 28 to first contribute to an RA.  The higher your marginal tax rate, the bigger the tax-saving, the bigger the benefit of contributing to an RA. If you have liquidity problems, earning an income below the tax-free threshold or want to increase your offshore/equity exposure, the TFSA is the better option. Joshua  What is the practical difference in taking money offshore using Interactive Brokers vs using EasyEquities USD Platform?  Do you suggest opening an offshore bank account and is this possible? The issue with the local banks offerings, for example FNB’s linked Global account, is that interest is only earned at around 0.5%. Ollie In episode #178 you considered the options for a listener who was planning to move to the Netherlands. One of the options canvassed was the potential of leaving money in a TFSA in the event of a market decline prior to emigration.  One element of this approach not considered, is that the overseas jurisdiction may consider the account taxable, meaning that the tax-free benefit of saving through a TFSA will be negated from the moment that the person migrates to the new jurisdiction. This varies on a country by country basis but should probably be considered by anyone before planning on leaving money in a South African investment vehicle whilst living abroad.  Innes  Since I am a little risk averse given how high developed markets are - I decided to buy some of this NFGovi ETF in my TFSA (about 25%) to give it some more diversification and less risk (and to hopefully receive a better return than cash/interest due to it being linked to bonds). However, looking at the price graph over the last 6 months - the return has been the flattest thing I’ve ever seen. And the 5 year historical return looked so promising and consistent when I was deciding to invest! I thought that bonds (and bond ETFs) were supposed to be “more certain/safer” than equities and have a better return than cash. Why do you think the return for the govi has been so flat of late? Do you think this would continue to be flat if SA is downgraded to junk status? I know you referred to the Ashburton 1200 as one of your favourite ETFs - would there be a certain bond or bond etf you would recommend and why? Are bonds or bond ETFs maybe a waste of time given their low (and not so certain) returns? Maybe I should be buying bonds and not bond ETFs? What platform would you recommend using to buy bonds? (If you would recommend them at all). Hugo  I love the innovation behind the product, one which will hopefully create a revolution in the investment domain. I am a bit underwhelmed though with the fee structure of the product during the initial build-up phase of the portfolio. There are current providers who can offer RAs with fees less than 1.5%, (10X and Sygnia come to mind) from the first rand invested. Sygnia does there Skeleton 70 product for example at 0.55% all in. Why not invest with a cheaper provider until you reach an amount where Outvest become cheaper, then make the switch? For example: R1 – R 818 000 at Sygnia = 0.55% / annum R818 000 @ 0.55% = R4500 (Outvest cap) R 818 000 to infinity at Outvest = 0.55% (decreasing to 0.2%) We have to assume that the funds invested in are of course all the same – and I think we can argue that Reg28 investments, whether aggressive or moderate or low risk, will all more or less perform the same. Am I missing something? Eleanore  I would like to transfer my RA from Allan Gray to Sygnia. Both Ag & Sygnia's forms ask about a unit transfer. I'm not sure what to select. Assuming a unit transfer is possible in this case (for a transfer from AG Balanced Fund to Sygnia Skeleton Balanced 70 Fund), should I select this? Which is best, a cash or unit transfer? I don't want to make a mistake and diminish my Retirement savings at this point due to a transfer mishap. Robin I received an Insurance payout which I have placed in an Investec Fixed deposit, drawing a compound interest of around 7.5%.  We’ve bought two apartments off-plan in Cape Town, which will only be ready for handover towards the end of 2022. I’ve made upfront payments of 25% and 50% respectively on the apartments. These funds are sitting in the Conveyancers Trust Account drawing a 7.8% compounded interest per year. I am unable to touch this.  Would it be better to move the money that is sitting in my Investec account into one ETF or a group of ETFs for three years. Or should I hold these funds where they are at the moment?  My feeling was to keep it in a secure environment so I will be in a position to pay off the properties completely, and then draw rental income.  However, the income derived from the Investec investment will be taxable, which will be lumped together with my other SA rental based income. Together the total income will be around R320K for the year.  Should I put the R320K into my RA? When the time comes to settle the payment on the apartments at the end of 2022 I’ll draw from my Unit Trust Investment to settle the difference, or repatriate funds from my overseas investment. If I keep it in the Investec fixed deposit I will end up paying around R63,853.00 in tax. One of your listeners from China (Podcast #169) was inquiring about where he can invest using Euros or USD. As an expat I use Internaxx - based in Luxembourg - https://en.internaxx.com  where I buy my international ETFs and stocks. I trust this will help your listener (sorry I don't recall his name I was listening while walking). Steven noticed we prefer ETFs to unit trusts and wants to know why.  Eugene is keen on opening a TFSA for his spouse. He’s not keen on using EE, so he wants to know who else we can recommend. 

We’re not prone to panic, but at this point staying calm requires a level of stoicism we haven’t quite mastered. You may have forgotten this in the diseased fog of the Coronavirus, but a mere two months ago it seemed as though the US was going to war with Iran.  Part of what makes it so hard to keep calm is that the rest of the world is in a flat panic. When even the Federal Reserve starts behaving erratically, you may be forgiven for wanting to turn your ETFs into Kruger Rands*.  In this week’s episode, Simon and I discuss some of the fallouts we’re seeing in world markets and in our portfolios. We try to understand some of the more alarming news headlines, explain why the US rate cut is by no means a good sign and talk through some of what we can expect as local investors.  If you take one thing from this episode, I hope it’s this: wash your hands! *Don’t do that. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Ursula  Transferring my Liberty RA to Sygnia, I stumbled across the 'Sygnia Life Berkshire Hathaway Fund' on their website. What are your thoughts on this product? It is touted as a 'linked Life Endowment Policy' that invests 100% in BRK shares. While not being targeted at 'major offshore players who are already set up to trade independently and can easily buy BRK’s Class A or B shares. Rather, the SLBF has been designed to offer a hassle-free option to invest offshore with Buffett without the complexity'. I phoned Sygnia in the hopes of getting some more information with regards to the TIC etc. but was informed that because the fund is so new, this information is not yet available.  I am at the point where I would like to start investing in addition to the funds currently directed my TFSA and my RA and was curious about this. Why would one opt for an investment like this as opposed to directly investing in Berkshire Hathaway and what benefits, if any, does a Life Endowment have? Barry I was sent a video that basically states that the US is bankrupt and has two options. The US government stops influencing the market and allows the business model to play out, the effect of which they compared to a 1930’s type depression. Take the pain in one big hit. The US government allows massive inflation, bypasses the banking system (which provides loans), and provides an MMT style (I had to google that) of providing “helicopter” money to consumers and maintaining debt demand, resulting in rising inflation or hyperinflation as more money chases limited goods and services.  It certainly seems logical that this could happen from a layman’s perspective. If you spend more than you earn for long enough, you end up in a world of trouble. Is this just some more scaremongering or possibly some realism in there? Secondly, if either of the above scenarios were to play out and one was invested in a ‘buy-for-life’ Total World ETF like the Vanguard VWRD or even the Ashburton 1200 or MSCI World, what would the effect of either of these scenarios playing out be on the ETF? Currently the US market cap is weighted at about 55% of the ETF, if the this scenario were to play out and the US market-cap dropped as they rebalanced, would the ETF over a period of time rebalance accordingly too, chuck out the US holdings and increase those from other geographical regions as the non-US regions capitalized on the market-cap that the US had lost? So, a (relatively, a few years) short-term drop-in ETF unit price followed by a gradual recovery again? Similar to how Steinhoff is/ has been worked out of the Top 40 by the ETF? What would the effect be on the value of the USD? Javid I have recently come across your gem of a podcast and have been trawling through as many of your previous podcasts as possible. My question is: With tensions amongst the US and Iran at an all time high it seems imminent that it may escalate into another protracted war that could even turn nuclear. With this in mind what preparations should South African investors embark on to protect/rebalance our financial assets in the interim as this plays out. Some of my thoughts: - If you’re holding onto ZAR cash should this be rather converted to USD or Gold which could be seen as a safe haven (bearing in mind the US could enter hyperinflation as they print more USD to fund another war). - I suspect Oil in the region would surge, holding an oil index in the interim? - Are there any stocks to consider - perhaps in the defence industry? - I guess one could also have a list of fundamentally sound stocks on a watchlist and purchase them when they are a deep discount?

Boy, did AJ open a can of worms this week! We fall down a preservation fund rabbit hole that’s perhaps long overdue. Here are some of the key things you should know.  When you leave a company’s pension or provident fund because you leave the company, you have three options when transferring those funds: You can move it to your new company’s pension or provident fund. You can buy a retirement annuity (RA) in your private capacity. You can put that money into a pension preservation or provident preservation fund. Both pension and provident funds are Regulation 28-compliant products offered by employers. They differ in one important way: with a provident fund, you can withdraw the full amount in cash at retirement. If you hold a pension fund at retirement, you can only withdraw one-third in cash. The rest has to be reinvested in a living or life annuity.  A pension preservation or provident preservation fund is designed to hold on to the money you saved when you were employed with your company. It’s also a Regulation 28-compliant product, but once you move your retirement money into a preservation fund, you can no longer contribute to that fund.  If you have a pension preservation fund and your new company has a pension fund, you can move that preservation fund to your new company’s pension fund. If you have a provident preservation fund and your new company has a provident fund, you can move your preservation fund to your new company.  All this complicated moving around of money makes one wonder why you wouldn’t just transfer your money into a retirement annuity (RA), right?  It turns out, by law you can make one full or partial withdrawal from your preservation fund before retirement. The first R25,000 is tax-free. After that you are taxed according to the table below.  At this point you might be wondering why AJ is under the impression that his first R500,000 would be tax-free when he is retrenched. In this idea he is right and wrong. If he got a new job, contributed to his new employer’s pension or provident fund and got retrenched, he would be able to retire out of the new fund upon retrenchment using the R500,000 tax-free withdrawal he would have received upon retirement.  He can only withdraw from the fund to which he was contributing with his new employer, so if he didn’t transfer his preservation fund to his new employer, he’d be taxed on that withdrawal. The other snag is that it affects the tax-free amount he can take upon retirement. If he withdrew R100,000 tax-free upon retrenchment, he’d only have R400,000 tax-free money left when he retired. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Alexis When you financially emigrate SARS makes you pay CGT on all your investments worldwide as if you had sold them on that day. Ok, fine, but I haven't actually sold them, and one day, when living in my new country I will want to sell them.  But then the new country is going to want tax on the profits, presumably calculated from the actual base cost. I'm not sure how to avoid paying tax twice in this situation. Unless I actually sell the investment when financially emigrating, and buy it again at a new base cost after this process is done, which seems like a waste because of fees, spread and spending some time out of the market. We asked our Head Elf De Wet about this. He has good news. Typically the country to which you are emigrating has legislation (if their tax system is advanced enough as is the case with South Africa) that will deem the base cost in the new country to be the re-acquired base cost (not the original) and it should therefore not result in double taxation. It can in very few circumstances result in double taxation, but the chances are very slim. AJ  After I resigned from my previous employer, I moved my Provident Fund money to a Sygnia Preservation Fund. I chose this option to follow the ‘’Tax rules’’. I no longer save additional money, as I have moved abroad. I’ve gone quite aggressive with my allocation on Sygnia (Top40, Property, Offshore, Rhodium & Palladium and no cash, no bonds) minimum fees 0.62%. On my return to SA and if I find employment where there is an umbrella fund available, I can transfer my preservation fund to their Fund. This means I start at my new company with a lump sum available from day one.  I’m not a big RA, regulation 28 type of guy. My main benefit would be if I am retrenched and my retirement value is close to R500,000 at retrenchment I could benefit and effectively take this tax free.  Secondly, I could take this money with a huge tax implication if I am in some sort of emergency where I need cash all before the age of 55.  I am putting myself in the position that at worst case, if a retrenchment happens I at least benefit in some way. The maximum benefit would be around R500,000 in retirement money.  This tax free withdrawal can only be done once per person. If you have used your R25,000 tax-free portion, the max benefit you would be able to take is R500,000 less R25,000 (R475,000).  Francois I am 28 and recently started to take control of my financial life. So far: - I started a budget via 22Seven - Paid off my car loan - Maxed my TFSA (100% Satrix global MSCI- Single ETF lowest cost- great article by Stealthy Wealthy comparing global ETF's. Single ETF strategy for the win)  - In the process of moving my RA from "Unnamed Life insurance company" (My EAC was 6.61%) to Sygnia skeleton balanced 70 fund    I am currently stuck. I am looking to increase my global portfolio.  I currently earn in USD and receive this money in a USD call account. Would it be better investing in USD directly in an ETF (example Vanguard S&P 500) or use ZAR to invest in a global ETF (example Satrix MSCI global/Ashburton 1200)?  I will only be earning USD for the next two years and will then have to convert rand to USD to continue my dollar cost averaging amount monthly if I have a USD-based account. What is the benefit of having a USD account vs investing in Rands via a global ETFs. Yakoob  Can a South African citizen buy shares in Aramco? It’s  a Saudi Arabian oil company that listed in November on their local stock exchange. Mbasa When buying property the bank will show how much interest you would pay over 20 or 30 year home loan period. When you rent the property out the deficit will be reduced and eventually become a surplus that can be used to quickly pay off the loan. Example: A R 850k mortgage will amount to R 2 000 000 in total instalments over 20 years (R8369 * 240 months).  Baring in mind that this is paid for by the bank and the tenant. Is it advisable to then save (ETF, shares, unit trust ) to reach that R 2m goal or borrow from the bank and rent out. I did a quick calc and about R2.5k per month at 10% pa over 20 years reaches the R 2m goal. Sam I am 34, I have a 9 month old daughter and would like to save for her education. Time horizon is 13-14 years. We hope to cover primary school from salaries or a separate investment. I don't want to do a TFSA in her name as we will withdraw it all and then "rob" her of some or all of her Tax Free lifetime allocation. Would TFSAs split between my wife and I be a good idea considering we would draw down on a large chunk of our lifetime allocation long before retirement? If not then what would you suggest? (Regardless of the vehicle, ETFs will likely be the underlying investment, thanks to you guys) Boitumelo In 2019 I tightened my budget a bit, moved my Pension Preservation to a low-cost provider and fully funded my emergency fund for 6-8 months. Because of my work in Botswana I do not pay tax and can thus not get the tax benefit from the RA. I am now channelling those contributions and excess into my discretionary investments after maxing the TFSA. I receive my salary in USD into a dollar account in Botswana.  I transfer some cash for basic living expenses here and some to my expenses in SA (i.e. bond, donations, investments etc..).  I then leave some USD inside this account at 0% interest. Should I perhaps build up some USD in my account here transfer every few thousand dollars to  a USD Account to buy some Vanguard US Total Stock? Would that be a good idea and better use of the USDs instead of keeping it in this normal cheque account?  In my TFSA I buy the Satrix World and the CS Prop. In my discretionary account, I buy the Ashburton 1200 and The Satrix Top 40. Given that I am already buying the 'World' in both accounts, will buying the US Total Stock in USD mean I will be too US concentrated and therefore at risk? I am just looking for better value and better use of the USDs while I am able to.  Lusani  In 2014 I bought a house, paid extra monthly and when I was left with 13% to go I opted for a second property as an investment. The worst move I made was applying for a re-advance on my residential bond and then paying for the rental property cash. The whole transaction incurred transfer and bond registration fees.  Things were looking rosey until tax time. My tax consultant told me I could not deduct the bond interest since the property address on the bond statement does not correspond with the address of the rented apartment.  I missed out on that deduction and as a result my income is higher. My worry is that when we get our annual increase (6%) in April, this rental income will to push me to the next bracket. I have decided to register a bond on the investment property. Based on my calculations, I will not pay any tax from the rent for at least 3-4 years. I will be deducting a whole chunk of interest, levies and rates, still taking in consideration the yearly increase of at least 5%. I want to retain my tenant and not scare them away with 10%. Must the bond be on that property? Some people say it is possible to deduct the bond interest even if property B is not bonded, but as long as you can prove where the money comes from. If I use this money towards buying stocks on EE, I will still pay tax. Registering my bond now seems dumb or was it a clever move? I only joined recently. Must I move it elsewhere, or cancel it? The thought of paying those fees kills me. Until my RA issues fees issues are sorted out I will not increase my contribution to the allowable 27.5% using this money. Tafadzwa What are the risks of trading in ETFs in an illiquid market to a retail investor? Also, how can one use small and mid cap ETFs to enhance returns? 

This time of year is like Christmas for money nerds (or maybe it’s just me). Everyone’s tax situation is unique and there are so many variables to tweak. It’s truly magical.  In this episode, we take you through some tax basics. We explain why the end of the tax year is significant, even if you don’t file a provisional return. We help you work out why tax-free savings are so important and discuss some of the similarities between tax-free investment products and retirement products like annuities and pension funds.  If you don’t find tax exciting yet, it’s only because you don’t know enough about it. Let us change your mind in this episode. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Janesh  In 2016 I moved to CPT and started renting. I was busy with my Masters and working at the same time. I went from a fairly decent Department of Health salary through 2017 with poor cash flow. I still managed to get by, even after getting married in the year. In 2018 - cash flow improved and I could start thinking of buying a house, which we did in April 2019. I started a new medical practice in July 2019, so cash flow came to a screeching halt and my emergency fund dried up due to the purchase of the house. I'm also sitting with a hefty tax liability as the people previously doing my tax hashed it a little bit. I was just listening to the episode on financial planning. My plan is to pay off some of my debt and at the same time build an emergency fund again. I think i just need somebody to say, it’s okay - these situations are part of starting your own business. Pascal  Since I asked my question referencing TD Ameritrade there has been an escalating fee war between major US brokerages. Most of them now offer no account minimums, no maintenance fees and zero commissions. What a time to be alive! Why wouldn't you want to invest directly through a US brokerage that allows it, now that they're so damn cheap? I'm still new to this game. Is there something I'm missing? Obviously foreign exchange fees and international wire transfer fees are unavoidable.  I want to support local companies as much as possible, but when it comes to offshore investing, how can you say no to zero commissions? TD Ameritrade seems to be the only one that welcomes South African investors. They even provide a digital "Ben10" form on your profile to reduce your dividend withholding tax through the platform without using a third party company (Interactive Brokers does this too).  The funny thing is, I personally can't even use them, because my Standard Bank offshore account happens to be in the UK channel islands which is on TD's list of restricted countries. Something you can only learn by going through the process of opening an account and trying to fund it. What fun. I now invest my USDs with Interactive Brokers. It's not free, but still cheap! Thanks Patrick! If it interests you at all, after MONTHS of intense reading and research, I've settled on this simple equity-only offshore portfolio: 80% VTI - Vanguard total US Stock Market 20% VXUS - Vanguard Total World Excluding US Together these 2 ETFs make up your well-mentioned VT - Vanguard Total World, but I've weighted more towards the US Market for now for a number of reasons, most importantly because it's the economy I'm most comfortable with, and not least of which, in your own words: If the US is fucked, then we're all fucked :) Vivesh I opened a TFSA with Standard Bank this month. I bought a third each of PREFTRAX, NEWFTRACI and NEWFNGOVI after watching Simon’s webinar on TFSA on OST platform. I understood that the distributions are reinvested in the TRACI and GOVI. The TRACI price chart goes up annually by 7.1% due the reinvestments, but I don’t see this with the GOVI.  I thought maybe the quantity of the GOVI ETF held would be adjusted upwards but that did not happen at last distribution. I can see the money received and reinvested in my cash balance history. How and when do you actually realize the growth/yield from this bond ETF if there is no capital gain from price appreciation due to distributions. The GOVI MDD puts the yield at about 8.65% ish, higher than TRACI.  Secondly, the PREFTRAX for example pays out quarterly dividends which could be used to supplement income, but how would one use the TRACI/GOVI for income purposes? Do you keep investing in TFSA to R500K limit and then when you need the income you sell the ETFs that reinvest distributions and go to cash or ETF that pays distributions? Guillym  I stopped investing when I lost my life savings in 2012, when I was 25.  I had close to R200k in my current account. I knew I should do something with it, so invested it all into a single scheme, and lost every cent. Simon may remember when the owner of RVAF Trust Shares shot his partner and then himself. As you can imagine I was rather jaded after that, even though I was mainly burnt due to being an idiot. So I started on properties. Actually, first for about three months I spent every cent I earned and partied like a rock star. I was used to saving two thirds of what I earned. All of a sudden I could afford to go to the pub/club every night.  After that I saved for a while and bought my first flat in Cape Town in Jan of 2014. Now I own three flats (the bank owns like one and a half) in Cape Town. Since finding your podcast, I have started diversifying away from property. I put some money into a trading account and then took it out to see that it wasn't gone.  Have like 6k in there now, all over the place. Will probably move R33k in before the end of the financial year for TFSA. I hear all the merits you guys mention on investments over properties, and have done a lot of the math. I am not sure how much better off we would be if I hadn't gone the property route, but I understand it is now time for ETFs and the like.  Marius My parents just sold a property to finance a badly planned retirement. They have R1.4 million to invest and can take care of their monthly expenses, but they cannot do anything more. What would you recommend? Candice When you speak of being over-diversified, what difference does it make if I put R10 into the Ash1200 or R5 into the Ash1200 and R5 into the Satrix  MsCi World?  I know they are very similar but one will outperform the other one day and is it not better to dabble a little in both? 

Conventional wisdom has it that a budget is at the heart of any successful financial strategy. My wisdom has it that a budget is an excellent tool for self-deception. Nobody was better than drawing up a theoretical map of how money should be spent than me not spending money that way. In this episode we discuss where budgets fall short. We each share our own approaches to budgeting and offer some more useful alternatives. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Ken from the Fat Wallet Community Group on Facebook. I've looked for a post on STXWDM + STXEMG vs ASHGEQ in various places, including this group but I can't find one. In episode #85 ASHGEQ was voted by Kristia and Simon as the one ETF to rule them all. Stealthy Wealth voted for STXWDM as the one ETF to rule the world. The argument for ASHGEQ is more diversification + emerging market exposure. The argument for STXWDM is lower fees. DOES STXWDM + STXEMG GIVE THE BEST OF BOTH? The argument against STXEMG could be too much Tencent exposure. In episode #72 Simon did some math and determined that there was less Tencent than in a JSE top40 index, so that seems ok. Does it cost more to hold two EFFs than it does one? STXWDM has a TER of 0.35% STXEMG has a TER of 0.40% For the sake of simplicity, I'll assume they both have a TER of 0.4% and R100 is bought in a 50/50 ratio. Holding only one ETF = 0.4% of R100 = R0.40 Holding two ETFs = (0.4% of R50) + (0.4% of R50) = R0.40 i.e. same same but different. ASHGEQ has a TER of 0.6% Does this mean that the combined cost of STXWDM + STXEMG is less than ASHGEQ? I presume there would be the cost of an additional trade? Two trades vs one. I don't know what that cost would be. Using EasyEquitites to purchase the ETFs, would buying both still work out cheaper than ASHGEQ after considering both transaction costs and TER? Assuming that the cost does in fact make it cheaper to buy STXWDM + STXEMG over ASHGEQ, and assuming those are the only two ETFs one buys, I'm interested to hear in what proportion you guys would suggest buying them, assuming a time horizon of 20+ years? In Stealthy's article he says, "I estimate the Emerging Market component of the Ashburton 1200 to be 3.5%, but let’s be generous and call it 5%." Following that, one might buy 95% STXWDM + 5% STXEMG to emulate to the 'one ETF to rule them all'. But just because that's the ratio of the ASHGEQ, doesn't necessarily make it the best ratio, and so I'm interested to hear what ratio others would suggest? Mariette  I've had one for a few years now, and there are the stupid things that they do for me which I can live without. They do help a lot with emails getting lost in the big ship. There have been a few times where I've requested cession documents, interest rate adjustments, etc. where it would take very long to sort out, and if I put my private banker on the matter, it's sorted within a day. I'm busy moving my tax free shares account over to EasyEquities, and I'm battling, this is where he will come in very handy. I'm soon not going to have one anymore, I'm downgrading my account to save on fees. Slightly ironic that I need this paid service when I want to invest better. Mariana  What salary is referred to when people talk about % of salary going to savings. Is it: Cost to company, which Includes employer’s contribution to: Pension/Provident fund (to which her employer contributes 10%) and 60% of medical aid, UIF Gross salary (Cash salary excl employer’s contributions as above) Take-home salary (Deductions: Tax, pension fund contribution (7% of cash salary) , 40% of medical aid, UIF, Group Insurance) When they ask about “after tax salary”, is that cash salary minus tax but still including my other deductions like PF and Medical aid? They (her pension fund provider) have a normal one indicating what my annual costs would be if I continue with the policy. Then they say I should use an alternative table if I’m considering moving the RA to compare with the new provider’s costs. Are they trying to make themselves look better (still horribly expensive) or why would the second table apply? At the moment I compare the current fund value plus the ongoing fees (table 1) against the termination value (> R50000 penalty) and the new provider’s fees for the remainder of the term 8-11 years( 55-58 age), am I missing some point with this 2nd table? Column two:   EAC if you are considering replacing your investment The table below shows the EAC calculation assuming that you terminate your existing investment immediately. The EAC table of the alternative product needs to be compared with the information below in order to determine whether or not the replacement may be in your best interest from an impact of charges comparison perspective. Minnaar With the upcoming elections in the US, there is lots of talk of certain technology companies having to be split up (either by congress or public pressure) (these include Amazon, Facebook etc). What happens to these companies that are major constituents in an ETF? If Amazon (which is now around 9% of the NASDAQ 100) decides to spin off Amazon Web Services into a different company, what happens to something like the Satrix NASDAQ 100 ETF? Do those new shares simply land up in the constituents immediately, or will it only benefit at the next rebalancing date? Essentially - do ETFs actually benefit from these occurrences? Javier An important advantage for new investors in using ETFsa would be the advisory service combined with the no fee on moving products to different providers in the future. It allows new investors to grow and get advice and if in the future with what they have learned they think their money is better off in a different RA product or TFSA then they can move it at no cost. I think this would help avoiding many rookie mistakes. Plus at the beginning the fees of a smallish portfolio will not have a huge effect in the future. And the one thing that made me the happiest is that they will manage the transfer of existing products my wife had in Old mutual, so we will not have to do any admin! just for that it’s worth it! Chris The 1nvest product tracks the the MSCI World Index. It has a total investment charge of 0.5%, with a total expense ratio of 0.4%. It’s almost identical to the Satrix product, except it pays dividends, while the Satrix MSCI product is a total return ETF.  Where can I see where, when and how much my dividends in Asburton will be? Olyn I’ve resigned. I am not sure if I should split my fund into 50/50 between RA and preserve preservation fund. I am 43 and starting a new job in Feb. Which preservation fund and pension is better? Louwrens I only discovered your show about a month ago and have been binge listening ever since. I am a scientist with the government. I don’t know if you collect scientists in bottles as well, or is it only engineers? I have a great pension plan and 100% of my expenses will be covered once I retire. My other investments are just bubbles money! Currently  85% of my discretionary investments are in a RA with shitty returns due to me paying for Old Mutual’s Christmas party every year. I am in the process of fixing this. The other 15% is in the MSCI World ETF.  I created a spreadsheet with sector distribution for each and then calculated the total % for each. I want to have at least 15% in Technology,10% in industrials and 15% real estate. This is personal preference only and not based on anything. To do this I have calculated that I need to invest the following 31.5% in an Industrial fund (like Sygnia ITRIX 4th industrial revolution global fund) 8.5% in REIT This will leave me with the following:  MSCI World    8.7%                                                                         RA                     51.1%                                                                         Industrial fund     31.5%                                                                         REIT                  8.7%  What do you think about this kind of approach? does it make sense, or am I going to over expose myself?

“Return” is one of those words that Finances Bros simply love to throw around. Good luck trying to have a conversation about investments without hearing all about it. This week, we discuss why return is something you can basically forget about, if your Finance Bro will let you.  We explain what the word “return” could mean, depending on the circumstances. We help you figure out how to know whether a return is good or bad. This is important, because a positive return can be a bad return. It’s one of those, “how long is a piece of string” things that we so love. As always, you can rely on inflation to just ruin things for everybody. We also explain how you can work out the return on your own portfolio.  Win of the week: Boitumelo. Jorge has some feedback for her. Our Church recommends that we keep an “Admin File”. In this file we keep a copy of all the different accounts, investments, bank statements, credit card statements, Last will and testament, RAs, car papers, water & rates, telephone, funeral policies, copy of ID’s, passports, pay slips etc. for both spouses. We then advise the family members where we keep this file. In the event of death, the person handling the estate will have a copy of everything they need to finalise the estate. When an account closes or and investment pays out., the item is removed and replaced with the new one. We don’t file the documents on a monthly basis as this would defeat the object of the admin file which is purely for information purposes. It is a very traumatic time for the surviving spouse in the event of a death and this enables the person helping the family on this sad occasion, from the info in the admin file, to contact all those institutions to get things going without having to bother the surviving spouse. Gerhard  You guys understand investments and are quick to point out how we get ripped off. You sadly don’t have the same understanding in medical aid. I wonder if a lot of the same thinking can’t be applied, since there’s lots of complexity, lots of fear, lots of fees. Why in the world is it so complex that one can’t understand and compare the different options. I have a family of 5 (well 4 + me) and I’m currently on a hospital plan at Bestmed for R4059 per month. It’s the best and cheapest medical aid I can get my hands on - probably increasing again in Jan. I can get medical insurance for hospital-related stuff from Affinity for around R2,500 per month - much more palatable. However there are annual limits.  The thing is, I don't know what this means. I don't know what amount of insurance you need to feel kind of covered. Also it seems in the States you get options with an excess payment that bring down your premiums, is there something like that in SA? It feels to me that if one had some clear insight you could potentially make better decisions. Maryn I've been recently diagnosed with a chronic illness. I am paying an unforeseen R4000 to R8000 per month for medical bills (a third of my salary). I have a Classic Saver with Discovery (I get a discount for Discovery through my job) of which the day-to-day savings have been exhausted soon after the diagnosis. I need your expert opinion (or just some cutting through the medical aid bullshit). Do I continue to carry my expensive medical bills month-to-month? Is it maybe worth it to register as a PMB patient, and upgrade my plan with Discovery? Do I look for a different medical scheme? Do I invest my monthly R4000 and run fast (real fast) away from the doctor after each appointment? I'm 24 and still have a long time for my investments to grow through the magic that is compound interest. I'm very proud that I still manage to invest my monthly R‭2750‬ into my tax-free (thanks again fat wallet), despite the increased medical burden. Do you perhaps have someone in mind? I'll pay a once-off consultation fee, but no monthly fees on top of fees (learned this trick from fat wallet ;) ). Please, can you share your wisdom?  

Life has this dreadful habit of happening. Almost always these goings on require money to solve. The financial foundation we advocate is designed to help you cope with financial crises when they happen. When you have no debt, sufficient short-term insurance, an emergency fund, medical aid and dread and disability cover, you have some tools in your time of need. Unfortunately life doesn’t sit around waiting for us to have our ducks in a row before causing drama. Sometimes you have to do the best with what you’ve got. In this episode we offer some ideas about what to do when life happens before you’re ready to cope with it. We talk about dealing with emergencies when you have debt and no emergency fund.  We have no elegant solutions, but hopefully a few of the strategies can help you navigate a tricky time with grace.  Good luck! Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Keith According to the national credit act (NCA), debt should be repayable at any moment by a borrower without any penalties. If a loan at the outset has a, say, 16% interest rate over its life, then the lender is not allowed to capitalize the entire life of interest over the life of loan so that early repayment penalizes you. As far as I can tell, that is illegal. NCA gives the borrower the power to ask for the full and final settlement account at any moment. Hence, if you are 2 years into a 10 year loan, they cannot go and add 8 years of interest into the loan’s capital amount. This would, surely, be illegal. Gregg I was listening to a program on TV where the panelist said we need to be aware when buying equities through Easy Equities, they are on the balance sheet of the brokerage. If the brokerage goes under, you are not guaranteed of getting all your funds back. Can you explain what this means? Perhaps explain using an example. If I buy Satrix 40 ETF – does it mean if I sell them that EasyEquities may not give me my money and that I have no direct claim from Satrix itself because the ETFs I bought are lying on EasyEquities balance sheet? This sounds like a risk. Is it one worth being nervous about? I would assume that as an Easy Equities user yourself, you’ve done your homework?  I am considering buying through them directly onto the US Market, which is one of their offerings. I want to make sure that I can quite comfortably do this at almost zero risk.  Dario Could you guys please talk about how EasyEquities functions as a platform i.e how they are able to provide fractional shares and are there any other good alternatives? I am asking this because I bought some STXNDQ without looking at the buying price. before logging off I decided to have a look and quickly cancelled the order as there was a 9% difference between the delayed price and buying price. Mariette My parents are 78 and 72 years old. My dad gets R14,500 pm from pension, so a lot of the extras fall on myself and one of my 4 sisters.  I took out life cover on my dad's life (after not such great advice from a 'financial advisor') which costs me a pretty penny every month. The idea is that if something should happen to him, my mom can use that amount (R500k) to offset the 50% loss in income from my dad's pension fund.  My dad had all his investments with Old Mutual and after all those years had a measly 2% growth.  He immediately took that money (about R450k) and put it in a 7-day notice account with FNB (6.3% repo related interest). He is dependent on the interest from that investment to cover expenses that are not covered by his pension. He doesn’t want to take any risks, especially with big institutions.  My mom has a buy-to-let property she bought with some inheritance money and try to save R1000 pm from the income. This can be done in a TFSA, but not sure if it will make such a big difference at their age. What would you suggest they do to stretch their savings a bit?  My first suggestion was to move from FNB to Capitec, take R370k and put it in a fixed deposit (8.55% interest) and the rest as an emergency fund with Thyme Bank (10% interest).  Also to try and reinvest as much as he can and not make use of the full R1000 extra from the increased interest rate. I'm not sure if my dad will go for an income-generating ETF, it's too unknown and too big a risk for him. Paul Here’s a list of his spreadsheets: The spreadsheets list my investments; their TER; their individual holdings (i.e. Naspers, BHP, Apple, etc.); how much (%) each investment is of my total value; to tracking what they have been doing on a monthly basis; my monthly expenses; SA inflation, my monthly savings (+-40%); retirement target and how far I am away from it; the amounts from every formal salary slip I have ever received (I can tell how much money I have made over my 14 year working career and my subsequent retirement contributions); to a breakdown of individual index funds for comparison purposes; to the monthly updating Rule of 300; as well as all the graphs in between. My company retirement fund (which I contribute 27.5% to each year) has increased by about 18% this year, which is great, after the bloodbath of last year. Should I get an RA or just leave my money in investments?  My understanding is that an RA is just tax delayed, but with having investments at least you have an accurate representation of what you should get out of your investments as the tax is taken constantly. An additional benefit (or negative depending on how you look at it) to the RA is that the money cannot be touched by anyone until it matures. What is your opinion? Stephen I had a legacy Sanlam RA which, after listening to your podcast, I started investigating the charges. To cut a long story short I decided to take the penalty and move it to 10X.  The problem I have with 10X though is the lack of visibility into what sectors they are investing. I think this is important to know so that you don't over-invest in certain sectors in your TFSA and Taxed portfolios. I then moved the RA from 10X to Easy Equities.  My reasons were: Strategy visibility Everything under a single solution Hopefully future functionality to build my own Reg 28 compliant portfolio. However, my question is why do these products all tend to overlap equities? Personally I'd prefer purely Satrix 40 for local instead of the overlap in the different sectors. For international I'd prefer Satrix World with an element of Satrix Emerging to capture the entire market. My EE RA is a small portion of my retirement as my main funds are within my work fund (Sanlam) and I'm maxing that out at 27.5% (any contributions above the standard 15% does not incur costs). I'm more prone to go aggressive on my RA and also simplify the approach. I'd prefer to stick with EE and have a custom Reg 28 RA based on Satrix products without penalties for not using Sygnia products. I'm hoping they release the functionality in the near future.  Do you have any connections at EE to find out if this is on their roadmap and by when? Eric I have a TFSA that I max out yearly. The only ETF that I have is the Sygnia S&P500. Although I've had some great growth over the last 2 years, I'm concerned that due to the market being at record highs, growth may start to stall & taper off in 2020.  To counter this, would it be a good idea to keep the initial S&P500 investment and start investing any new money into something like the Ashburton 1200? Maybe contribute toward a 50-50 split between the funds or contribute until a 50-50 split is reached? I'm very aware that there may be duplication of the same companies / regions if I choose these funds so is there maybe another fund to counter the exposure to the US market?  

The financial world is filled with dreadful products. Avoiding them all is a tempting strategy, but not feasible for most people. In our first full episode of the year, Simon and I dedicate some time to help you spot a bad product. Below is a checklist of red flags you should watch out for before investing in these products/ Debt Interest Balloon payments Revolving loans Fees Savings TFSA in cash Disclosure - 13% compound vs simple Fees Products that are tied to other products Insurance and medical aid Requirements Complexity Investments Promises of above-market reruns Non-diversified/concentration risk Fees Lock-ins Is it tied to an insurance product Derivative products Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Tafadzwa I stay in Namibia. Last month I discovered your show. I’ve been teaching myself FI by reading various blogs for 3 to 4 years. I recently turned 41 and your podcast was just the kick up the behind I needed to DO something about my finances. I am restructuring my life from top to bottom (or vice versa). I reduced my bank charges from 450 to 213 just because I went and raised hell. Guess what, there was a bundled package which suited me to a t. Thanks guys for the proverbial butt kick.  I am working on reducing my debt. Bye-bye to my clothing account in 5 months. Good riddance. My car loan is much more difficult. The prime rate was reduced from 10.75% +1 to 10.25%+1 in April this year. My installment was not reduced appropriately as was implied in the contract with the bank. I have 18 months left to clear the loan. Is the debt set in stone or can it be reduced through setting early? I need a hack please.  I decided to start investing in ETFs on the NSX. Satrix listed the MSCI World, Nasdaq, Emerging Markets, S&P 500 on the NSX in April 2019. Previously, only commodity ETFs where listed.  There seems to be little awareness about ETFs and possibly very little liquidity in that sector. I am aware that these are global ETFs. Will the lack of liquidity affect me in any way? Easy Equities implied that I can open a USD account. Is it a good option?  I am learning financial literacy with my wife and kids via YouTube and this podcast etc. Am working on my emergency fund (been start - stop) for years.  How viable is it for a contract worker to invest long term for retirement if there is no access to pension, RAs, tax breaks etc. Jon-Luke Many moons ago I bought some Choppies shares and some time later I sold with a bit of profit. But I did not sell everything a decided to hold a few thousand shares (they were dirt cheap) on the off chance that the company might turn around. Now with the company having been suspended for over a year I’m wondering what will happen if it gets delisted. What will the process be? If they delist do they have to pay share holders a nominal amount or do the shares “disappear” and does the value disappear too I saw a SENS for Choppies saying that they were possibly accepting a sale of all the South African operations... What does this mean for shareholders? Wouldn’t the shareholders usually be asked to vote on a decision like this even if the shares are suspended? (They are not delisted yet). Or is that perhaps the next step in the process? Stephnie What if the very nice family member gave the very lucky family member R500K immediately as an interest free loan (payable in full at the end of - say - 5 years, with no monthly payment required), and then every year for the next 5 years reduced the outstanding loan amount by the R100K tax-free 'gift/donation' threshold. This would allow for the immediate transfer of R500K with no tax implication for either party. The risk of course is if the very nice family member passes away in the next five years, the outstanding loan amount would be owed to the deceased estate. Tax Elf De Wet responds:  SARS would view this as a simulated loan (i.e. actual donation) on the day the loan is made and would levy donations tax on the remaining R400,000.

The world changed for the better this week. You may have missed it, but OUTvest launched a retirement annuity (RA) product whose fees will hopefully change the way we think about fees forever. With Simon recovering from a vicious flu, this week’s episode sees OUTvest head Grant Locke explain his revolutionary new product. We return to our regular programming next week, unless Simon succumbs.

Most of the time I hate it when people say “the exception to prove the rule”. It doesn’t make any sense. Except sometimes it does. When it comes to tax-free investing, you want to be in equity. It’s because you save tax in three places: dividends, capital gains and income. However, not everybody should be in equity. People who will need the money in less than five years should really be in cash. People who are already living from their savings would also probably not benefit from an equity investment.  This week, Lorian’s 80-year-old dad is our case study in when tax-free investments can be cash.  Lorian Dad made good investments, but has a fair bit of cash in a high interest earning account. He pays high tax due to this interest. To 'dilute' the pot a bit we are thinking of opening a tax-free bank account and making use of the annual R33k allowed. If he lives for another say 10 years then that is R330k he keeps out of the taxable pot. Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

If it’s parenting advice you’re after, you’ve come to the wrong place. The reason why we have quiet places to record is precisely because we don’t have kids. However, we know a thing or two about the financial system. This week we help soon-to-be dad Daniel to figure out where he can save for his future baby.  Daniel We’re expecting our first in June 2020. I want to, as you so many times suggested on the show, take out a TFSA for the boss baby. Thing is, I don’t trust the kid to not blow it all on his/her 18th birthday. What will the world look like 18 years anyway. Kids are not becoming more sensible, unless I’m missing something. You’ve probably covered this one before, but do you have any  tips on trying to prevent this from happening? Or is it just down to ‘good’ parenting, mild manipulation and hoping for the best? I think I recall Simon mentioning some years back that he pays for his nephews, but can’t remember if it is TFSA or RA? Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

Timing is everything in investing. If you could get the timing right on every single investment, you’d be rich before anyone else. What we want, in theory, is to put the money in when it costs the least and take it out when it costs the most. That’s it, really.  Unfortunately it’s impossible to know for sure when that is. We guess, we try. Sometimes we get lucky, but most of the time we aim for the ballpark. In this episode, we help Nicole work out when is a good time to take her money out of the country.  What we come up with is really simple: don’t do it when people are panicking.  Nicole I’m on board with Patrick's thinking. I’d like to move the majority of my discretionary money offshore.  I've been waiting until I'd saved my first million so that I can use interactive brokers without large fees.  I'm finally there, but I'm concerned about the exchange rate. I don't want to end up like the person Simon mentioned who waited 13 years for it to get back to the amount at which they took it offshore. If we assume South Africa will be downgraded in April, do you think the currency will recover at all before then? Is it just a generally bad idea to take it offshore between now and then? Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

Why is it so hard to talk to family about money? Shouldn’t the people who love and care about us most be most open to what we have to say? At our live event in Cape Town, someone wanted to know how they can convince their family members to think like them about money. We said it’s impossible, but Ivan disagrees. If this is a problem you’ve been longing to solve, you don’t want to miss this episode. Ivan I listen to the Dave Ramsey Show podcast.   On one of the shows someone asked the exact question on how to get his wife on the same page financially.   The response was to talk to him/her about their “WHY”  He recommended talking to your loved one about what they want to achieve in life and showing them how saving now and sacrificing in the short term can help him/her achieve that dream.  I thought long and hard about this. With the financial info I had from my father’s affairs made a spreadsheet and powerpoint presentations. I started walking him through the baby steps with a whole comprehensive list of “why’s” he can achieve once he has reached the baby step 7. I pitched the idea to my father. It gave him hope to change his behaviour since there was a reason and a plan to change his behaviour. It is still early days and it takes effort to remind my father why he is not spending on a credit card anymore, but there has been changed behaviour from his side. This has impacted his finances and his sanity since he has a plan for the future and his life. Talking about WHY he does things now has changed a lot of elements in his life.   I understand that it might not work for everyone but maybe it can work for other people as well. Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

If you know you'll be leaving the country for good in the next few years, should you invest your money or keep everything in cash? In the first of five mini Fat Wallet episodes, we help Karlien think through some options. Karlien Your show gets me excited to invest, but I'm at a weird place right now.  I'm getting married next year and then we want to immigrate to the Netherlands because I'm a Dutch citizen. We aren't very likely to return to SA permanently. I have no debt and I'm currently saving for the wedding and our big move.  Considering our imminent departure in the next year or two, should I be investing in something like a TFSA or ETFs now, or should I wait until I'm on the other side? If now, how do I make sure I invest smartly considering our move. Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

The end of the year is a good time to take stock of how things went financially. At the beginning of 2018, Simon and I discussed our money resolutions for the year. At the end of last year, we revisited some of our financial assumptions.  To wrap up our 2019 Fat Wallet year, we once again discuss our personal finances and which assumptions we’ve come to challenge throughout the year. For me, learning to relax is always a challenge. I spent a lot of money on a holiday and it took me a while to realise that my financial journey is only for me. I don’t need to justify my choices to anyone and if I want to spend a fortune on a holiday, I damn well will.  I’m also starting to be a bit more sceptical of smart beta ETF strategies. After three years of writing the ETF blog, I’ve looked under many hoods and heard many explanations of why a particular investment strategy is simply perfect—on paper. With a market trending sideways for an absurd number of years, these strategies should have come into their own, so why haven’t they? Colour me weary.  We will record a few, short episodes to ensure that you get your Fat Wallet fix throughout the holidays, but this is the last full one for the year. With that, we’d like to thank you so much for your support and participation for another full year. This show is community-driven in every way and wouldn’t exist without you. We appreciate every single download, email, tweet and visit. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Bleeped version is here. Win of the week: Anna I finally decided to start investing after listening to your show.  I am starting by maxing out my R33 000 tax free for this year.  While researching tax free accounts I came across an article on Stealthy Wealth "what these 9 experts hold on their TFSAs" Simon holds Satrix prop 31.8%, Ashburton Global 1200 36.6% and sygnia itrix MSCI world ETF 29.5%. I then decided to research the fund fact sheets of each one and noticed that the Ashburton 1200 and Sygnia itrix MSCI basically invest in the same companies just at different percentages.  I'm totally new to this so what am I missing? Isn't that then just investing in basically the same product if their holdings are basically the same? What would the reasons be in investing in both these options? Colin My parents are reaching retirement age. They mostly worked government jobs and have decent government pensions.  They have a portfolio of properties which is supposed to be their retirement income along with the pensions. They’ve kept the bonds maxed and used the allowable tax deductions through the years really well. Getting closer to retirement age, larger chunks of the bonds are getting paid up, as they are going to need to start drawing an income from it within the next five years. They are finding it more and more difficult to find enough deductions on the property alone to cover the profit. Should they take the money out of the access bonds and put it into a fixed savings? At Tyme bank they’ll get 9.75% for 100k and the remainder with African bank where you get 9.2% on a two-year fixed deposit. (5 year fixed at 10.75%, but wouldn’t want their money tied up for that long this close to retirement).  By doing this they’ll minimising the profit made on the properties as the interest paid will be much higher with the bonds still being maxed.  To wipe out the remaining profit made, calculate what’s needed in RA contributions to have enough deductions to get as close to making a loss as possible annually. If they're moving R2m out of the bonds/mortgages they're going to be paying tax on the interest earned in any case. So they could then just take 200k odd out each into fixed savings, 30k each into TFSA, they left with R1.5m sitting in bonds/mortgages. Come retirement they could just take the money out of the TFSA and fixed accounts to pay off the bond. Should they put a lump sum into a RA to offset the profit made? What would be the best way to mitigate the tax payable? Emmanuel  My wife and I have maxed out our TFSAs (ASHEQ and Satrix MSCI) and we are looking for the next best thing to do with the extra income. What is your ideal framework for extra income investment after TFSA?  Normal/discretionary long term investments (ideally for withdrawal between 40-55, if it is favourable) and RA Did you ever find the answer to the tax efficient way to invest in RAs? Is the 27.5% the best option assuming emergency fund and other needs are in place. He’s currently building his DIY RA on Sygnia. Here’s what he has: Kyle We systematically worked through our expenses and 30 minutes later, viola!!! A revised budget, with greens all around. The next step was putting the plan into action and one month later, most of the plan have been executed... which included amongst other things: Cutting back on food budget (we don’t eat less, just buying more efficiently – Yes, 50% off Checkers meals is our thing now) Changing bank account to Capitec – Full time (changing debit orders wasn’t as cumbersome as I thought) Reducing airtime allocation Reducing internet speeds Paying up and cancelling ALL retails accounts Changing to a cheaper gym Driving less, reducing fuel allocation Consolidating and changing insurance Retirement savings remained the same (RA and TFSA for both of us) Short term savings reduced by 80% (but we are still trying to save as much as we can, even with one income) While the process is ongoing and it hasn't been easy, what I’m most grateful for is that bloody complex-as-all-hell budget spreadsheet.   If you lectured Budgeting 101 to the masses, how would that lecture go down? What do your budgets look like? How is it structured? Excel? Paper? What are the must have categories or line items and do you do your allocations down to the R1 like I do or is it a little more of an estimate. Would love to hear your take on this one.

For the longest time I thought a progressive tax system referred to how we spend our tax money. Poor, naive me. It turns out that a progressive tax system means there’s not one tax rate. How much tax you pay depends on how much money you make. Your tax rate gets progressively higher as you earn more income. In a way, you pay less tax on the money you make first.  The table below shows how your income is taxed. Unless you’re in the lowest tax bracket, you’ll notice a rand amount before the percentage you pay on your salary. When you multiply the highest amount in the tax bracket above by the corresponding tax bracket, you get to that rand amount. In other words, all the money you earned before you got to your current bracket is taxed at a lower rate.  A good way to think about this is by allocating a lower rate to the money you earn first. Let’s say you earn R423,000 per year. This puts you at the upper end of the 31% tax bracket. However, since tax is progressive, you actually only pay 31% on everything above R305,850. In other words, you only pay a rate of 31% on R117,150, not on the full R423,000.  If you earn R423,000 per year, you earn R1,185 for every day of the year. Your first R195,850 is taxed at 18%. For the first 165 days of the year, your tax rate is therefore 18%. We got there by dividing the upper end of the first bracket by your daily income. For the next 92 days, your tax rate is 26%. The last 96 days of the year brings your tax rate is 31%. At this point you might notice there are 12 missing days in your year. Those are the 12 days the government gives you for free. Neat, eh? It’s good to know the upper limits of your income tax rate, because income from interest or rental income gets added to all your other income and taxed accordingly. This affects your investment choices. If you notice that income from your investments might push you into a higher tax bracket, you can start making choices that might be more tax-efficient in the long run. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Chris Please tell fellow SA’ns traveling abroad, that the Revolut App is amazing.  You can transfer money into a wallet for 1.6% flat rate and from then on you pay zero fees.  You can also order a card for around R80 , but if you have Apple Pay it’s not necessary as you can just link it.  You pay zero fees per transaction and get really decent conversion rates. It’s much cheaper than any SA bank I’ve ever used.   Martina I have resigned from my job and October was my last month. I have been offered a scholarship to study overseas in Italy for six months. I have a small side hustle but will not be earning a stable income whilst I am abroad. I have no guaranteed job to come back to. However, I don’t plan on going back to a corporate environment again. My work will pay out my pension fund which is through Momentum Funds At Work (which has not performed well in the last 2 years). Is it best to put my pension in a preservation fund or an RA?  My understanding is that preservation umbrella funds should carry lower costs / fees than preservation funds and retirement annuities available to individuals, but  the Momentum preservation fund fees are 0.76%. and Sygnia Skeleton Retirement Annuity fees are only 0.65%. I’m not sure if there are hidden fees and what the advantages are of putting it in a preservation fund vs a RA, besides being able to draw from a preservation fund before 55 as opposed to after 55 for an RA. Charmaine I heard that you can transfer your annuity from one provider to another for a fee of R650 or something.  I don’t know if this is for living annuities only. If one has a RA with those money grabbers, there are high penalty fees. What are the options? Shall one turn it into a living annuity and then transfer it?. Shall one draw 17.5% just to get the money out. I think if the value is less than R247,000 you can take all the cash, with obvious tax implications What are one’s options if you are stuck in an expensive retirement annuity? Frank  I too have been looking for an offshore investment broker and was looking at Degiro as well. I just wanted to share that unfortunately there have been recent changes in regulations in the EU which resulted in Degiro now requiring its clients to have both an EU bank account and be resident in the EU. That said all existing non-resident clients can remain clients. So it looks like the door on EU based brokers is solidly closed and I'll have to start looking at US investment brokers instead. Marco We're currently putting at least R10 000 extra into our bond access facility. This is also essentially our emergency fund. At current projections, we should get the house paid off by late 2023. My plan is to essentially arbitrage the interest on my house debt (8.9%) to fund a Tyme bank account that earns up to 10% interest.  The plan would essentially be to stop paying R10 000 extra into the bond, but put it into 10 day notice Tyme bank account. If we started with what we have currently saved up, and put in 10K a month from now, we should reach 220K around early-mid 2021 with monthly compounding, and then it should start paying ~23K a year in interest. Once this is achieved, resume paying the 10K into the bond as before, except now we have 23K a year extra to put into the bond, or an emergency fund that pays for 2/3rds of a TFSA every year (hopefully they increase this amount). If we put the 23K extra a year into the bond, we'll pay off the house by mid 2025(July 2025 ish), around 18 months after if we had just put the 10K a month into the bond.  The argument could be made that we can pay the bond off earlier (end of 2023), but then we're left with no emergency fund at the end of 2023, and have to essentially build it up. The 10K plus the extra money freed up by not having bond payments would build it up faster, and assuming Tyme has the same 10% account, to build up the emergency fund to 220K(probably higher with 6 years of inflation to add to living costs) would take around 12 months. Also, since my partner and I are married, double interest exemption can be gained per year eventually for the emergency fund. Although we really only would need around 220K for a 12 month emergency fund, so not enough to attract interest and dividends tax--we have no other interest earning amounts. I know the adage, "time in the market is better than timing the market" holds true, and this plan would limit our RA contributions and TFSA allocations for a year or two, but the payout would be a chunky enough emergency fund that pays 10% p/a and would contribute 2/3rds of one of our TFSAs--not bad for an emergency fund. Pieter  Do I need exposure to local equity? Assuming a 100% equity ETF portfolio, are there benefits to holding South African stocks in addition to global index ETFs? I know that the JSE has historically outperformed world indexes, but there is no guarantee this will always be the case. I am not pessimistic about SA, but I want to be optimally diversified. I am already invested in SA by virtue of the fact that I earn and save Rands. Is there a reason to put those Rands into South African stocks, other than to bet that the JSE will outperform the rest of the world? Marvin I am a bit stumped and need some guidance. My dad has finally reached retirement age 65, however, does not have sufficient funds to sustain my mom and himself through their life. He does do the odd job by this is not regular and cannot plan based on this income. I’ve assisted them in paying off their flat (Current Value R 750,000) so all they need to cover is lights, water, rates and levies (R2,500.00). We have gotten their total living expenses down to R8,000 pm. My dad’s RA is worth R 175,000. His pension is worth around R600,000. When my dad lost his job 8 years ago, we stopped contributing to it as the odd private jobs he did went to living expenses and I felt it would be better they pay off their flat. My dad is expecting an inheritance of ±R100,000. They are both currently receiving a pension grant from the government. Thankfully they are both still healthy and as kids, we have them on a very basic medical aid.  I really need guidance as to what I should do now without putting their pot at financial risk. My plan is as follows:          The flat is a large part of their retirement source and needs work done to the place. If we were to sell it in the future or rent it out, we would need upgrades. The plan is to use half the inheritance to upgrade and invest the balance. (At this point, I have no intention of selling the place, as they still need to live somewhere).         Regarding the RA and pensions, my dad is keen to take the 3rd, but will this still be tax effective or even worthwhile?         If we take the 3rd, we would then take a living annuity out for the balance, and invest the 3rd and balance of the inheritance (50k) in The SATRIX World ETF and only use this when the living annuity runs out. Else I saw Africa Bank is offering 10.75% on a R100k deposit for 6 years. This works out to an effective interest rate of 13.33% due to compounding.          Do I invest the 3rd and inheritance in a TFSA? Tim I have a query based on being penalized 40% by Sars for transferring equities and money from SGB to easy equities within the TSFA ring fence environment. I was under the impression account transfers were tax free (we didn't withdraw the money and re-deposit) Has anyone else suffered this injustice? We have disputed it with SARS and have asked easy for help in the interim.  Would be nice to know if we are a first or if the community has had similar issues.  Lungi I started listening to the podcasts two weeks ago and I pretty much listen to you guys all day, every day: at work, at home and while I'm jogging :) One thing you have brought to my attention that wasn't even on my radar was the fees issue on my investment products. And boy did I get the shock of my life! I'm currently contributing to an RA with Liberty and I have one with Old Mutual which I don't contribute to anymore.  I also have a Pension Fund Preserver Policy with Liberty (which is currently invested over 4 investment products each with its own management fee).  This afternoon I decided to look through my statements and found that I was being ripped off in fees for the current RA that I am contributing to. I currently contribute R535 premium and according to my calculations for September 2019, after the monthly fees of R321.20 (over 2 investment products), only R213.80 actually goes into the RA. So basically, 60% of my premium goes to paying management fees. This is a very poor investment.  Will I be able to consolidate all my RAs and Pension Fund Preserver into one product so I can pay one management fee. Or is it better to diversify? I can only currently contribute R500 to an RA - looking at the fees charged by the companies, am I better off putting that money elsewhere till I can afford to contribute more? like in my Easy Equities Investment Account? Will other RA companies be able to get me a better deal than the one I currently have?

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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. 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? Split the available cash evenly across the funds so the purchase values remain equal. Distribute according to which fund generated which dividend. 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.

In this second instalment of my Holiday Show Load, we are not nearly so clever. We tried to push through as many questions as we could, but you know how chatty we get! This is the Double Jenny episode, which delights me no end. We discussed some of the things Jenny the First can do to choose the right ETF for her. If you find yourself in a similar position, you can find some more tips on making this choice by reading the below articles:  Comparing ETFs: Costs Comparing ETFs: Asset classes Comparing ETFs: Methodology Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Maryanne If I check on the ETFSA site the TER for my Sygnia ETF is .6 &.8 % pa. When I look at my statement I pay TER & management which is more like 1% . When I asked why so much for a passive fund I was told  DBX charged the same.  Margaret SARS want to know your net gain/loss as well as your capital gain/loss. Could you explain the difference between these? I have a TFSA with Sygnia and Allan Gray. The Syngia IT3 gives me interest, dividends and capital gain/loss. The Allan Gray. Gives me net return, interest, dividends and capital gain/loss.  Allan Gray had this explanatory note that they owned the underlying investments, so the tax implications accrue to Allan Gray. Given the whole point of TFSA is that you don't have tax implications. Can you explain what's going on here?  Jenny I recently opened a brokerage account and bought a couple of ETFs.  I’m a newbie and need a little advice on my portfolio. I bought:  Satrix MSCI world The Satrix S&P 500 The Satrix Nasdaq 100 Ahsburton Global 1200 Sygnia msci US Sygnia 4th industrial rev  I am invested in property in South Africa and am looking for global exposure. I was just wondering if it’s wise to put money into all these different ETFs of which some are very similar. Would it be better to cut down and rather put more money into one?  What should I do going forward with the ones I have?  I invested in tax-free savings account. I’d like to open a normal investment account soon, but I’m not sure how many ETFs to choose? Jenny I will be receiving some inheritance in the near future - R3m. I feel a responsibility to look after it and make it grow and not blow it on a bad investment.  I am 44 and I have a bond on my home of R1.5m.  I don’t necessarily have to pay my bond off with my inheritance as I rent it out, so I can deduct the interest from my rental income for tax savings.  I am invested in property in SA so would like international exposure. Do you think I can invest it all in two or three ETFs like the Satrix s+p 500 and msci world. Would this be a good idea or do you have any other ideas on what I could do? Santosh From my experience, this can be accomplished via direct dividend paying shares, or buying a Dividend ETF like the Satrix DIVI. The other is to buy mutual funds that pay income on a bi-annual or quarterly basis. These will pay different amounts depending on what's invested and hopefully will cover all expenses during the course of a year. At a 5.5% typical bond fund yield, around R4.4M is needed in capital and if we assume 20% goes in tax, we'd need R5.45M to be comfortable.  I'm not accounting for inflation as I'm assuming the capital will never be touched, so it will move "up" hopefully with the underlying unit price. I'm further assuming that the "Cents per unit" paid will increase with time and thus account somewhat for inflation (I know this is a risky bet!) Do you agree ? What would be your suggestions for the best funds to use for this purpose, excluding property. If RSA goes to junk, the yields will increase, which will mean a good regular return if bonds are used as an investment and as the prices will fall, one can buy more bonds for an even larger "income". IF this is true, why invest in anything else but bonds?  Am I correct in the above thinking, or am I being too simplistic. We discuss income ETFs here. Mona Since listening to your show my wife and I have seriously been looking at some financial options. My wife currently has R1.8m in a 32 day call account earning R10 000 interest per month.  We know this is not the best option, but our financial advisor from Standard Bank has told us to give notice and he will invest it offshore rather. Is there a better option? What would you say is a conservative fund to do this with for a period of 10 + years? Katie from summertownpictures.com I have heard your cries about fees, and decided to act. I have a TFSA with FNB. I decided to call them up and ask for my EAC for my Tax Free Shares Account.  The consultant was unaware of what the EAC was and sent me a tax certificate. Sensing some disgruntlement, she got hold of someone higher up in the food chain and he told me my account costs R20 a month and gave a vague brokerage fee. This took roughly an hour over the phone.  And this is not the EAC expressed as a percentage as per ASISA standard requirements. Am I right? After explaining this to him, he told me he could manually work the EAC out for me. My complaint was escalated, and this is the response: "I have gone back and requested some information from our Product manager regarding EAC on Tax Free Share accounts. He has advised me that this would apply to the Tax Free Unit trust accounts and not the Tax Free Share accounts as EAC is specific for providers that are ASISA members like unit trust providers. FNB Share Investing is not an ASISA member and therefore not required to provide clients with a EAC of their product." Does that sound right to you guys? Based on this I shall be moving my TFSA to Sygnia PRONTO. See ya later FNB. Franko I started working at the age of 21 and started investing into an RA through some crap that was sold to me.  After a few years I stopped contributing to it and left it. I have since changed jobs twice and have been working for a wonderful company for nine years now.  This company contributes to a provident fund on my behalf and has been doing ok. About two years ago I started to really think about my retirement.  I tracked down my old RA and moved to a new rip off scheme and started to contribute to it again. After reading some books I realised the fees are mad and moved it again to Sygnia and got rid of my “advisor”. I only contribute R600.00 to the RA as my main focus is my TFSA.  After the move and my new lower fees I started doing some more research. I had no idea how TFSAs worked.   I thought it was like a savings account at the bank that you can save money at a low interest rate and pay no tax on it. I dug deeper and found out I was so wrong.  I opened an account with Satrix and started investing into the S&P500 and trying really hard to contribute the max amount each year. Listening to your podcast I think I need to diversify even more.  I want to invest in either the Ashburton 1200 or the MSCI world index fund. But what do I do with my S&P500 investment? I know selling it will reduce my overall tax saving years from now and the amount already contributed cannot be contributed again in another fund. Do I leave it and stop the contributions to open the new TFSA or do I sell and move on? My S&P500 investment has been doing really well and if I am correct, the S&P500 is at an all-time high or close to it. If I do continue investing in it, do I buy now at this high or do I wait a while to see what it does? Jamie I have an emergency fund (6 months expenses) - In an account earning 7.2% I contribute to an RA through my Financial Advisor with Stanlib and am quite happy with the asset allocation. My contribution is currently only 5% of my gross salary. I currently have a very small equities portfolio which is currently doing terribly :( I have a Unit Trust with Investec (Equity Fund Class R) - I do not contribute to monthly.  I have a TFSA which I have maxed out for the last 2 years in the following ETFs: Sygnia MSCI World - 35% CoreShares SciBeta M-FI - 35% CoreShares PropTrax Ten - 20% Ashburton Global 1200 - 10% I am currently sitting on R1m cash (after CGT) due to the sale of shares in a company I was involved in. This money is sitting in my bank account earning 7.2% until I decide where to invest it. How do you feel about my weighting and choices for the TFSA? Should I be contributing more to the Global 1200 - I hear you speaking about this a lot? Should I be contributing more to my RA? Where should my R1m be invested considering all of the above? I would like to have some cash available for the odd splurge if needed ;).  Would it be wise to keep some money in cash to then use to max out my TFSA at the beginning of each year without having to contribute from my salary?

In honour of my long-awaited holiday, we spent two shows doing nothing but answering questions. This is the first.  Don’t forget we’ll be at the JSE in Cape Town for a live recording of The Fat Wallet Show on 31 October.  Win of the week: Jonathan The fees are a little confusing, because the quote has three different fee tables, all represented in a slightly different way. Depending on who you are, this is either super transparent, or designed to confuse - or both.  I learned three things.  One, Sygnia allows investors a lot of flexibility, so you can really build your own portfolio. You can build your RA portfolio to align exactly with your investment strategy (reg 28 compliant, of course). Two, Sygnia is really cheap, and fees are fucking confusing. Sygnia quote an annual fee as low as 0.36 inclusive (!!) but then show an effective annual fee of 0.52% year one, 0.46% year two in the same document (still good but wtf). The EAC seems to be the "what you're actually charged" amount. The 0.52% EAC is basically the lowest I could get with the available Sygnia products. The main "downside" is that international equity is all SP500 and not true global spread - because the SP500 ETF is almost 0.5% cheaper that the MSCI world! The biggest issue for me is because of market movement, there is really no way of realistically 'checking' what you are being charged, so you really just have to trust the provider, which I hate, because the quoted fees are always so absurdly vague (all providers!). Third, RAs don't have to provide less returns that the rest of your portfolio!  My question is whether the last option is a good shout, or whether such a large component of global property is not a good idea for some reason. Which would you do? Which would Simon do? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. The bleeped version is here. Stephen REIT dividends: There are still those quite insistent that REIT dividends qualify for the interest exemption. They do not. I'm not in the biz of arguing, but for clarity this is the situation as per the tax legislation. Ria I can finally call it mine, 3 years after I signed the OTP, and 2 years later than it should have been transferred to my name.  During this time all my savings went into a MM account with the idea to put a big lump sum towards the repayment. After the monthly bond repayment, levies, rates & everything else, I still make about R900 p/m off it (I rent it out) which I set aside for maintenance etc. I save about R8000 p/m, and my outstanding loan is about R1m. Do I: 1)      Put everything towards repaying my bond ASAP? (Apart from my 33k p/a for TFSA) 2)      Invest everything in ETFs and let the rental income continue to pay off the bond? 3)      Go halfsies – 4k p/m into the bond and 4k p/m into ETFs Dave I have been amazed by the consistency of your message. I think the only two things that have changed are DBX World is now the Ashburton 1200 and your attitude to tax changed from pay tax, to try only pay tax once. After all 162 podcasts, I have the following points/questions lingering: Why haven't you two moved to Durban? A lot of people are worried when they die that their dependents will be left stranded while the estate is sorted. First thing is that some life insurances pay an advance (maybe 10%) and another option is to set up regular payments to another account in their name to cover key expenses. Set it up now. Be ahead, for when accounts are frozen. With the TFSA for children - it is not binary. Try give 1-2 full years, ask friends and family rather to pay towards that than buy another toy for the toy box. This gives them 18 years to internalise the compound effect, something that took me 15 years after I understood the maths. It also gives a real discussion point about money. It still leaves 90% of the allowance (which could change) for the child. Last point is that how people think of risk bother me. They say something is risky (or aggressive), but risk has time and context factors - for example, cash is riskier than investments over time. Anyway, thanks for being awesome and helping me catch-up on the SA Financial Scene. Dr Dan I am, at times, a government employee and they, when I can't choose not to, contribute to a GEPF (Government Employee Pension Fund) on my behalf.  I’m in the process of getting hold of my current pension statement. I assume that the maximum 27.5% contribution is the combined total that goes into my GEPF as well as the amount that I contribute to my own RA? ps: Why is it called 'Just one lap' I'm sure you get asked frequently but I haven't heard the answer yet Jens Just a reminder, to COMPLETELY read any updates of your Insurance contract. I started with a new company in 2017.  I only read the 2018 update superficially, and then got a surprise when I read the 2019 update. My father in law’s car, which was insured on my policy, had the name of the owner changed from his mane to my name (without any communication by the Insurance Company - in 2018 or  2019). When this was queried with the Insurer, they stated that only vehicles that I owned could be insured and was informed that my father in law’s car was therefore not insured in the two-year period (luckily there were no claims!).  Still trying to get this issue fully resolved by the insurer after two months. Errol We now are avid ETF investors which are awesome for my wife and our future. We are 45 years old so have a 20-year investment plan in place in terms of ETF investing. On top of our existing RAs and pension funds We have bout R10,000 worth of ETFs in Ashburton and Satrix 40 etc through EasyEquities. What if the website shuts down or the company goes under. What happens to the money I invested in and how would I get access to it should something like that ever happen? I don't want to ask them directly for fear of a biased answer. Dave 0) get professional advice. Use the following as a prompt to unpack some of the issues. I’m a professional, but not in tax or finance. I have spent several years living & working in the USA on a work permit/ visa and submitting tax returns in both countries. 1) to answer Simon - it is possible to have dual- SA citizenship I think there might be a requirement to inform / request permission SA Dept Home Affairs when applying for citizenship of another country. 2) when Dirk got his USA green card, he went fully onto the US tax books. The IRS taxes US citizens on global income.  Any TFSA held in his name in SA, while not taxed in SA would probably be assessed for tax in the USA. There is a double-taxation agreement between SA & USA but I can’t see any tax advantage to a person who has tax residency elsewhere (health warning: I’m an engineer, not a tax specialist). 3) there are a number of SARS criteria for triggering tax residency in South Africa based on the period of time spent in SA.  To keep it simple - Dirk should limit time in country to 90 days or less per tax year to avoid being tax resident in SA. If he does become tax resident in SA, then SARS will want a share of US income & he will have to rely on the double-taxation agreement to limit total tax.  FYI While US tax rates on income tax are lower than in SA, but US tax payers also pay social security tax and might also pay state taxes. 4) the 180 days that Simon refers to is for SA tax residents who meet several requirements to be exempt from paying SA income tax on income earned offshore. This will be capped at R1m in the next tax year FY2020 & makes working in low / no tax regimes (like the Middle East) less attractive to SA tax residents working overseas. It will no doubt prompt some of them to do a financial emigration from SA. FYI: The issue of tax residency is in tax law one of intent and does not require financial emigration. Financial emigration is a SARB exchange control process that also results in the person ceasing to be tax resident in SA.  Brendon My wife and I max out our tax free savings account every year and currently invest roughly 50% of our monthly income into a range of bonds, dividend ETFs, property ETFs and international ETFs. We are both 38 years old and have had the idea of emigration on our minds for several years. Although we haven't yet taken the leap and don't immediately plan to do so, it is nevertheless something we would consider. My wife has an RA which she contributes minimally to in comparison to the rest of our joint investments. I don't have an RA. The reason neither of us are very focused on RA's is because if I’m not mistaken, we would be heavily penalised for closing the accounts early to emigrate. So I have two questions: What kind of penalties would we be looking at for closing an RA early and withdrawing the funds if we were to one day emigrate? Would it be worthwhile (even considering any penalties) for me to open an RA since my wife already has one and for us to both start contributing 27.5% to each of them. Alternatively we would continue with the ETFs which we can withdraw any time. In the end, emigration is not a definite plan but rather something that we are open to and have therefore not focused on RA's up to this point. John The cost of MWeb unthrottled, uncapped Fibre has now dropped to R399 down from R899 last month for a 10meg line. The catch however, is they dont drop the price unless you specifically phone in an request the new package.

If you’re a regular listener, you already know your emergency fund is the most important thing in your financial life. It’s boring, yes, but crucial. You should protect the assets you have with insurance. For as long as you’re earning an income, you are your most important asset, so dread disease and disability cover is a big deal.  Once those two elements are in place, where you go next becomes more complicated. We think everyone should have tax-free investment account. If you’re a salary-earning tax-payer, taking advantage of the tax breaks offered in retirement products is a good idea.  In this episode, we get five versions of the same question: which investment option is better in the long run? We come up with the following check-list of questions to help you decide: Where can the money stay invested the longest?  Time is a powerful ally in investing. The longer you can leave your money to compound, the better. Is the money guaranteed? This ties in to how long you can afford to stay invested. If you need the money in the short term, you want to put it where the outcome is guaranteed. Is there a limit to the up-side? Once again, this comes down to time. The market can go up forever, whereas a fixed rate or guaranteed product can only deliver what was promised, nothing more. Is it the most tax-efficient route? When you’re talking investments and time, your risks are inflation and tax - both of which will affect you whether you are aware of it or not. The sole purpose of investing is to counteract the effects of inflation. That just leaves tax. What is the opportunity cost? The very act of putting your money into one vehicle means choosing against all the other vehicles. What is that choice costing you? Are you considering all the moving parts? When it comes to offshore investing, are you thinking of the currency move and the market move? When it comes to asset allocation, are you accounting for your retirement savings allocations too? Are you taking your money out of the country at a high rate? We tend to move money offshore when the rand crashes, which means we’re taking money out at a high rate. Money should be taken offshore when the rand is strong.  Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Candice My “work husband” recommended the show. This was roughly around the time I found out I was pregnant. I mostly started listening out of fear, but since then we’ve paid our debt and started an emergency fund. Is it advisable to max out our daughter’s TFSA annually and just deposit bits and pieces to our TFSA?  Or should we spread our contribution equally across all three?    We will only draw from her TFSA in 20 years, if we need to for studies. If not, we’ll hand it over to her for her 21st. I have a company ra with the green company, but we’re going to start contributing to a 10X RA as well.    We don’t want to be financial burdens on our daughter when we’re older. We want her to have enough money available to not have to take student loans etc and get a helping hand at starting life. I just want to know we are on the right track.  Herman wrote an algorithm. The results are in an article called “The ideal pre-retirement allocation mix” on justonelap.com. Nico-Ben It seems the market is currently going down. At the moment my Satrix 40 is at a loss.  This does not bother me as this is a long term investment. In one of your podcasts, you said this should be seen as the JSE is having a sale, just like a retail store might have a sale. This  makes perfect sense.  I was planning to put the rental income into the bond, and top up my TFSA balance in February.  Looking at the prices dropping, it also seems like I should consistently buy the Satrix 40 in the TFIA.  Which course of action would you suggest?  I get it that we cannot predict the market from now to February, and that is too short term to really expect any real profit. Guido After maxing out my tax free savings I'm not sure whether I should carry on saving in a global vanilla etf like Ashburton 1200 or something like the 10x high equity fund. Should I invest in both or am I overexposed as the 10x fund invests in the satrix msci world as well. I am 40 years old and looking for long-term growth. I prefer a global etf at the moment as S.A equity is not doing much. The 10x high equity fund has 50% local equity but otherwise is nicely diversified. Which one should theoretically give the better return in the long run? Gerhard I currently maintain a 50/50 split between international and local investments. Every month I use the new money to try and keep it in balance. Hopefully it's 20+ years before I need to touch any of this money.  Recently I stumbled across Galileo Capital's YouTube channel. One thing Warren Ingram keeps mentioning is the "fair value" of the USD to Rand. He feels it's at about  R13.90 to the dollar. One should only move money offshore when we are below this level. This includes buying the international ETFs on our local market. Should I just ignore the USD/Rand and keep buying international every month? Or, does one keep the money earmarked for international in cash, and wait for the Rand to strengthen back to those levels? Andy I now own three properties in Cape Town.  I live in one (paid off, but lets ignore this lifestyle asset) and 2 investment properties.  Paid R800k for the first flat and I’m renting it out for R7800, which covered the bond repayments and the levies and rates. I ended up settling the bond with a lump sum. I used the bond to pay "cash" for the 3rd flat. I now have bond debt of about R600k (on the first investment property) which I’m smashing with my monthly salary savings and rental income from my 1st investment property.  The third flat hasn't got a tenant yet as I bought it off plan. I do have market exposure and the necessities covered. Example: I currently have that Liberty evolve product that tracks the top 40, which I will move into simple Satrix top 40 shortly. I also have some individual stocks which are taking a hammering. Mainly speculations on my part. I’m slowly moving away from individual stocks but they are so ridiculously cheap now that I refuse to sell them.. TFSA is maxed (missed one year becasue im an idiot) Emergency fund is adequate. Do I start filling up my Standard Bank OST account with my favourite ETFs or do I smash the bond and then fill up on ETFs? Albert I stumbled across your podcast while trying to find out why the yield of the Satrix MSCI World Equity Feeder Fund Unit Trust was less (by a few hundred rands) than the yield of the Satrix MSCI World Equity Feeder ETF in my TFSA over a period of two years.  On a simple TER basis the Unit Trust version of the same product was 0.63 more expensive. At first this didn’t seem too bad, until I started running the mathematics with a few assumptions and looking at the lost return over time. Naturally this infuriated me beyond belief. Since then, I’ve been working my way through your library while going through all of my expenses, investment activity, insurance and pension funding.  Being in my early 30’s, I have some investment groans about poor investment choices in my 20’s like: buying a new car in my first year of permanent employment transferring my previous company’s provident fund savings to a preservation fund which has a TER of 3.2%,  investing into equities via Unit Trusts without an emergency fund and occasionally dipping into the capital to fund emergencies.  That said, I currently don’t have debt, have always contributed as much as possible to my employer’s retirement fund and am grateful to have some savings and enjoyed some treasured memories of overseas vacations. You have both inspired the following change in my personal life:       I have penned a life plan and investment strategy;       I have set up an emergency fund which will increase over time (thanks Tyme);       I have reconsidered my luxurious expenditure (mostly eating out far too often as I live in JHB), and increased my monthly savings rate from 30% to 35%;       Launched a crusade against fees in my personal life:       Short & Long-Term Insurance premiums,       Moving from an Asset Manager platform to a Stockbroker (Goodbye expensive Unit Trusts),       My RA’s and preservation fund (this move is still ongoing),       Drafted a will, and       Placed a mandatory review of my finances firmly in my 2020 calendar. The Question: Given the amount of money I ought to have saved this year thanks to your sage advise (far better than any financial advisor I’ve met), I would like to send through a bottle of Veuve Clicquot. Then I took a look at the price of those particular bubbles, and surmised that it is beyond what I am prepared to pay for quite a while. Would it be possible for you to set up a Patreon or something? I wouldn’t mind kicking a few rands your way on a monthly basis to keep the show running. Alexander From listening to your podcast and speaking with friends and family, I would like to avoid credit. But I am also cognisant of the fact that I’d most likely have to incur at least some debt for a house one day.  The Standard Bank consultants informed me that building up a credit score starting now would make applying for future loans easier and that I’d possibly get lower interest rates. Would building a positive credit history (by using credit, instead of my normal cash, and paying it off in 30 days with that exact cash that I would have used) actually allow me to negotiate for better loans in the future? How important is having a credit score in reality? Does your asset base (i.e. my investments) influence your credit score? Surely having built up an asset base would count for more than having a positive credit history, or am I wrong? Do you have any general tips/advice for how I can start planning/structuring my life to minimise my future debt and living costs? At this stage in my life I’m very flexible regarding where I decide to work, buy a house and so on. Chris On the Sygnia website they claim to charge an admin feed of 0.2% on Sygnia ETFs and 0.4% on other ETFs. Since my ETFs are all from other service providers, the 0.4% admin fee would apply + the TER of the ETF itself. (e.g. Satrix World = 0.4% admin + 0.35% TER = 0.75%). However, on the Sygnia RA platform, there is a tool for calculating EAC fees which gives a slightly different output. It states my current EAC fees are 0.89%. On my quarterly statement, it gives a table of each ETF, with the respective TER and management fee applied. The management fee ranges from 0.1% to 0.3%, which is quite reasonable. However this does not tie up with the EAC quoted on the online platform. I'm a bit stumped.  The way I see it, worst case I am paying 0.89%, which is in range of the 10x fee of 0.9% so this is acceptable. The fee appears to go down to 0.61% over time which would then make it cheaper than 10x. I should also mention that you do occasionally have to rebalance the portfolio to remain Reg 28 compliant. Sygnia charges a 0.1% brokerage fee for these transactions Ross I have my money back home in a brokerage and savings account. I would like to invest my overseas earnings into something without converting back to Rands. Preferably into USD, EU or GBP. What options would you suggest? Are there any multi currency account banks that accept sign up without residency? 

This week, Ben inspires us to delve into how ETF units are priced. A recent presentation of our favourite five concepts made me realise how far removed share prices are from the companies whose shares we buy. After the initial public offering (IPO), what happens to the share price can be entirely unrelated to the business.  When we talk about how ETF units are priced, we refer to the net asset value (NAV) or the “fair price” of the ETF. However, NAV in ETFs have nothing to do with the NAV of the companies represented in the ETF. This is confusing, no? In this episode, we use our price-weighted index as an example to illustrate how ETF units are priced. We talk about how much of the pricing model is science, how much is whimsy and where ETF issuers actually make their money. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Ben When is it a good time to sell an ETF? On EE it seems that you can only use a market order and sell at the particular unit price at that point in time. They have no option for a limit order. Would you say this is a major issue, in that you are forced to take the price right then.   Is it better to wait and buy at an opportune time each month as opposed to a monthly debit order that will buy at a unit-price that may be suboptimal? How often is an ETF re-priced? Is this only done once a day at a particular time? Win of the week: Richard I upgraded the service plan to a maintenance plan so I was covered, which cost R10k for 5 years. Worth it. I noticed that during services they didn’t seem to do much. Oil change here and there, maybe a spark plug. I got the feeling it was built to cost them nothing to service for five years. Then the service plan expired. To extend it for a year was R15k. So five years for R10k and 1 year for R15k? That seems weird. I didn’t extend and paid for my next service. A couple months ago I noticed it was using a lot of oil. Like 1 to 4 pints per refuel. Asked them to check a few things out. That’s on a car with 73000km on it. They added almost a rand per km.  If I saved R1,000 per month it would take me five years to pay it off. That’s more than the fuel bill over the same period. That’s a great addition to my child’s school fees. Or a nice holiday. Or a nice anything that will leave me with something better than what I had a year ago.

Earlier this week we introduced ourselves to the education department at the financial sector conduct authority (FSCA). They recommended we spend some time on what you can do when you feel like you’ve been wronged financially. In this episode we discuss what rights you have on your financial journey. We also offer some ideas of where to go if you need to report shenanigans.  We help you find the answer throughout your financial journey: Debt  If you didn’t take on the debt If you feel like you have been treated unfairly If you’ve been handed over If you can’t take on any more debt Savings If your money got stolen If you’re not getting what you were promised Insurance If your insurance company isn’t paying out for things you feel you should be covered for Investments Fraudulent investments Bad market conditions Losing money Bad returns Pyramid schemes Advice If you received the wrong advice Subscribe to our RSS feed here. Subscribe or rate us in iTunes. The bleeped version is here. Win of the week: Hilois I have just finished the latest episode highlighting rookie mistakes, and I have made a BIIIG one. Earlier this year I moved from my company providing a provident fund with Momentum, to a company that does not include a retirement option. I decided to get an RA. Conveniently I received a call from a 3rd party consultant for Discovery (where I have my medical aid). I was in a rush (and obviously hadn't started listening to The Fat Wallet Show) and signed up for an RA with 3.5% fees, not including the consulting fees (EEEEEEEEEK!). Luckily this only started in May, and before I completely fund someone's Merc I would like to make a move, but I now feel completely overwhelmed with where to look and not to be ripped off. Do you have any recommendations for where to open an RA, and look for life / dread disease and disability cover? Enesh  I am a Surgeon and have been offered shares in Cure Day Clinic in Midstream. The shares are unlisted, but I can buy in at R250k for 2.5%. Megan Are there any tax benefits I can claim or get with a retrenchment package? How would you suggest I go about it?  Is there any way I could get more of the money in my pocket, even if it is at a later stage? I'm not sure if I would get the money in a lump sum or installments. Not too sure how it works.  My plan is to settle all debt, mostly my car. I can then fund my emergency fund and my flip-a-table fund. I have a TFSA that I haven't put money into this financial year. That's about what I have in place. I want to put money away for both my parents to say thank you to them for standing by me. My mom is in her 60s and my stepdad in his 70s. I get the feeling I am their retirement plan. So this needs to be part of whatever I'm planning with the money.  In the meantime, I'm doing online Teaching from my apartment. That's $10 an hour. I'm busy finishing the TEFL course which will increase my rate by $5. So that's an income for me. I know I can claim back a bunch of things with working from home and sorting out my own tax. Although it's a priority, it's not high up on my list. The big thing is to sort out the retrenchment package benefits, get my parents sorted, cancel debt and have my six months flip a table fund. If you have any suggestions, even if where to read up, that would be great. 

The downside to doing my job is that I don’t get many opportunities to talk about my own financial insecurities. As with most things, there’s a distance between theory and implementation. I have my bad habits and anxieties around money as much as the next person. Billy’s question around minimalism and frugality gave me an opportunity to talk about some of the things with which I struggle. An ever-present challenge is finding a balance between spending and saving. I’m always too far in either camp. You can accuse me of many things, but lacking the courage of my convictions is not one. Far be it from me to tell you what to take from these episodes, but I do hope our conversation sheds some light on the importance of the process. It’s a lifelong journey, full of surprises and challenges and new joys. That’s what makes it fun. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Billy I saw Simon in Woolies the other day (I was like a silent groupie lurking in the shadows). Next time, I'll buy you guys a bottle of bubbles to say thanks for the awesome work! I'm a 30 year old engineer (another one for Kristia's collection!), and in great part thanks to you guys, I recently moved to a smaller place, got rid of a bunch of useless kak, and also scaled down on my car. This also extended to my finances, where I scrutinized all my financial products, cut unnecessary costs, negotiated better insurance premiums, and started to actively put money away in cheaper investment vehicles (such as Easy Equities). I know that both of you have decided to actively keep your living costs low, and I recently read an article where Simon mentioned that he decided to scale down a lot and move to a smaller apartment with his wife. The idea of having very few possessions to tie me down, whilst having plenty of money put away appeals to me quite a lot. I've realised more and more that having lots of things means having lots more to worry about. Physical clutter, financial clutter and emotional clutter are different sides of the same die. As much as we like to think finances are separate from other aspects of our lives, everything feeds into our overall well-being, freedom and contentedness.  So, thanks to you guys, I've developed a bit of an aversion to unnecessary "kakkies" - specifically financial and insurance products laden with complex "kakkies" that only serve to obfuscate real costs and returns. I like Kristia's idea of investing in one ETF (or at most very few), and not over-complicating my portfolio, as more products could mean more blind spots. To get to my question: Being minimalist seems like a full-time struggle - an active raging against the beast of financial dependence. What are the principles you both follow to keep your living costs low? What did you cut down on that made the biggest difference? Also, how do you prevent the activity of keeping costs low from becoming a cumbersome penny pinching exercise that ends up defeating the purpose?  Donal  While all this was going on, I was also busy researching possible brokers that I could use to purchase Vanguard All World (taking Patrick McKay's advice!).  I ended up with a company called Degiro. While their fees are low, they are nothing like the "easy" I'm used to with Easy Equities. Their registration process is a bit of a pain in the ass and their online trading platform is not as user friendly.  I jumped through all the hoops and signed up for a Basic Account. I made my first lodgement and did my first Vanguard purchase. I did a small amount first to test the water. All went well and I was ready to plunge all my funds in.  At this point I got a little nervous and did a bit of triple-checking online just to make certain that there were no negative comments out there about Degiro.  Apparently, when you hold a Basic Account, they have the right to lend out your shares to other investors who use them for the purpose of short selling. I guess it's their way of making some cash on the side using my shares. If you don't want to allow this, you need to open a Custody Account, which means that they cannot lend out your shares. The catch is that they charge 3% on all dividend payouts for a Custody Account - compared to 0% for a Basic Account. Is this type of lending out of shares by a broker commonplace? Do you know if EasyEquities do it? If they do, then I would feel a lot more reassured to carry on with my Basic Account. But if you guys think it's unusual for a broker to do this and it carries a high risk, then I’d rather close my Basic Account and sign up for a Custody Account and take the 3% hit on dividends. Captain Pants I plan to pay off my bond within the next six months, which will be 10 years early. A scenario I hope many Walleteers will experience in the future.  While looking forward to redirecting my repayments towards ETFs, I'm wondering what are the best practices when paying your bond off early? As far as I know there are two options: Almost pay it off and then adjust the bond repayments to a negligible amount. A benefit of this would be that the bond stays open as easily accessible cheap debt. However there would be a fee of at least R69 per month for the next 10 years (~R8,280). I would not be the owner of the property - the bank would still be. So I would be unable to mortgage it (correct?), but can dip into the flexi-bond if need be. What monthly amount should I aim for? Would the bank allow me to pay off R1 per month + fees for the next 10 years? Pay off the bond in full, close it and become the owner. I understand there may be a fine attached to this. If it is less than fees I would pay over the next 10 years it may be worth it? What are the benefits of truly owning a property?  Also, is it possible to overpay your bond? ie. have a positive balance in it? Would that earn interest? Is there anything I haven't considered? Will wait by the wireless for your response. Karabo I have rental properties. I've been saving my emergency fund in their bond accounts. The challenge is that this emergency fund reduces interest paid on the properties in effect increasing my tax liability on income earned over the year. Income earned on rental property is taxed as income. Where else can I invest my emergency fund to reduce my tax liability on these rental properties. Should I still keep the emergency fund in the bond accounts or save it in a different account. Stephnie When each of my nieces (who are now 2 and 4) were born, I invested a once-off lump sum into SATRIX Top40 ETF for each of them.  I opened an account on the SatrixNOW platform for this purpose, and currently both lump sums are invested in a single account.  The account is in my name. My plan is that the investment will be my gift to each of my nieces on their 21st Birthdays, and they can then decide whether they want to cash in the investment, or keep the ETFs. At the time that I opened the investment, I just stuck the money into SATRIX and didn't think too much beyond that. But now I am starting to think about how to ensure that this investment will be as tax efficient as possible and as fee efficient as possible. If my understanding is correct, if my nieces decide to cash in the investment when they turn 21, I would be liable for the capital gains tax since the account is in my name. Is that correct? Is there any way that I can avoid or lessen the capital gains tax burden on my nieces' investment?  If my nieces want to keep the ETFs when they turn 21, will I be able to transfer the ETFs to them? (i.e. is it possible to transfer ETFs to a stockbroking account in their name?). Are there are taxes or fees I should be aware of, aside from the usual charges incurred when transferring an investment from one platform to another? Would there be any benefit in opening investment accounts in my nieces' names now, and transferring the ETFs to them now?  If you have any other thoughts on how I could structure and handle my nieces' investments to be as optimal as possible - I'd love to hear it. Maureen I've inherited some Kruger coins and would like to get a fair value for them. Is there a website that will give me a fair price on any given day? Also, I've heard you say not to sell them to a Scoin shop. Where can I sell them for the best price? Justin I am in the process of paying a student loan and an unfortunate car loan. I have a little money left that I would like to make use of and not just lie in my account adding temptation.  I am lucky enough that my parents still help me out and I have medical and a Providence fund with the company I work for, so I can't really see the desperate need for an emergency fund.  Should I put the little money left into a TFSA or should I start an emergency fund anyway? If I should start one, what is the best way to go about it rather than hiding my money under my pillow were all it does is finance the dreams of buying bubbles? Ben My parents stay in France (not near Champagne unfortunately) and they are UK citizens. They have a unit in a complex in SA that they are going to sell. They would like to gift/loan us the money to help us buy a house with a granny flat where they can then stay when they visit. My understanding is that the tax on gifts are 20% for everything above R100k, so we thought of doing something like a low-interest loan in order to circumnavigate that tax. Do you perhaps know who can advise us on this to ensure we do this right?

Our first ever paid episode of The Fat Wallet Show is courtesy of the Index and Structured Solutions team at Absa CIB. If you see one of them, show them some love.  In honour of this newfound wealth and the cool products that made them possible, we decided to dedicate this episode to financial risks that aren’t market-related. In November we’ll follow this up with market-related risks and explain how those freaky new ETFs hope to bypass market risk. We spend some time in this episode on the most sinister of all non-market risks - inflation. We’re all subject to it, yet we so easily forget to account for it. We also cover the risk of losing your income, fraud, counter-party risk, tax, divorce, death, income disparity in households and over-insurance. We offer some ideas to help you prepare for these risks. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. E&H My partner is in his early thirties and I am in my late twenties and we have some questions about offshore investing.  - we like investing passively in the stock market, ie index funds - we try to save aggressively and are inspired by the FIRE movement - we assume that the rand will likely continue to lose value in our lifetime - we plan to emigrate within the next 5-10 years, partly for lifestyle factors, and partly for the purposes of studying and gaining new skills. We might be keen to return to SA later on.  - we are hesitant to invest if the investment pays out in rands, and essentially want to start contributing to an offshore fund that we can access in the foreign denominated currency once we've emigrated.  what is the cheapest way to get money offshore? what are the currencies/offshore accounts that you could recommend? what is the best way to invest our money to achieve our goals? Jon-Luke I’d love to know what you guys think of this offering from Investec: Guaranteed 40% over 42 months - Effectively 11.43% P/A (not compounding?) - meaning if you invest R10,000 you will make R4,000 profit. If you were to put the R10000 into African Bank at 9.20% (Compounding) you would make R4 428,16 profit. So I guess the Investec offering has the possiblity of making quite a bit more - but how is this worked out exactly… And what are the chances of the S&P 500 going up by that much...  

If you’re reading this, you are one of the few survivors of last week’s internet dumpster fire. This week, Simon and I spend time putting together a model to help you make sense of the news. We focus specifically on when a news report should move you to action and when you should just walk away.  Here’s the formula we came up with: Figure out what the claim is. Find evidence that supports the claim. Find evidence that disproves the claim.  Ask yourself whether the claim has any bearing on your investment strategy.  Act accordingly.  My thought in choosing this topic was that we’d spend a few minutes discussing some mental models to help us interpret the news and the rest of the episode answering questions. 50 minutes into the discussion, I felt like we had barely scratched the surface. For that reason we didn’t get to a single question this week. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Adam I disagree with the consensus on pet insurance. In all honesty this goes against your rules that you cannot abscond on something like this. If you are a serious pet owner (and not just getting a goldfish because meh) then do it the right way. It's the same argument that instead of having health insurance "you save funds into an index tracker" etc. etc. You are healthy when young, so the likelihood of a serious health issue is small, but you still have health insurance. Just don't have a pet if you place a financial cost on it like that. My dog has had two surgeries, but over and above that throw emergency visits to the vet here and there and insurance has us covered (well mostly - they don't cover dog biscuits).

The biggest challenge in supplementing a parent’s retirement income is whether to save in their name or your own. This week, we help Kim and her sister think through their options to help their mother in retirement.  Kim I cannot describe to you how empowering The Fat Wallet Show has been in my life. You have made such a profound impact I can't thank you enough. I grew up in a home with ZERO financial education. Throughout my engineering degree there were no lectures or exposure to the topic of personal financial management.  As a result of your show, I now have a financial strategy for myself, I feel I am in control and I sleep well at night! I can find and read an MDD and understand it, without feeling overwhelmed and confused. A few months ago I struggled to distinguish between financial products, all these names I didn't know - TFSA, RA, ETF etc. Now I can eat them for breakfast :) You have helped me bring a real sense of peace and security into my life and I will always appreciate it. I recommend your podcast to anyone whom I think would find it beneficial.   Her mom is turning 60. She started her discretionary investments late, because she was in a marriage where she didn’t have an eye on her finances. When she finally did, she realized she owed SARS a lot of money, which she has paid back.  She has a company pension fund and started saving some money in a tax-free account, but at a very high fee over over 3%.  Kim is concerned that her mother will fall short in her investments based on the rule of 300, by about half. My sister and I want to both invest on behalf of my mother, to improve her circumstances going forward.  I know you have both said go into safe investments as you near retirement, but my mother needs good growth. We can collectively invest a lump sum of R80,000 and then a further monthly sum of R10,000/ month. Invest heavily into local equity.  If the SA market dips / crashes in the next  5 - 10 years, we're screwed. However, if we assume that mom keeps this for a full 10 - 15 years and only withdraws it when she is 70 - 75 yrs old, perhaps it will provide a nice boost for her later.  Invest heavily into foreign equity to avoid a local crash. Is an offshore ETF that invests in international equity still based on the JSE? In the case of an SA Stock Market crash, will this ETF still hold its' selling value ? OR if we want foreign, is it better to invest in USD? We are worried about currency conversion & fees the EE USD option. Invest 50% in equity and 50 % in bonds. If the stock market crashes / SA politics goes south, is there be a risk of the government not being able to repay its' retail bonds? Don't do so much investing on her behalf If both my sister and I focus on building our portfolios, we can reach a point in five yrs where our dividends/ growth can be withdrawn and given to mom. This is of course not the best idea i.t.o. compound interest so more practically we will stop contributing to our investments and pay mom out of our salaries.  My mom has no other assets. Even though it will be a huge drain, my sister and I are considering buying her flat to give her security and reduce her expenses. In a TFSA, if you keep reinvesting your dividends, in addition to your annual contribution, won't you end up exceeding your maximum contribution? If you're in funds that don't pay dividends, your growth will also push above the threshold. I am assuming the limit is on your contribution and not the value of your account? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Christoff When you invest offshore directly, you only pay CGT on the investment's gain, not on the currency devaluation.  If you on the other hand invest indirectly like with an offshore ETF, you WILL pay CGT on both the investment growth AND the currency devaluation. Lethabo I have an RA and TFSA with the same broker. I have noticed that some of my ETFs in my TFSA had dividend payments (yay!!) but the same ETFs in my RA did not. I am not sure if I am missing something but it just seems kinda strange. How do dividends work with RAs? Brent I have my TFSA ETFs amounts and allocations bedded down. I am now reviewing my provident fund. Is one able to cash out a provident fund and put it into an ETF? Will there be tax implications for the early cash out?  Would it be better to decrease the % contribution and start my own ETF investments on the side. My employer does not contribute towards the provident fund. I don’t have an RA. Nicky  In an attempt to diversify my portfolio fully, I thought I would buy some bonds. The fixed rate bond (5 years) is currently at 8.25 % according to treasury website, which is very similar to interest rate offered by Capitec for I think > 100K for 49 month term. Any advantage of the one over the other? How are bonds handled in your estate? How are bonds treated in terms of tax? If no gov retail bonds have no tax advantage, why would people choose them over fixed deposit? I am worried I am missing something as surely the government would tempt people into lending them money by making bonds in some way more attractive than fixed deposit. Keegan Do you guys suggest using an IG account and buying foreign shares listed on other stock markets? or Should I open an online account as a citizen of an EU Country?  What are the tax implications?  I have some extra cash I’d like to invest. The ROI on my investments have been greatest in my business although it is somewhat high risk. Do I reinvest in the business and buy more equipment and try expand or do I look for ways to build up a stronger financial portfolio while I am still young? Rahzia I plucked up the courage to stop two debit orders for an RA that I held at Sygnia and a unit trust at Coronation (which charges -1.74% fees). I wanted to contribute to my tax-free account only. I do contribute to a pension fund with the organisation that I work for (8% employee and 15% employer). My husband and I want to get out of our car and home loan debt within the next six years. We bought the house this year.  The extra money after the debit orders are cancelled will go towards the debt repayments. We do have about 2-3 months worth of expenses as an emergency fund. Is it better to put all money into getting rid of debt and then focus on saving/investing as much as possible thereafter? If we were to do this, it would mean no ETF investing for six years. However, all extra money after the debt has been repaid will go into saving and investing as much as possible. What about the time aspect? If we don’t put all the extra money we have into paying debt, we won’t meet such an aggressive target of six years to eliminate the debt. Candice My husband and I have historically had a terrible relationship with cash and anything finance-related. We have recently had a baby. My one requirement for having this baby was that we do it debt-free. We are in our last month of paying off debt and then we are free. We don’t own our cars (corporate cars) and we currently rent our home. Do I use a broker to start off with or do I try to go at investing on my own and figure it as I go? We both currently have RAs (with the big green company you despise) and medical aid. We have a savings account with 24 hours access for emergencies and a 32-day call.  I would like to get a tax free savings open for our baby now and then stop contributing to the above savings and rather invest the cash elsewhere, but have no idea where to start? How do I know where to invest, what to invest and how to trade? Is it not better to use a broker who can advise better? Anne I managed to save R100,000 in a savings account. Finally got brave enough to transfer the money to my brokerage account. The plan was to buy Satrix Msci World and Satrix 40. Now I’m just staring at the money. What’s the best plan? Invest all the money on one day? R5000 per month or per week in each fund? Second question is FNB or Capitec? I earn a salary, have a few debit orders, card transactions draw money once or twice a month and have an emergency fund. Theresa I opened an ETFSA investment account six years ago and have a monthly debit order of R500.   The account is in my seven-year-old grandson’s name, but I pay the debit order and his mother is listed as his parent/legal guardian and she has to sign any transaction forms.   I know it would make more sense to contribute to a TFSA, but I don’t know what to do with the existing account. Should I sell off R33000 worth this tax year and the rest next year to close the account? My daughter has never declared the ETFSA account to SARS. I’m told I can’t contribute directly into a tax-free account unless it’s in my name.  I wanted to have a little nest egg for him for later but now I’m thinking there must be a better way to invest for him.  Should I open a TFSA in my name and leave it to him in my will (which would require a trust if he is still a minor when I die) or should his mother open an account for him and pay into it every month from money I give her.   I already assist with his expensive therapy costs every month as she doesn’t earn much and I am aware there is a limit of R100,000 allowed before tax is payable on donations.

Not many of us are well-equipped to manage a large sum of money. Our monkey brains spent so much time learning how to run away from predators and exactly zero time learning about financial decision-making. We don’t blame it, of course. Compounding is lost on the dead.  All this monkey business makes retirement a nightmare. Most of us learn to cope with money one pay cheque at a time, and even then we often do a bad job of it. Over time a monthly income starts to feel manageable.  Once the corporate machine spits us out, often in our 60s, we are suddenly expected to understand drawdown rates and how a living annuity differs from a guaranteed annuity. We have to make sense of the tax code - a seemingly impossible task. The behavioural aspects of financial management we avoided thus far suddenly become the key to our survival. All this while we profoundly change our daily routine and often our living arrangements.  Since managing our money in retirement or financial independence (whichever comes first) will involve the most important financial decisions of our lives, we should be preparing for those choices from the day we start saving. This episode of The Fat Wallet Show is dedicated to that enormous amount of money we have to manage in independence. We talk drawdown rates, what happens when you become too old or too sick to make good choices, what to do when you only have a few years left to prepare and how to think about annuity options. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Johan I’m nearing 65, which means need to retire now and are clueless as to where to from here. I mostly saved and invested in single stocks. Lately, as you advocate every day, in ETFs. But how does one do it from here? I’m comfortable with the 4% rule and relatively sure with a 5% inflation increase per year that my money will last into my 100s. I am, however, not sure how to actually do it. I think one will sell enough equities at retirement for maybe two years’ income and stuff it in a savings account and draw monthly from there and replenish it thereafter on a yearly basis. My concern is that at this age one tends to be out of action every now and then (e.g. in hospital with pipes and wires coming from all parts of your body) for a few weeks and then you are incapable to do or think at all.  Technology also starts to run away from you, you are not that quick anymore to master a new mobile phone/windows/ trading platform/ etc. and you cannot hear the call centre operator at SARS/bank/etc. anymore. You get the picture? On the other hand I have been milked by many a financial advisor in my younger days and do not trust them and wish to steer clear of them.  Any idea how one can continue to bypass financial advisors but cater for ones diminishing abilities in this regards? Syd My wife and I will be getting at least 90% of our post-retirement income from a guaranteed annuity and plan to supplement this with income from investing in Income Funds.  We bought the Income Funds with the tax-free lump sums both me and the wife could take from our retirement funds as well as excess contributions to retirement funding. Those will be invested in my wife's name.  Income form the Income funds are mostly interest income, which will not be enough to make her tax liable. Part of the income proceeds on a monthly basis will then be used to continue contributing to our TFSAs until they are maxed (about 80 years of age).  In this way I am channelling money whose investment returns would have been potentially taxable into investments in our TFSA's with zero tax implications!  AJ and SM I'm the unemployed female partner (61-year-old couple) with ZERO retirement savings. Hubby works in the Middle East. We've managed to save all the SHOCKING parent visa fees needed for a move to Aus, with no guarantee they'll grant the visa. (Our daughter and grandkids are there ... that's the pull.) Hubby is more or less assured of another 12 months on contract. We now have US$ X amount monthly we can do something with. What is best to do? What is the index? Where does one find a 'fee-friendly' broker for investing in Ireland, for example?  Also, we have no assets, no policies, but I have just discovered that I have a retirement policy that I had forgotten about. It's paid up and has +-R20,000 lying in a Sanlam acc till I'm 65. How I can I best utilise that money? We have an adult autistic child that lives with us. A nightmare scenario for the day hubby doesn't have a job anymore. We need to save intelligently for the next 12 months and we are ignorant on money matters. Totally ignorant! Win of the week: Carl I finally paid off my student loan! I now have an "extra" R10 000 per month that I can either use for my vehicle debt or put into my savings.   I already max out my TFSA and contribute to an RA.  My company provides me with a vehicle allowance each month which covers more than the monthly installment as well as insurance.   For the age old question:  is it better to put this "extra" money into the vehicle to pay it off as soon as possible?  Or is it a better idea to put that money away? Does the fact that I get a vehicle allowance make any difference? Deborah I want to invest in my first TFSA ETF. I am 40 and am playing a bit of a catch-up game so I would like it to be aggressive. Please can you recommend an ETF and who to buy it through? I also see you have One Lap ETF - is that an option? Sabata It helps to negotiate and / or fight with your insurer.   Dialdirect tried to increase my car & household insurance premium from R 1163 to R 1458 per month; a 25% increase.   I thought this was rather excessive and shared this view with my insurer.  My premium will now be REDUCED to R 1099. I feel rather smug. John-Ross Are there any compounding benefits to having one ETF, as opposed to 2/3 ETFs? Gregg You mentioned your friend that managed to feed herself and two children on R1,000 a month. I am all for cost cutting, and would like you to please ask your friend firstly, how old are her two kids, and secondly, what type of meal plan does she implement at such a low grocery bill?  I would love to know how I can economise on food because prices keep on going up. What are your reasons for using Easy Equities as a broker for your TFSA?   I am also researching where to place my TFSA. I know you have also mentioned ETFSA before who also appear to have low fees.  Can you give me some pointers here because I know you are a great one for not wanting to give any of your hard-earned cash away, especially on fees. Rudolph How does investing in gold, "fail" to produce "income"? Adri Patrick mentioned the Vanguard FTSE All-World ETF. He said that he is buying through his brokerage account.  Is there a South African platform with US account through which you could buy this ETF? I see that Easy equities only has the Vanguard FTSE emerging markets available. Can you suggest a platform through which one can buy the Vanguard FTSE All world that is not too expensive? Interactivebrokers.com  degiro.ie Christina I paid off the last of my debt in 2014, increased my monthly debit order to my savings account and wandered off to pay attention to things I find more interesting.  After about four years, I realised that my "emergency fund" was getting rather bloated and I should probably start investing some of the money. I went about this in exactly the wrong way. I invested about R 400 000 through Sanlam, set up a monthly debit order and called it done. All of this was around June of 2018. Then I started listening to your show in April this year and I realized that I had been lazy and I that I was probably paying for it. I went through all my statements.  Not only was all the funds in my investment actively managed, I was also paying about 1.6% in fees on top of the fees for each fund. I have shut down the account and gotten my money out (minus about R9,000, which is probably a reasonable stupidity/laziness tax). I have set up an account with a broker and invested about R50,000 of the money I got out from Sanlam (and another R150,000 from the still slightly bloated emergency fund).  However, it looks like we might be at the top of the market and that investing the rest of the lump sum right now would be a bad idea. Part of me is saying: just put the money in the market, set up a monthly debit order and call it done.  But I can't help but feel I am being lazy again. Is it a better idea to actually pay attention to the market for a few months and wait for prices to drop a bit before investing (given that the S&P 500 is at record highs and everyone appears to be piling in) or is it actually okay to just buy more of my chosen ETFs and assume that things will work out more or less equal in the long run?  Catherine I am selling my property with the intent to rent instead I own my property outright, which means I will be getting a huge lump sum (of about R1.6m), probably at the end of this year.  I guess I would like to spread across my ZAR and USD accounts in global equity ETFs like MSCI World and Vanguard World.  This is the majority of my net worth, and I’m unlikely to ever again deal with such a lump sum. What if the market crashes the day after I invest it??  Isn't there generally a global crash approximately every 10 years, and wasn't the last one 11 years ago?  Please can Simon look in his crystal ball and tell me when the next crash will be.  Tshedza I have just noticed that since I decided to track my expenses, I analyse too much what I spend on and what value I get in return. For example; the R3.50 cost of a plastic bag at Evergreen in Tshwane Market (I now request an empty box or just put everything back in the shopping trolley and pack them nicely in the car boot). In June R600 bought me 329 kwh of prepaid electricity and this month the same amount got me 255.50 kwh. This change was brought by the start of the new financial year for municipalities and this appears to be what R600 will buy me going forward. Plus my bank charges me R1.50 to buy electricity on their app.  All these are things I would have easily ignored during my autopilot days, but not anymore. Am I just being too analytical or am on the right track?

Bonds are wonderful, magical things, but they can be tricky. Pool them all together into an ETF, and it gets even more complex. First of all, the tax on a bond ETF is tough to figure out. Coupons are taxed at your marginal rate, after an exemption.  When your coupons are reinvested, as in the case with our total return bond ETFs, do you also pay capital gains? The answer is surely no, but when SARS comes knocking for an audit, would you be able to strip out the coupons reinvested for the period?  What about inflation-linked bonds, where your capital amount increases by inflation with a coupon on top? You’d pay capital gains on the inflation-adjustment and income tax on the coupon. Will you be able to show which is which for the period? I love thinking about bonds and bond ETFs. On the one hand, they’re incredibly simple, but once you start thinking about the tax implications, the simplicity leaves the building.  This week, we approach bond ETFs from two angles. As a short-term investment vehicle, bonds make a lot of sense. However, once you start delving into the tax aspect, a bond ETF seems less appealing than an ordinary government retail bond. The role of bonds in a retirement portfolio automatically limits you to bond ETFs, but why are the inflation-linked bond ETFs underperforming the all-bond index? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Victor I am required to travel to Mozambique and Zambia for work.  I require a car that would be able to get me there and back reliably. I currently drive a 1992 Nissan Sentra which breaks down about once every few months.  Luckily my father lives nearby and he can frequently provide me with assistance (this would not be the case when travelling for work). I was looking at a second-hand Honda Jazz as they seem to be reliable and provide a good fuel efficiency. The current cost of this car is about R150k. Ideally I would like to buy this car cash in about three years. I have received an offer of 13k for my car. I think it would be best to sell this car and invest the money, then use my partner's slightly more reliable 2004 Ford Fiesta in the interim (she lives close to work and does not use her car very often - also she is aware of this arrangement, i.e. I won't be stealing her car).  Considering my budget and still contributing to my TFSA, I estimate that I would be able to contribute about 3.5k per month to savings for the car (increased annually by 15-20%). Taking into account inflation of an assumed 5% p.a., and low average market return of 1% above inflation, I should be able to achieve my goal within the specified time frame. My question however pertains to the best investment vehicle for short-term investments. I have looked at cash/cash-equivalent, income investments, money-market, and bonds.  Firstly, understanding the difference between the first three is fucking difficult. Bonds I kind of get and I agree with you, they are cool to think about. Should I invest all of my money (13k lump sum + monthly contributions in the same investment vehicle? Or should the lumpsum be in a different place, say fixed deposit or a notice account or one of these weird products which banks offer? While the monthly contributions go elsewhere like a bond ETF or into the NewFunds TRACI or perhaps even a combination of the two?) Furthermore, I consulted your guide to bond ETFs. I prefer the bond ETFs which reinvest your money, so I would have to choose between NFILBI and STXILB. Satrix have a lower TER and most of their bonds are long term thus providing better rates. Therefore, I believe STXILB is the better product? In terms of cash investments I like products which I can access through my broker (such as TRACI) rather than my bank. Please assist me as I am very confused about which investment strategy would provide me with the best returns. Does my investment horizon allow me to look into bonds? Or should I only be looking at cash/income/money-market things? Win of the week: Cindy What have you done to me? I have turned into that obnoxious person telling people to keep their cost of living low and to invest in ETFs. And I blame the Fat Wallet. :) I wrote to you a little while ago with plans of tackling my debt like a rugby player after some much needed Fat-Wallet-encouragement. Since then, I have paid off my debt but got back into debt thanks to a shitty emergency fund. Now, I am hella close to paying it off again with the backing of a pretty sexy emergency fund. Fat Wallet and Just One Lap have been educational, motivational and just damn inspiring. I am so ridiculously into personal finance that I am on a serious mission to change my work environment to the financial sector. As a graphic designer I want my job to fit my values - to design in order to educate people about their finances and not to design to make people buy more crap. Chris I'm currently doing an ETF based retirement annuity on the Sygnia platform using the following split: Local Equity - Coreshares Top50 - 45% International Equity - Satrix MSCI World - 25% Local Property - Satrix Property - 15% Bonds - Satrix ILBI - 15% Cash - 0% I'm unsure if I have chosen the correct bond ETF to complete my Reg 28 compliance. Initially I thought an inflation linked bond would return inflation + 2%, however looking at the historical performance, inflation linked bonds seem to have underperformed inflation over the last 5 years (ILBI index returned 4.37% from 2014-2019). In contrast, the GOVI index has  returned 8.18% over the same period. How can there be such a huge discrepancy between the two indices, particularly as one of them is linked to inflation and should therefore be returning greater than inflation?  I still have 20 years to retirement so my goal is to set my RA up as aggressively as possible - I.E. I don't mind short term fluctuations. Do you think the GOVI or the ILBI is the more aggressive fund (hopefully returning better long term returns)? Willem My basic fee sits at 1%, but then they add a performance fee clause which is pretty unclear. I’ve looked at the other options. The only passive investment which I can select is the Satrix Enhanced Balanced tracker with a flat fee of 0.36%, which sounds much better. Do you have any comments on this ETF?  I’d like to make this change, but I just feel that I don’t really have much of a choice with regards to passive funds. Ashley I am looking for the lowest cost provider to put together a bespoke share portfolio (chosen by me) in a retirement wrapper, for part of my retirement investments. PSG offer the service but it requires that you appoint a PSG advisor at an additional cost of 1,15% per annum. You’ve made me allergic to fees that don’t add the required value. I’m quite happy to pay handsomely for the professional services rendered but am battling to rationalise a fee based on a % of assets under management – especially given the size of the underlying portfolio. I don’t drive a particularly fancy car, but the fee I will end up paying to the advisor would allow me to pay off two more similar cars. I’m looking to invest – without having to buy the investment manager two cars that could be mine.  I understand that you may be reticent to recommend a particular provider – but could you guide me in my search by suggesting a couple of places where to start. Brenda I have just turned 60 and have unfortunately made many disastrous money decisions in the past.    I have only been permanently employed, and contributing to a pension fund, for the past five years.   Needless to say, the thought of retirement (age 65) fills me dread and until now I have just stuck my head in the sand and tried not to think about it.    I have two properties (both currently with big bonds) but on retirement the proceeds from selling one will pay off the bond on the other, so I will have a paid up house and a roof over my head.  With only a few years to go, what is the best way of investing if one doesn’t have the benefit of time in the market?   RA? or TFSA? I am contributing a total of 20.5% of my current salary into my pension fund (company contribution and mine together). Matthew  My parents have asked me if it is a good idea to put a some portion of their investment portfolio in the DCX10 index. They are not computer literate so I recommended they just stick to ETFs as crypto currency is more complicated to trade, hold, and a great way to lose your investment if you do not know what you are doing.  Having access to crypto though this index takes out the complications above. So is it an option or is it too good to be true? Can I view this index as an ETF? By that I imply, Self healing and removing bad performing currencies. Gives diversification and a weighting based on some predetermined method[1]. Tokens are generated or issued like ETFs. Are you protected in some way? (e.g. Trade insurance, compliance as an a financial service provider, etc.) Can DCX10 be trusted to some degree? Taking past experience into account, will the token still be around even if the crypto market retraces? Remember that the previous BTC retrace in 2018 was over 80%from all time high and subsequently majority of altcoins retraced over 90% from all time high. Can DCX10 cancel the token due to bad performance? Chris I have a share portfolio of R1m . I also have a Unit trust portfolio of R1.5m from which I live. I am considering investing in a foreign ETF.   Will probably start off with R1,000. Any suggestions?

For two years we’ve had to live with the shame of the Listener Love Index. The wisdom of the crowd is not quite so wise when it comes to stock selection. Let that be a lesson next time a friend offers a hot stock tip. This week we finally replace that horror show with our new index - the Fat Wallet Price-Weighted Index (FWPWI). The methodology is one step dumber than that of indices weighted by market capitalisation. Market-cap indices multiply the number of shares in issue by the share price. We ignore the shares in issue and focus on nothing but the price. You’ll find JSE-listed companies within the R80 to R250 price range at the start date.  I’m curious about how this index will fare against our benchmark, the Satrix 40. In essence we’ve stripped the outliers - at the top we’re talking Naspers and a bunch of commodity stocks. At the bottom, property.  We end up with a fairly defensive index. You’ll find a number of consumer staples and retailers - those businesses we can’t do without during tough times. The index is heavy banks, which could turn out to be disastrous if that dreaded downgrade finally comes. Here’s hoping Dario is right about that. Here is a video of how we put together the index. In the podcast we discuss why understanding this matters to beginner investors (and everybody else). The coolest part about this index is that you can easily replicate it for your portfolio. You simply add the average price you paid for your holdings and divide by your number of holdings. That will give you a DIY bird’s eye view of your overall wealth. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Steyn I’ve started to realise that property might not be a very good investment. As I understand it, there are two factors that make a property a poor investment: On average it only grows at around 7% - just a fraction above inflation CGT doesn’t care about inflation I ran the numbers and it became clear that the CGT you will pay after 20 years almost strips your growth entirely.  If you buy a property for R1m and it grows at 7% per year, it will be worth R3.95m after 20 years.  In today’s money it would be worth R1.23m. So in real terms, your property only grew by R230,000. If you want to sell it, CGT will be calculated on the total growth of the property and not the inflation adjusted value. CGT will therefore amount to R210 000. After 20 years you only made R20,000 profit. This is sad. This has not been the case with our two properties. We’ve been very fortunate with both of them: We bought a rental property in a new development three years ago. They only finished and transferred last year October.  Over the past three years, the property has grown tremendously and in the meanwhile new phases were added which made the development quite sought-after.  The developer kept some units in our block and is now selling them for R1.5m. If I can sell it now I will make a nice profit, but I can’t since there’s a clause that restricts me from selling before five years unless I’m willing to pay a penalty. This is to keep speculators from tanking the prices. We also bought another house which is our primary residence at about R400,000 under market value.  Is my rationale correct that by cashing in on this equity and putting it into ETFs or an RA, would be better over the long run?  I’m considering putting the two bonds in a structured facility at FNB. This might give us a better interest rate (currently 9.5 and 9.6% respectively). Do you know anything about structured facilities and is there anything I need to look out for? Lastly, I’d like to share a property hack: I have a 55 day interest free period on my credit card. So each month I put my whole salary minus debit orders in our bond. For the next 55 days we live off the credit card’s interest free period. We clear the credit card after this period and restart this cycle. If we continue to do this over the next 20 years, we will save about R260 000 in interest and take 18 months off the term without using any of our own money.  Dario SP has kept our credit rating below investment grade....for now. I can't say I agree with Ramaphosa in all things, but I do recognise that he has the potential to steer this country into a better direction. I am a firm believer that he will at least get SP & Fitch to upgrade us up to investment grade. I think we have some time to prepare for this. I don't think 2019 is the turning point just yet. How do we best position ourselves and how much upside is there? I currently hold some STX40 in my TFSA but I think investment grade affects bonds the most considering our JSE is largely offshore?  Gregg You have my school-going son investing R300 a month of his pocket money into a Global ETF – how’s that for awesomeness! I’d much rather he do that than blow his money on what typical teenagers get up to now a days. Well done guys!  If I buy a house worth R1.5m, but I take out an access bond for R2m, it means I have automatically created an emergency fund of R500K. I don’t pay interest on what I don’t utilise, so I would only be paying interest on what I spent, in this case the R1.5m.  I totally get it that this is not the same, nor as good as buying a house for R1.5m,  then putting R500,000 into the bond thus reducing it to R1m, but still being able to access that R500,000, all the while it is “saving” me interest. This is ideal.  But in the first instance, if one does not have a big enough emergency fund, is this not a good way to kick-start one? Rudolph wants to know if raising taxes does the same thing to the market as raising interest rates does in terms of inflation, economic growth, investments, corporate profits, government revenues, etc? Ben wants to know if it’s dumb to sell his old EW40s for ASHEQs in a TFSA.

Making mistakes is a great way to learn. Someone can explain diversification a hundred times without ever having the same impact as one share dragging down your entire portfolio. At Just One Lap, we like mistakes almost as much as we like questions. We know - mostly from experience - each mistake gets you closer to that ideal portfolio.  In this week’s episode, we use Ntombe’s question as a kick-off point for some of the common mistakes we all make when we start investing. We talk about the tendency to be too diversified when we start out. We discuss why starting your investment journey outside a tax-free savings account is really not a good idea. Here are some other common mistakes we discuss: Checking your investment account daily Taking on too much risk because you’re in a hurry Not taking on enough risk because you’re scared Not having a strategy Not paying attention to fees Waiting too long to begin Leaving your important choices to someone else Thinking you should earn more money before starting If any of these apply to you, don’t miss this one. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Ntombe I opened a brokerage account last year. I didn't know much so my thinking was a "learn as you go".  I bought shares that were very cheap, testing waters.  Balwin Prop, Vukile, Delta, PnP, Old mutual and Satrix Top40.  Out of all of them Satrix is doing well. The rest are always in the negative. So I'm thinking of selling even if I lose and just buy more on Satrix T40 and Prop and other ETFs maybe TFSA. What will you advise me to do and which one are good? I don't have much so I use my salary and currently able spend about R200 pm buying on my EE, which is a start for me.  I was just shooting in the dark. Did not know what I was doing, it was a learning curve. I'm still learning but I'm getting there slowly. They were very cheap, also because I've seen these names and thought they kind of big companies. Brecht  I have a savings bank account in Germany with some Euros in. The interest rate on this account is less than 1%. Would it be worth my while to move this to a broker where I could invest this money into ETFs in Germany? How does the tax implication work on this? Nadia You mentioned that Robert Kiyosake's advice on buying gold isn't such a great idea. I'm not very clued up about gold and I was wondering if you have done a podcast I could maybe listen to about why you think buying gold isn't such a good idea? My mom knows a lady who also firmly believes that gold is the way to go and I'd love to hear your view.  Wim I invested in a cow about 9 months ago and paid R8,500.  To my surprise last month I received mail saying my cow, Silly, was on its way to the slaughterhouse. I was paid about R9,600 after all the deductions, feeding,  entertainment etc.  It was about 8% return on investment in less than a year. I felt chuffed, but haven’t decided to repeat since cost increased considerably. I have a bond with remaining debt of about R500,000. My wife and I contribute more than double the repayment required. We have RAs. Should we rather push our extra savings currently going into our tax-free saving, RA or into the bond or continue with R2,750 into the tax free/RA? I would also like to know if it is possible to choose a south African stock at the end of your show or once a month that prove a good investment opportunity. I do realize ETFs remain the primary equity vehicle for investment. Waldi What do you guys think is the best type of investment for him seeing as he is close to retirement age? Should he just put the money into a savings account and let the interest run on that amount? Is there still time for investing in ETFs? Or should he look at other things like Property (Maybe to rent out as an AIRbnb) or offshore accounts?  Joyfully Prosperous I've inherited some RDF (Redefine Properties Ltd) shares and noticed that the analyst consensus on Sharenet is to sell them at the current price levels. These levels are in line with the lowest in the last 5 year period. So, what am I missing? Why do 86% of the analysts agree that they should be sold. Can these analyst opinions be trusted in general?

We can all assume the chief economist at Stanlib knows a thing or two about the world. Imagine my alarm when I read he thinks we need to fall out of love with equities. Thankfully the headline was just clickbait and Kevin Lings said nothing about Bitcoin. If you let yourself read beyond the headline (lesson learned, I assure you), you’ll find a thoughtful explanation of why the South African equity market is where it is today. In this week’s Fat Wallet Show, Simon and I discuss what our alternatives are if we don’t love equity. We get to talk about bonds, which makes me so happy. We also delve into stacking your home loan and the right amount of emerging market exposure for equities. Roberto What's a general recommendation percentage-wise in ones portfolio allocated to emerging markets? I have been buying Satrix World and Emerging Markets ETFs in my tax-free savings, split 70% and 30% respectively. Is that perhaps too aggressive on Emerging Markets? I have seen online 20% max is usually recommended, at least for investors in Europe. @layoutordie Stocks give a 13% return, but (tfsa aside) you pay tax now or later. Paying off home loan gives a 10.5% (or greater) return, tax free. Am I missing something, or is a tax free return of 10.5% better than equity? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Shane We recently adopted a rescue cat named Myshka. She's 18 months old, has all of her vaccinations and has been spayed. I've been listening closely to your views on funeral cover and thought that the same philosophy could be translated into pet insurance. We spoke to a veterinarian friend of ours who indicated that Myshka is unlikely to have any health issues during the first 5 to 7 years. She has a life expectancy of at least 15 years. Diet apparently plays a large part in their health, so she's only getting Science Diet (There go our bubbles...) With this information, the plan is as follows: Step 1: Obtain quotes for the "Rolls Royce" of pet insurance for an 18 month old female cat with no medical history (Let's let the actuaries assess her risk and do the hard work for us for free). Step 2: Select the most expensive quote (the theory is that we are selecting the most risk averse actuary out of the lot). This quote came to R410 per month. Step 3: Round up to R500 per month to build in an extra margin of error for risk and invest this amount into an equity ETF and watch our Money Bunnies grow (thanks Stealthy!). We worked on the following figures and assumptions: - R500 per month contributions adjusted annually by inflation (assuming 5%) - Assuming an annual growth of 12% over the 5-7 year period - Adjusting the 12% growth down by our assumed 5% inflation figure to 7% We are assuming we are in a relatively safe space regarding kitty health in the first five years After 5 years we enter the "danger zone" but we have almost R30,000 in today's money to pay for vet bills. Assuming the pet insurance premiums don't increase (which they will), this means that we would be spending in excess of R24,600 in insurance premiums during the first five years of Myshka's life. This is the same period of time that she is at low risk. This investment is not as liquid as we might want it to be for an insurance, but that's why we have our six-month emergency fund to draw on in case of kitty emergency. We can then slowly replenish the emergency fund or cash out some or all of our investment to replenish the emergency fund when the market allows for it. By the time Myshka reaches the end of her lifetime at a conservative 15 years and assuming she hasn't had any major health events, we will have a tidy little sum of R215,000, which can be put towards a royal kitty funeral with loads of bubbles or a golden plaque in memoriam of our beloved Myshka (Don't worry, I'm just kidding, I'd never invest in Gold... Bubbles it is!) Brecht A few years ago I worked for MTN and they had a share incentive scheme in which the employee received shares after a certain number of years of employment. I’ve watched these shares climb very nicely and have watched them drop very nicely. I am way over invested in one share and was wondering how best to start selling and getting diversified whether in ETFs or other shares. My thinking is to start selling R40,000 a year to not incur CPT and that would be a great start to funding my TFSA and buy some other ETFs with the extra? Your thoughts? Currently my MTN shares are with ABSA stockbrokers and they charge a +-R80 admin fee every month. Would it be worth moving? Sexy Bear Two years ago, I found myself desperate and in a deep, dark hole to the tune of almost R3m. That was made up of a house, vehicle debt and over R600,000 in unsecured loans and credit card debt. We overspent my income by at least R20,000 per month! From the outside looking in, I was probably ‘living the dream’. The reality was vastly different! I was unhappy and in debt that I couldn’t even afford to go away for a weekend. I realised it was absolutely absurd that despite earning a decent salary I was literally broke. I put the house and my wife’s car on the market, I started frantically paying back debt a little bit at a time, lump sums when I had them. The legal fees for the divorce set me back a bit in my journey but they were SO worth it, I was divorced within six weeks. I also had an ANC which was helpful… Today and I am in a much healthier (and happier) financial position! I only have a few more rehabilitative payments due to my ex-wife. I am debt free. I have an emergency fund I have a credit card with a R 1,000 limit. The bank initially wouldn’t reduce my R 350,000. I had to threaten to close my account. I have closed my Allan Gray Equity account. I have consolidated my RAs into one. I have fully funded TFSAs for my kids and myself I am in the process of changing my medical aid from Discovery to Genesis for a R1,500 per month saving. I have threatened the bank that if they don’t waive my R475 pm account fees, I am changing to Capitec… They have asked for a meeting to discuss…?!? DSTV is on its way out… I have life insurance for my kids… and a will… I max out my RA annually. This is with 10X now, at 75% local exposure? (Reg. 28) I don’t want any more developing market (or RSA) exposure. Because I don’t want further rand exposure than already in my RA, I believe the STXWDM is right for the TFSAs. Am I correct in saying that I already have enough emerging market exposure in the RA? I have a further R500,000 pa that I want to invest in dollars. I prescribe to Patrick McKay’s take on buying the market, so I am interested in the Vanguard world from either Ireland or the US. Should I use my EasyEquities USD account to buy VT ETFs or try and set up an Interactive Brokers account and buy the VWRD? I am aware of the death duty on the VT, but you can’t control everything (or anything at times!), so it wouldn’t cause me sleepless nights that if I were to croak suddenly there would be a tax liability. If I were to croak slowly I could always sell or move prior to my last croak… I would need an international will with the VWRD through IB, would I require an international will for the EasyEquities VT? Is the EasyEquities USD account truly offshore? If I reach my goal of financial freedom, become an international jet setter and say moved to Croatia, would I be able to access these EasyEquities USDs from there, assuming I have a Croatia bank account? Do you see any gaping holes in my financial restructuring above? At this point I will have all my investments in three places: 10X RA, TFSA STXWDM and EasyEquities USD VT, although I feel OK with this do you feel that it is sensible?

Tax-free savings accounts have an annual limit of R33,000 per year and a lifetime limit of R500,000. It will take 15 years’ full contribution to reach that limit. The money in a tax-free savings account is not liable to any tax, except VAT on brokerage. For as long as you hold the account, you pay no dividend withholding tax, income tax or tax on capital gains. While you can’t make up the contributions you missed, you can continue contributing to the account until you reach your lifetime limit - however long that may take.  The tax savings on these accounts is what makes them so indispensable to a long-term portfolio, but that by no means implies that these accounts are only for those with a long-term investment horizon. The tax savings start from your first dividend payment, which means they are for everyone who prefers not to give 20% of their dividend to the government. If you listen to this podcast, we’re assuming that’s you.  Can you be too old for a tax-free account? In this episode, we argue these accounts are not age-dependent. We also spend some time discussing appropriate asset classes as you get older. As Patrick Mckay likes to point out, the tax-free allocation is the last money you ever want to use. If you’re in your 70s, that probably gives you an investment horizon of 10 years or longer. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Joyfully Prosperous is wondering how to handle his mom’s TFSA account. My mum is 78 years old. Does it make sense to open a TFSA account in her name? If so, would the Satrix 40 ETF be a better option than the Satrix Property (SA) ETF considering that the tax-free benefit will fall away eventually when we inherit shares from the estate. Win of the week: Jennifer from New York. I want to express my deep appreciation to you and the Fat Wallet crew for such a thoughtful and informative podcast. I am 42 and live in New York City. I came across your podcast in a blog post last year while searching for English-language personal finance podcasts from around the world.  I'm painfully aware that my knowledge and cultural biases around finance have been molded by media sources that function as if the United States is the only country in the world that matters. Through the Fat Wallet Show, I have learned about topics specific to South Africa, and have found connections between those topics and issues we deal with here in the U.S.  In a recent episode, you discussed the fact that some banks to intentionally mislead customers by stating misleading interest rates. Simon pointed out that in the UK, institutions are required to disclose the APR (Annual Percentage Rate). Here in the U.S., banks must also disclose the APR, a fact that I have taken for granted until I heard to this episode. I did a little googling and discovered that in the U.S., this mandatory disclosure only became law in 1968.  This is consumer protection I'm certain most everyone my age here takes for granted. In addition, I am humbled by your resolve to continue steadily investing through a years-long economic downturn, a situation which we very well may face here at some point. My work colleagues are quick to stop contributing to their retirement accounts as soon as there is any slight downturn in the S&P 500, such as what happened at the end of last year. And of course, they only resume investing when the markets are back up. When the U.S. does enter a real recession, I plan to continue dollar cost averaging into my index funds. I understand that is easier said than done, but I hope I am able to be as steadfast as you are. As a side note, I've realized that my current top three financial podcasts seem to have a common theme - they are all hosted by women with journalism backgrounds! The Fat Wallet Show Afford Anything (hosted by Paula Pant) This Is Uncomfortable (hosted by Reema Khrais) Keep up the excellent work, and again, thank you from the bottom of my heart.  If you or Simon ever find yourself in New York City, I'd be happy to take you out for coffee (good coffee, of course).  :) P.S. Please tell Simon that we here in New York also cannot stand the Orange Man. I must constantly remind myself, although it is a small comfort, that he did not win the popular vote. :( Kea  What do you think of a trust for shares? I am getting married in September. It is difficult for me to convince her family to marry out of community of property. I want to open a trust to put my ETFs in it. My partner and I have different views about money, I am a saver and she is a spender. I intend paying University and school fees for our children with this investment and am scared she might have different views about the use of this ETFs. What are the disadvantages and advantages of having ETFs in a trust? Hong Kong Hans I'm a new listener and new to researching. I live abroad, so can't deal directly with South African products, but I've learned so much general knowledge from your show and enjoy it tremendously. You've mentioned several times that buying shares in a company entitles you to a share in the profit. How are we to understand companies that don't pay dividends despite turning a profit? For example, facebook has pretty decent profits, yet have never paid dividends at all. Fried So thanks to you guys, I moved my (and my wife's) RA to 10x. Was quick and painless and didn't cost too much. The IT3(a) I received from Sanlam assigned the SARS code 3920 - RETIREMENT FUND LUMP SUM WITHDRAWAL BENEFIT. There's another spot where the code is 3699 but I can't find a description of it on SARS' website.  I didn't withdraw that money, it was transferred directly to 10x, it didn’t touch my account. I'm really concerned about this and hope that you would be able to answer 2 questions, and hopefully set my mind at ease. According to the IT3(a), the lump sum is taxable. Do I now have to pay tax on that money? On money that moved from one provider to another?  Will this lump sum withdrawal affect my tax-free withdrawal limit when I eventually retire in 44 years, 17 months and 24 days? Victor Would the following scenario then make sense as a retirement strategy? My partner retires two years before me. I continue to work and we cover our living expenses using my salary during this time.  When I retire two years later, we draw down from her retirement savings (which should then be taxed at a lower rate) to cover our living expenses. Then when I have been retired for two years without earning a salary we start drawing down from my retirement savings as well. Rudolph What criteria is used to regard one market as "developed" and another as "emerging"? Does gross domestic product or gross national product per capita play a role, what is the cut-off point? Are EMs more susceptible to global market volatility, in comparison to DMs? If so, what causes such? Could it be that, their markets, assets, and level-caps, are smaller, therefore less resistant to shocks and volatility? What type of stocks or asset classes are more profitable in EMs as opposed to DMs?  In what instance would you rather hold debt and equity in EMs? If the yield is higher in EMs, what determines such yield? How is such yield influenced by political, interest rate, and exchange rate risk? Rob As a result I now have about 80% saved in cash and the rest in various ETFs.  I have made the decision to transfer the entire 80% that is in cash into my EasyEquities account and have submitted the relevant forms to EE and FNB already. Once the cash has been transferred to my EE trading account, should I purchase one or more ETFs immediately or should I buy smaller numbers of shares at a time in order to phase in my investment? One of my concerns with phasing in is that any cash I have not used to buy shares will attract a cash management fee from EE of 1.75% and only accrue interest of prime minus 3.5%.

At age 37, Patrick Mckay had amassed enough assets to sustain his lifestyle without ever having to earn an income again. In the biz, this is what we call financial independence.  The Financial Independence, Retire Early (FIRE) movement has enabled many younger people to think differently about their expenses and assets. Even if you love your job, understanding basic FIRE concepts like the 4% rule is a great framework for making better financial choices. But what about people who are further along their journey? Is it possible to apply these principles in your fifties? In this show, Patrick and I discuss how older people with insufficient retirement savings can use FIRE to ensure a financially secure retirement.  Here are some of the tools we discussed in the show.  https://www.investorchallenge.co.za/com_calc_fire.php https://investorchallenge.co.za/the-only-way-to-get-rich/ Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

Compiling a financial plan before you earn an income or when you have very little is ideal. You can’t afford any bad financial habits yet and your cost of living is probably as low as you can get it. As it happens, those are the two most important ingredients to rocking your finances. Generally, our umbrella financial plan, the one-size-fits-all beginning to financial life, goes as follows: Pay off your debts Set up an emergency fund of between three and six months’ living expenses Protect your assets with dread and disability cover and insurance Invest in ETFs using tax-free savings accounts Have a retirement annuity In this episode we use this framework in the context of unemployment or low income. This one’s for you if you’ve never worked, if you worked and then lost your employment and if you have less than R500 per month to invest. P.S. Remember to mail us if you want to help us sell Just One Lap. Win of the week: Margharita Since discovering Just One Lap three months ago, my finances have undergone a HUGE spring cleaning. I'm saving 50% of my earnings; am maxing out my RA; have opened a TFSA; started investing in the stock market through EasyEquities; changed banks (to Capitec); reviewed all my policies and got rid of those that overlapped; started using 22Seven to track my spending and last but not least, did the homework on (and then eliminated) costly financial advisor fees. Thanks for providing a great resource, as well as the encouragement to manage my finances "like a grown up!" My questions: 1. You both love the Ashburton 1200 ETF. Why do you prefer this to the Satrix MSCI World ETF, when the TER on the latter is slightly lower? 2. If I invest in the Ashburton 1200 ETF, is it best to do this within my TFSA, or in my general investment account? Or both? Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   Santosh Capital Legacy stated that if someone dies in a hospital, the hospital reports it using the person’s ID and an online system and immediately the bank accounts freeze. No time to "go to the ATM" as the death will be reported even before the family knows Desmond My mum has been waiting five months to receive her pension. We've been to the GEPF and have only been shunted from pillar to post and promises. There has been no assistance from them whatsoever. Aman I've just completed a cash out of my EE USD account to my FNB Global account. I'm assuming this would work the same to the similar global-type accounts offered by the other SA banks. There was no charge on the EE side for the withdrawal. The only fee was the cost of the receiving bank (mine being R55 for the amount of $33/R465). This gives me peace of mind as EE isn't clear on the cash out process in their FAQ section. Anton In the offshore investing with Candice Paine, investors are cautioned to have a will(s) in place that properly deals with any offshore assets. If memory serves me correctly, in another podcast Kristia mentioned a company well versed in preparing offshore wills. However, for the life of me I cannot find this podcast and it would be quite a challenge to trawl through all the likely podcasts (I have attempted some but without success!). Do you perhaps recall the relevant podcast and the name of the company? ZAQfin Kieran I have grown to be an advocate for low-cost, index-tracking long-term investing. I have begun to advise my younger sister financially in this regard, as she has recently started earning. Personally, my investments are simply split between: - S&P500 (Sygnia), MSCI World and Emerging Markets (both Satrix) ETFs in TFSA (27% of total); - 10X High Equity RA (41% - aiming for lower but contributed a big lump-sum a few years ago); - Cash balance in Capitec account (32%). I’ve advised my sister to first and foremost use her full TFSA allocation and buy S&P and MSCI World. Thereafter, to purchase the same ETFs in her standard non-TFSA brokerage account. In addition, an emergency fund of somewhere between 5 and 10 months of expenses, obviously in a savings account with high interest (Capitec/Tyme). Assuming she still has additional funds to invest, is an RA the right way to go? I like 10X because it maximises Reg28 allocations and mirrors the low-cost, index-fund strategy of just buying ETFs, the major benefit of course being the tax-deductible contributions. But the money is 'locked away' for much longer, and potentially shielded from the full returns of its underlying indices (S&P, MSCI World, etc), because of the Reg28 limitations. Would love to hear your thoughts on when and why one might or might not begin contributing to an RA

I grew up with the idea that you can lose “all your money” in the stock market. I’m sure many people did. Movies about the stock market don’t do much to put us at ease - if it doesn’t end with someone losing their last penny, it’s not very entertaining. This week, Nadia got us thinking about what it really means for your portfolio when there’s a stock market crash. Her anxiety was provoked by Rich Dad, Poor Dad author Robert Kiyosaki, who stated in a recent interview that all money is fake and we should all buy gold and silver. Fat Wallet veterans can guess how we take this news. We talk about what we actually mean by a stock market crash and the different ways that could affect your portfolio. We also share some gems from our Twitter community. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Nadia  I was wondering if you guys could help ease my mind a little.  I've been wanting to do a lump sum deposit into my TFSA and split it between the Satrix top 40 and the Satrix MSCI world. I have most of my TFSA in the Coreshares equally weighted but I think I've given up hope for that ETF and I'd like to cut it out once it's back in the green (if that happens).  When I was about to do my lump sum, I came across this article "Rich Dad Poor Dad' author warns South Africans of 'biggest financial bubble' ahead". This made me a little nervous and got me thinking about a market crash. I don't know if I understand exactly what happens to all your investments when the market crashes. What will happen to my TFSA investments, my RA, Unit trust etc if the day comes where the markets crash.  What do you do in that situation? Do you just wait a few years for it to restore itself? Should you buy while the price is low and hope for it to climb up the ladder again? For example, if I had 50k in a Top 40 ETF, does this mean I could potentially lose that 50k if all those top 40 companies fall flat? Could this happen in a market crash or would it only be a few companies who take the plunge?  I think having a better grasp on what situations could unfold in the future would help me feel more confident about where I'd like to put my money and it'd help me understand what to do or how to handle things if shit hits the fan. Thanks again for the amazing work you guys do. Honestly, I'd be completely lost without you. From Twitter @SammyJoeD Lol I don't know but I'd like to think it's a closed system (don't ask me to elaborate, it makes sense to me that way), the money goes into someone else's pocket, say someone who has placed a bet on the option that the market will crash. 🤷 @andrevdwal It hits the vehicle's windshield! @Gerda04288858 Peeps panic and jump out of windows. Some unlock the safe and use their gun. Bad stuff.  @adelinerodd Nothing @tshidadoz1 When the market crashes, u loose all your investment... then other  non- finance people laugh at you for wasting money by investing so it would have been better to chow it🤷🏽‍♀️ @adriaan222 Is the money invested in shares, or in cash form? I think it stops being money when in share form..  @OneAfrica12 It immediately stops growing. Waits for market recovery and grows very very slowly while investor recovers his losses. Win of the week: Brett My short journey started in 2017 when I became a financial advisor/broker (not an IFA) with Liberty. I’ve always wanted to be someone who made a positive difference in people’s lives and I thought that this was the perfect opportunity. I drove to all my clients, so this gave me loads of time to listen to podcasts. Then I started listening to your podcast. This is when I started to understand what was actually going on. I looked deeper into the investments I was recommending, and the fees charged for them. I always knew there were fees involved, but I did not fully understand the impact they can have on your investments over time. After asking my Regional Manager why the fees were so high I was told:  “There are loads of costs from our side and you need to earn an income too.” This made me mad, but I did have to earn an income as I was earning on a commission-only basis (another huge problem with the industry).  When you start out, all you want is to be as successful as you can. But that success often comes at a cost to someone else, someone else can only afford to put R400 away per month for their retirement but would have to pay a fee of 4.2% per annum.  Most of the time they were not even aware of this. As Simon says, ”It should be illegal”. I also found out that 90% of active fund managers underperform the index, so I was basically being paid for poor returns since I could only provide active funds to clients.  It got tougher and tougher with each passing week and I felt the main reason I had started the job had been compromised. I could not carry on so I quit and hoped for the best. Since then, I have learnt more and more about investing and saving, and even got a job at one of my favourite companies (10X Investments) as a consultant. I am paid like a normal person (basic salary) and don’t take any fees.  I believe the problem is not with the advisors/brokers/wealth managers. The problem is with the companies that do not educate or train them properly, especially when it comes to passive investing and low fees. It’s just sad to see that the people who need the most financial help are the ones being screwed over the most by the big companies. I have never been happier since I left ’the dark side’ and believe that I have helped more people now than I ever would have previously. So I just wanted to say thank you to you and others, like Sam Beckbessinger, for shining the light. Smith  I have a few thousand to invest over 10 to 15 years. Are the current open Barloworld KhulaSizwe shares are attractive in large volumes - in my situation between 1,000 and 10,000 shares. Should I buy 1,000 shares only and invest in other investment vehicles. What would be suitable ETF to buy with the remaining money with relatively good returns in the next 10 to 15 years. Robyn In the five concepts podcast, you mentioned that dividends were paid out to you and you got R500 odd for doing nothing.  I recently bought my first shares and ETFs through the Standard Bank Online Trading platform and want to know HOW the dividends are paid out?  Does the money go into my trading account or into a personal account? Also, when are dividends usually paid? Is there a specific time of year or is it different for all companies? Andy  I have a significant amount of money invested in the Liberty Evolve Capped Tracker, which is a Top 40 Tracker. I’m not 100% sure the costs involved but the Financial advisor who sold it to me said that there are no costs but the returns are capped at 8% for the first three years (any returns in excess of 8% is shared with Liberty) and thereafter returns are uncapped. The Effective Annual Cost (EAC) is at 0.6%.  The investment to date has grown by 3.1% pa (lost all first quarter gains in May unfortunately) Should I exit as soon as I can (August 2019) and move it into the Satrix 40 on my STD BNK OST account? I will have to pay CGT on this,  but I don't understand the product and not sure what costs are hidden.  Would you also suggest putting a portion of it into STXWD? The amount in question makes up about 40% of my net worth. I have the other 30% of my net worth in a residential flat in Cape town (Access bond completely paid off) earning a nice yield (11%pa) and the other 30% is made up of individual shares (more speculative smaller caps) on OST, an Allan Grey RA and a small amount in STXWDM. Jonathan My financial advisor friend says the better funds in SA have a proven track record of 10  years beating the index Because 10x reports before fees while all other funds report after fees, 10x is obscuring a true comparison. 10x released a video today showing their performance comparison after fees, against "average fund managers", which isn't pretty for fund managers. However, he argues that calculating the average with a 10x hat on will include all the worst funds to push down the performance. Could you comment on these figures from 10x, allan gray and investec opp: 10 year performance: 10x: 10.2 before fees Allan gray: 12% Inv opp: 11.3%T Gerhard “Most active managers have a hard time beating the index. Why do they have a hard time beating the index? The index owns the haystack. In the haystack are several needles. The index doesn’t need to go hunting to find the needles. They just bought the entire haystack and all those needles came with it. The S&P500, Apple, Microsoft, Google, Facebook comes with it - all kinds of businesses that have incredible economics and tailwinds are just part of that haystack. An active manager goes and tries to find the needles in the haystack. What ends up happening is they also end up owning haystacks, but those haystacks have no needles in them. The index is too dumb to know it owns Amazon. The active manager is too smart to pay up for Amazon.” Adam M sent a link that explains the debt snowball method we’ve discussed before.  Find the Just One Lap DIY debt repayment plan here.

If you are earning money, you probably know you should have an idea of where your money should go and why. Most of us avoid drawing up a financial plan because we think we don’t know enough to make good decisions. For some reason, the head-in-the-sand approach is the only comfortable thing about money when we start out. In this episode we argue even a terrible financial plan is better than no plan at all. Without a financial plan, it’s so easy to fall prey to noise. Sometimes the events that inform our financial decisions have nothing to do with money. In these moments we make emotional decisions that could very well destroy our wealth over time. You are welcome to copy my financial plan until you come up with your own. Here it is. Get assets An asset is something that can earn more money in the future. Since I’m only at the start of my journey, my brain is my biggest asset, because that’s what I use to earn an income. Educating myself is a further investment in this asset. The income that I earn is a consumable until I turn it into an asset. I do that by buying shares. Shares are assets that will bring in more money in the future by going up in value. They also pay dividends as long as I hold them. I buy shares using my retirement annuity and through my EasyEquities account. In my EasyEquities account I’m buying the Ashburton 1200. You can find out why here. Protect the assets Accumulating assets is what wealth creation is all about. Once you manage to get your hands on an asset, you want to hold on to it so you can earn an income from it. Most of the time, you need to protect your assets from yourself. I protect my hardest-working asset, my brain, by having a medical aid and dread and disability cover. Should something bad happen and I can no longer earn an income, I have insurance that can take care of me. I protect my income by managing my tax burden. I do this through my retirement annuity allocation. Because I pay less tax, I have more money to turn into assets. I protect my shares with my emergency fund. I want to sell my shares on my terms at a price that I find acceptable. If I need to sell my shares to take care of myself in an emergency, I have to accept whatever price I can get in the market, which means I might lose money. Selling shares can also trigger a tax event. I further protect my shares by using a tax-free account. All the income and profit from selling shares at a higher price than I paid for them goes directly into my pocket, tax-free. That’s my entire strategy. This strategy holds up, no matter what’s going on in the market or in politics. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Gerrie When I realised every R300 in my hand on the day I retire gives me R1 per month for the rest of my life! Screw the 300 rule. Don’t see it as a rule. Make it practical. Even better... Since I'm a good few years from retirement the number is even better. Every R200 I put away today will get me R1 per month from age 60 till I check out much much later. I now check all my non-critical expenses against that number. Servicing my car last week was necessary, but it stole R25 per month from my retirement. So my next car should be simpler and cheaper to service. See the full conversation here. Dirk I recently became a US citizen, I have a 401(k) and a small equity portfolio with some single stocks that pay divvies, some ETFs and flyers I took on recent IPOs. The rest of my family is still in SA and unfortunately my dad is sick so I’m thinking about coming back to the Republic at least semi-permanently or chasing the summer months between the Northern and Southern Hemisphere. I have zero assets in SA, not even a bank account, but I’m fo’ sho jumping in on the TFSA. I’ll still be working for a US company remotely from SA, earning dollars. Will SARS come after me for money I earn while living in SA for less than six months out of the year? Should I skip the advantage of a TFSA to remain “off the books” for SA tax purposes and just be liable to Uncle Sam? I suppose a tax pro will help but I’m trying to tap into the wisdom of the crowd here with your excellent podcast. Adam Quick one on one of your adages on working towards financial independence. Make sure you are well covered for medical expenses - at the very least have a hospital plan. My son was recently admitted to hospital - he ended up in the NICU for almost a month. Throughout the process I continually checked with the clinic about our "tab" just to make sure things were fine. He was diagnosed with a very rare blood disease (1 in millions) and passed away after fighting for four weeks. We were left with all the invoices to start making their way through and the bill ended up around R1.3 million. Thankfully Discovery (who have been very cool throughout everything) paid over 95% of that. Small blessing, especially when one of your frequent reminders of his fight are the bills that come afterwards. Just wanted to put things into perspective for the larger crowd. These things DO happen. There's an organisation called Rare Diseases which acts as a support group for parents with children diagnosed with a rare disease. But within that organisation is something called Rare Assist who support parents (for a small monthly fee) with the administration of dealing with medical aids. I kid you not we were getting around 10 daily notifications when my son was in hospital and eventually you just left it to white noise. Anyway, this organisation helps ensure all the invoicing was done correctly, all in-hospital expenses are carried out accordingly and they even motivate for additional costs to be paid. Such as the 200% / 300% scenario where they motivate the gap to be paid. In our cases they recouped close to R15,000 for us. Not bad for a R270 monthly fee. Also, they can support even typical households - it needn't be rare disease. You never knew such organisations exist unless you are caught up in that world. Call this part testimonial / advice for parents out there. Lloyd I’m not a first-time buyer. I’m selling a property that will give me R1m in my pocket to invest. A crappy house costs R3m and entry point is closer to R4m. These same houses can be rented long-term for R15-20k per month, vs the R22k a bond would cost. I’m trying to work out if it is better to invest the R1m or to put this down against a bond of R3.5m on one of these expensive houses. If we rent for R15k and invest our cash elsewhere, we have flexibility and save a whack on maintenance and property taxes, which can be as high as R2k in these areas. It seems like a no-brainer, except you eventually end up with a "valuable asset" at the end of the bond where I am not sure my R1m will grow as well? Mbasa I have a preservation fund that can wipe out my home loan. Would it be wise to take a tax knock to pay off my home loan and use the free money to add to my TFSA account? I want to contribute the full R33k and max it out as quickly as possible. Riaan Until now I’ve been maxing out my TFSA in a savings account at Investec earning 8.62% per year. I didn’t know anything about ETFs,  but still wanted to save TFSA money. I then discovered your podcast, stopped contributing monthly towards my Investec TFSA and started contributing to an EasyEquities TFSA (Satrix Rafi 40 and Satrix MSCI World). Do I leave the money with Investec or transfer it over to EasyEquities to buy ETFs? Do I stick with the Rafi 40 and MSCI or do I diversify a bit more?

We don’t recommend jumping into your first investment before you have your financial house in order. The humble emergency fund is at the heart of any good financial strategy, followed by insurance. At the beginning of your financial journey, you don’t have many assets. When you’re starting out, whether it’s getting a handle on debt or starting from zero, your ability to earn an income is your biggest asset. You need to protect that asset first. Your emergency fund covers your expenses while you find new work, should you lose your job. Your medical aid helps you take care of your body so you can show up for work. Your dread and disability cover replaces your income should an accident or illness render you unable to work. Once those risk management strategies are in place, insurance to protect you from having to cash in your assets (once you start building those) become important. Car insurance and insurance on things that allow you to work, like your laptop and cellphone, are recommended. The purpose of insurance is to protect your assets. Once you start investing, you want to remain invested for the long-term. If an emergency could put you in a position where you have to sell your investments to pay for the emergency,  you want to make sure insurance covers you for the emergency. However, on your personal balance sheet, insurance remains an expense. It protects you from needing to destroy your assets, but it doesn’t build your asset base. As you accumulate more assets, your wealth can pay for emergencies. This is called self-insurance and it’s wonderful. You can take care of yourself without destroying your asset base. Once you stop your insurance contributions, that money goes towards building your asset base even further. This is a delicate dance. Over-insurance means your money goes towards an insurance company, not towards your asset base. Under-insurance puts you at risk of losing the assets you already accumulated. It’s worth keeping your finger on the pulse of this issue all the time. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sebastian Once you reach financial freedom would you cancel your current life, income protector and disability policy? I do have 3 rugrats, hence the current need for the insurance. John I know you guys always say people without dependents don't need Life Insurance. My broker said that while this is true, I am still young and healthy with a low monthly premium ~R150 a month. He said that should my health status change in the next few years it would be way more expensive to get life insurance then. (I know he would be getting a kick back but that’s ok). I get returns into my PPS profit share account which is expected to have enough capital after 7 years to pay for the cover itself. What are your thoughts on this? Paulo’s son qualified as a dentist last year. He needs to 'insure his hands' for obvious reasons and he needs to insure himself against malpractice. What route or products would you guys suggest he use? Hickley Hamman: MacRobert Inc Attorneys "Insuring his hands" is maybe more specific than he needs to go. Most income protection/disability policies cover you for an inability to practice your chosen profession. If his chosen profession is dentistry, that should do it. An insurance broker would probably be better placed to advise him. On the malpractice insurance front, again a broker is always a good idea. He can also contact the South African Dental Association at 011 484 5288, although I think they may be allied to a particular indemnifier. There are a number of good players in the market, the main ones are probably Dental Protection (UK based but big presence in SA), Natmed and EthiQal. Professional Indemnity insurance is one of those things you think and hope you'll never need, but it happens. He should make sure that the cover he receives is for the costs of a legal team, damages (probably minimum R500k) and also covers matters before the HPCSA. Some of the insurers will also offer benefits beyond all that and will provide advice on general ethical issues, and also cover for criminal proceedings (it happens). Generally speaking in an increasing litigious environment, I think it's a good idea to get broad cover. Win of the week: Bongani Today I had a conversation with mom about retirement. She doesn't have pension fund at work and her salary is not enough. I still look after her, she’s never had a proper job.  I had convinced her to save R150 a month and I will add R200 a month. I want to open easy equities account for her. She is 50 years old, which ETF I can pick for her? I know R350 being invested for 15 years it will make a huge difference, better than not putting money away. Boitomelo Suppose I have already contributed R66,000 into my TFSA account and I happen to receive a lump sum. Is it possible to "pay in" the R434,000 and thus max out the TFSA? Or is it a case of, once you start the annual thing, you must continue that way until you reach the limit? Hugo I belong to my company’s Retirement fund. It is by far the biggest contribution I make to my retirement, combined with a generous allocation from my employer. The default Balanced fund I am in has a EAC of 0.75% (Not bad for one of the largest fund managers in the land?!) The Umbrella manager of the Retirement Fund gives us the choice of several funds, some the same cost, some more expensive, all Reg 28 compliant of course – just with different strategies. Now I noticed they have a “Passive fund” – with a cost of just 0.35%. They say: Its asset allocation is directly comparable to the Specialist LifeStage Range (Which I currently invest in), but instead adopts a passive multi-manager investment approach where it selects skilled managers that can passively replicate the exposure to these asset classes. Sounds like they use ETFs to replicate the more expensive actively managed funds. It almost sounds too good to be true. The benchmark asset allocation is very similar to my current fund. Based on fees alone, it seems like a no brainer. Wonder what you think? Jonathan I used to hold a handful of stocks, most performed crap, and I just bought ETFs. I'm holding on to Shoprite and Discovery. I back both companies in the long term, so I'm not worried about the awful performance (I'm down 15% and 20% respectively). I was wondering though if Simon and you could comment on the price movements.. Discovery swings wildly, while Shoprite has more of a constant movement (down). Why does Discovery swing much more than Shoprite and why does the market hate them? Next one - you made a comment that you're paying 11.5% on your house. Surely you can do a percent better somewhere else, given your in financial sector? Or are you impacted by the fact that you're "self employed"? Santosh I have a lump sum to invest and my options are cash or stocks. With the performance of these classes over the past three years and instability in the global markets it appears that wherever an investment is made, it either all moves up or down. No longer are bonds the hedge it once was - it also moves with stocks. Asset classes are no longer decoupled the way it was in the 1980s. What I find particularly frustrating is that the efficient market has become very efficient in efficiently taking away in one week what it had given the previous week. Last week I lost R130K overnight over three days and made R30K back by Friday, which saw me end off the week about R85K poorer, through no fault of my own! I have noticed is that the Allan Gray Stable Fund does not suffer the wild swings given the performance of the JSE, MSCI World and X-Rate (ZAR/USD) Does this not strengthen the case for a Stable Fund or portfolio structuring to mirror a typical stable fund by way of asset class allocation ? Mbali I have an RA and Investment for my son’s education with an additional life cover with Liberty. I’m pretty happy here. I have a money market fixed deposit account with Investec. I got this 5 years ago. I feel like I should be looking into the interest I’m getting, but honestly I’ve been saving into this account for so long I’m not sure what I need to be looking out for. I don’t remember there being a tax free element. I’m looking at opening a dollar account, can you share some insight on what the benefits and disadvantages of these are for saving? Noting that the dollar is pegged to the UAE Dirham. So this is very good for me. I’m looking to get a tax-free account through Standard Bank to build a future emergency fund. I’m sure you’re asking what the hell is this? Well I figure that I might come home in the next 5-10 years. So I would like to come home to an emergency fund in case I really struggle to get myself back on the market and my business up and running. Questions: How do dollar accounts work, who provides the easiest and best dollar rate? What are the tax implications for me as an expect after the dreaded changes in 2020? Should I be worried about having so much of my financial planning in South Africa (operating in Rands)? Dubai is not really an option for me to save as interest offered is so low (between 1%-2.5%).  I’m only comfortable with South African’s financial regulatory framework. I won’t make the R1m a year mark for 2020 tax, but I’m wondering if I will be hit with any of the above financial instruments I do have and the ones I want to get? I would like to dabble in the ETF market, reading a lot and listening to you guys a lot. Just a question for you guys:  Am I adding too much to my portfolio? I am willing to be aggressive with a small amount to start off. Where should I go? Get Down Adam Donate your relatives to science! Ka-ching! My gran died and we gave her to Wits medical school to use as a cadaver. They collect the corpse and take it to Wits. The Med students do their thing and then at the end of it, they wrap the cadaver up in - I guess what you would call it is gauze. Anyway, long story short, a year and a half after the death Wits sends you an email to come and collect a little box of ashes from their anatomy department. Cue the triangle sandwiches! Wallet remains fat!

Before we begin, please take a moment to complete our survey. It would really help us out. Investing is daunting because there are no clear answers to basic questions like, “How much money do I need?” or “Am I on track?” To make matters worse, financial institutions like to exploit our limited knowledge on the subject by making promises that aren’t exactly false, but not exactly true. If you’ve been investing or listening for a while, you know the market has been struggling for years. As a result, we are getting a growing number of emails from investors who are concerned that their lacklustre portfolio growth is the result of either the products in which they are invested or the institutions managing their money. Two weeks ago we talked about when poor performance is the result of bad management. Find that episode here. This week we help you think about what your performance actually means. My tax-free account is up by 17%. However, I started investing in my tax-free account in 2015. Inflation for the period is 21%. I am 4% poorer, even though I have more money. My discretionary investment account paints an even bleaker picture. That account is 5.6% in the red. Since I started that investment in 2013, inflation has been 32.8%. My investments need to gain 38% for me to be back where I started. If I didn’t understand the impact of inflation, a 38% growth in my portfolio would seem like payday. As it happens, our friend Stealthy wrote a blog about the effect of compounding, not only on your investments, but also on your costs. He made a compounding calculator that will bring a tear to your eye, which you can download here. You might enjoy running your own numbers. The discussion was inspired by a discussion on The Fat Wallet Community group. Join here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Carl Perhaps you're just Starting Out on your Journey, a 21 Year Old with Too Much Bad Debt & a Small Investment Portfolio, receiving a Few Hundred Rand in Dividends every other Month, Thinking, 'this is gonna Take Forever & I'm Never gonna make REAL Money so why bother'. Perhaps you're a Financial Genius and the rest of us are just a 'Cautionary Tale' to you. Perhaps you're a Lowly BlueCollar just like I am... and the Only Time you get to See the Inside of the Boardroom is when you're Cleaning it... and Nobody Ever Asks about your Ideas or Opinions, in Fact, Most don't even know your Name even though it's Printed on your Uniform. LIFT your Vision for your Salvation is at Hand - and who's Coming to Save you from yourself? YOU! Which is GREAT because that Means Complete Control is in YOUR Hands! I Feel I have Absolutely NO Reason to Boast, because I only Managed to Start Investing at Age 38... after Making Sure I Squandered every single Opportunity Life threw at me.. For Most of my Life I Thought the Best Plan was to Spend my Last Cash on the Day I Receive my Next PayCheck… As you Grow Older you'll Realise that Time isn't Important, it's EVERYTHING - because of the Compounding Effect. So, are you Going Laduuuuma! - or are you Constantly Scoring Own Goals? How about Setting Small, Incremental, Reasonable, Realistic, Attainable Investment Goals - BabySteps, because your Personal Investment Journey is Probably a Daunting Sight... When I Started Investing ALL I Dreamed about was Receiving my First Dividend... and the Golden Egg was R130 Laid by Country Bird on 21/11/2011- Because everyone Likes Chicken, Right? It was the ONLY Dividend I Received in 2011... but I was Ecstatic with Joy because I Reached my Initial Investment Goal - I Felt like a Millionaire, like I wanted to Buy Drinks for Everyone! Then I Started to Dream about Receiving a Dividend EVERY Month... and 2015 was that Year. Yet Again I Felt Immortal, because I had Reached my Goal. Then I Started to Dream about how Cool it would be to Receive R10K in Dividends in a Single Month...Well, End July 2019 WILL be that Month - and yet another of my 'impossible' Dreams WILL be Realised! - and this Time I WILL be Buying Drinks for Everyone - because Everyone Loves Bubbles, Right? Now I'm Starting to Dream about what I Need to DO in Order to Receive R10K in Dividends EVERY Month, of EVERY Year... I'm Thinking about WHY it Took 9 Years to Reach this Goal. I'm Thinking about HOW to make it Happen Again. I'm Thinking about How to SHORTEN the Period - Perhaps Halve it to 4.5 Years... If you're NOT Dreaming - START! If you ARE Dreaming, NEVER Stop! If you Give Up, the Outcome is Predictable & Guaranteed, so Start Climbing that Mountain Standing between You & F-I-R-E. Don't Start Tomorrow, don't Start Today, START Right NOW - and ADD another Zero to the BottomLine! Khwezi I just turned 35 and came to the realisation that I don’t have money to retire on, let alone to leave for my wife and child, in 15 years (as I plan/ planned). Would it be possible to structure my portfolio as follows: 3 Defenders (those that provide cushion/ prevent loses, giving +/- 15-20 year returns) 4 Midfielders (a champions league great mix of conservatives, and aggressors giving returns in about +/- 10-15 years) 3 Strikers giving returns in 5 - 10 years. I recently joined the Just One Lap community and before your shows have been tip-toeing around in the dark with no clue whether I am going forward or sideways to a cliff. S’fundo wants to know what homework he should do before investing. He’s 22. I recently started my investing journey, and I am looking forward to investing for long term returns (15 - 20 years) so I can take full advantage of compound interest. Which are the most effective due diligence processes to undergo when valuing a company or ETFs to determine if they are worth buying for the longer term? How can someone with no prior knowledge of the markets or finance world learn going through those processes effectively?

The sad thing about the work we do is that it has a 0% sexy rating. Once you understand the five financial concepts we keep harping on about, it becomes easy to figure out the rest. The things we invest in won’t make you rich overnight. If it did, we would be sipping champagne cocktails on a beach, not talking about the five financial concepts a hundred times a day. However, the work we do here will hopefully help you identify poor financial choices before you make them. This week, Karabo shares the story of her grandmother’s funeral cover. All hell broke loose on Twitter after I posted about it. The feedback was either, “If her grandmother had died in the first month it would have been a great idea to get funeral cover.” Or, less kindly, “Funeral cover is a scam.” This week, we offer ways to think about funeral cover. It’s an insurance product, and insurance plays an important role in financial management. However, like all other short-term insurance, there comes a time where you have to stop paying for it. The sunk cost fallacy makes that much harder in funeral cover. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Karabo My grandmother passed away recently. I found out from my mom that for the past 13 years she's been contributing R250 towards a funeral policy that paid out R10,000. When I do my own calculations, if she had simply saved without any interest earned, she could have saved R39,000. She's trying to convince me to get a funeral policy but I'm not buying the maths as a funeral policy would only work if a person dies in a few months. Is there a way of saving money that can earn good interest as a death insurance for family members without taking out a funeral policy? How can I convince my mother to consider alternatives to funeral policies? Andy Was listening to your "What the Fee" episode (March 10th) and wanted to let you know that Ucount rewards can actually be redeemed as cash. (Nothing against Playstation VR, but I am an XBOX guy) I racked up about R9,000 worth of Ucount over five years and received an expiration notification. I redeemed R8,000 and put it into my investment properties bond. What you have to do is redeem the points into a pure save account (terrible savings account), from there you can transfer it where ever. I see they also have options to put it directly into a TFSA etc. They can only be redeemed in R2,000 increments. I currently contribute a total of 10% of my salary to my RA which is compulsory at my work. (my work pays 50% of my contribution, so 5% myself and 5% company). My company has chosen to use Allan Gray and we have some Durban-based advisors. The actual Annualised return since inception has been 1.72% and over 3 years 1.74%. The admin fee, platform fee and advisor fees comes to 2.66%. I would love to max out the contribution to 27.5% but I don't want to put it into that RA. What options do i have here? Do i have to negotiate this with my company or can I open a separate RA and contribute 17.5% to ETFs? Lalitha is 59 and she has a nice lump sum to invest. She thinks she’ll probably retire at 65. She already has a tax-free account. Where should her money go? Beyers What is your opinion about keeping a portion of your emergency fund in Kruger Rands as a currency hedge? How are Kruger rands taxed when you sell them? Milan On Sygnia's platform you are able to buy Sygnia ETFs in a RA wrapper. The net result is one of the cheapest RAs you can get at the moment. I have attached a breakdown of my fees. The EAC is just 0.41% There is also a check to make sure you are Reg 28 compliant. You do not have to invest in bonds or cash to be Reg 28 compliant. Your portfolio can comprise of just Equities and Property. If your custom portfolio breaches Reg 28 allocation rules you have 12 months to fix it. Anne I am trying to teach my kids to save money and buy shares with their savings. My son insists on buying gold shares. Is there any etf with the word “gold” in that could be a good long-term investment?

Sometimes we say you should move your investments, sometimes we tell you to stay invested no matter what. This week, we receive two questions about moving investments. We use them as examples to discuss when it’s a good idea to cut your losses and move on and when you should hold tight and wait for the market to recover. Sign up for our movie night here. Tamryn I have RAs two with Old Mutual. I contribute R1,500 a month to one, increasing by 10% a year. I transferred the RA from my previous job to the other one, so it was just one payment. I tried to work out the growth using Stealthy's formula. If I did my calculations correctly, they are not doing well, unless I don't understand the results. The lump sum one grew by 7.7% pa. The other one was even worse, over 177 months, only returned 3.9%. Are they doing terribly? I know they would have been affected by the stock markets not growing a lot the last few years.  I have been thinking about moving, but there will be a huge penalty. Follow-up: I just received the EAC for my two policies, the once-off one is 4.1% p/a. The one I pay in monthly, the 1st year, the EAC was 17.5%! Year 2 was 7.9%, from now until I retire  its 4% pa. I'm just waiting for them to let me know the penalty for moving. I can't believe it! 17.5% and this was an advisor my gran used and trusted so my mom and I used him too. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Zee Recently I started taking control of my own investments. After being invested in unit trust at major brokers for years, the growth and dividends were not satisfying. I now invested funds in smaller amounts in units trusts, more in a TFSA and the rest in ETF. After listening to a few of your podcasts and studying a few blogs, I have diversified accordingly. Can you advise if my current portfolio of ETFs are the right choices or if I’m duplicating any: - STX40 - STXWDM - STXNDQ - STX500 - PREFTX - PTXTEN - Standard Bank Rhodium ETF - Standard Bank Palladium ETF I also bought equity shares via EasyEquities in Discovery and Shoprite. Lastly you spoke about Bond ETFs. Any recommendation to which one will be suitable with a portfolio like mine? Lavinia And if I haven't said it to you and the team recently, a HUGE big thank you for this blog. I have learnt so much since signing up. Truthfully, for the first time in, like, FOREVER, I feel as if I am on top of my finances and finally working towards getting down debt and building wealth. I read your blog whenever it comes out, I try attend the Power Hours when I can, they are gold to meet and hear the experts in person, and dare I say it, but the dream of financial freedom is attainable. Which is saying something, as I seriously inherited some bat shit crazy, nonsensical, hysterical money mythology from my poor parents. So thank you for all the effort to host the Power Hours, the effort to write and research and to share all the info with me. Li'l old me is making sense of this money stuff, finally! Rudolph How are some defensive stocks, 'defensive', if they are also sensitive to interest rates, for example, banks, utilities, and real estate? And also possibly stock market volatility? Cait has a relative who gets an irregular income from running a preschool. They’re trying to work out how to calculate the 27.5% they should put towards her RA. She pays the expenses of the school and uses what is left over for her expenses. Antoine I have no obligation to save for my kids’ retirement. As far as I am concerned, it is their life, which means it's theirs to mess up or succeed with. I’d much rather give them the education they need to succeed and make sure they never have to look after my wife and I financially. If these priorities are ticked and I have some cash left, I'll pay for them and their spouses and children to go on family holidays with us. What's left when I drop dead, will go to my grandkids' education. Give your children the best shield and sword and send them off to slay their own dragons. I think you take a big risk on future interest rates, to rely on a possible student loan while saving for their retirement. The only place I see use for a TFS account for kids, is for saving birthday money they get from uncles and aunts. Say you borrow money at 10% per year, and you invest it and get a super 13% return. If your income tax is 30% you will be left with zero minus any costs involved including vat. What am I missing? Can you deduct the 10% interest on the mortgage loan from tax? I don't think SARS will fall for :" I use this mortgage loan to earn an income on the stock-market." This will only work if you are making money by renting out the bonded property. If the people have R100 and government have R100 and the GDP increases, government prints more money. So if the inflation is 4% it means government will print R8, which is 4% of the total R200. So the end result is government has R108 and the people have R100 but the R100 can buy 4% less than the year before. This is why government bonds can always keep track with inflation. Do I understand this correctly? Ronald I am a bit surprised that no mention has been made of the EURO STOXX 50 Index listed as the SYGNIA ITRIX EUROSTOXX50 here in South Africa. This index fund was recommended to me by a German stockbroker friend who has had 40-years experience at the Dusseldorf Stock Exchange. In his portfolio the Euro Stoxx 50 comprises of 85% of his portfolio the rest DAX and DOW JONES and cash. Lorin wants to know if we can recommend a wealth mentor.

At what point did South Africans become so obsessed with having money offshore? For a while everyone was obsessed with gold, then something about Jacob Zuma and suddenly Magnus Heystek was a thing, like a bad dream. Our friend Edwin has this ability to ask a question in a way that stretches my brain more than any answer ever could. This week, his question was simple, “What’s the point of taking money out of the country?” What, indeed! P.S. If you wanted to catch a movie with us at the JSE, you can register here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Edwin I have little money offshore from a previous company share scheme. It is in an account managed by the company scheme and doesn’t cost me anything or grow. It just sits there. It’s in pounds, so every time the Rand drops I feel richer. I also like the thought of having an emergency stash offshore should I need it one day. I have thought of repatriating this money and it raised a whole lot of other questions. What is the point of sending money to another country when you can 1) Buy global shares and ETFs with Rands from SA 2) Buy currency if you need it quite easily through a number of platforms e.g. Standard Bank Shyft, Easy Equities. Unless someone is buying a villa off the south coast of France, or planning to spend time overseas why do people bother “sending money offshore” when you can just as easily buy the Rand hedge in Rand in a locally sold ETF or in currency itself? What am I missing? Is there an advantage to having your physical currency in another country or should I bring my pounds back home and just buy a low cost ETF? Pierre I’ve been contributing fairly regular lump sums to an offshore USD denominated Allan Gray unit trust since about 2016. According to Allan Gray the costs of this investment are as follows: Annual investment management fee = 1.16% Annual platform administration fee = 0.56% Annual financial advisor fee = 1.15% I’m not sure if this total of 2.87% includes fees that the company who does to actual exchange from ZAR to USD charges every time I add to the investment. Should I just stop contributing to this unit trust, hope for the best and continue contributing to my EasyEquities USD Vanguard S&P500 ETF? Should I try to close this investment, have the funds exchanged to ZAR and reinvest it into EasyEquities USD. I am not aware of a way to have the investment directly transferred from Allan Gray US to EasEquities USD, are you? Mzwa For all the noise that comes with it, BBBEE schemes in my opinion are not radical at all, and barely benefit the average black retail investor. Instead they largely benefit high net worth and these BBBEE connected folks and well-poised trusts and institutions. I say this because mainly because of the complexity that it comes with. At times you don’t even get access to main shares. The company offering the BBBEE deal is basically just providing the loan, and and any dividends must first pay up the debt. The discounted share price is countered by the debt that needs to be paid back, and missing out on dividends. Does not seem very worthwhile on paper for small time investors who likely do not have a tax free account, and are nowhere close to maxing their RA yet, and perhaps only trying to learn about the financial markets. What’s different about the BarloWorld deal is that it’s a sale and lease back agreement, and with guaranteed cash flows, the debt might be paid up quicker and value realised perhaps around 5 to 10 years. I just would like to hear you weigh-in, especially for people like me who could still put in money into Tax Free savings and/or RA. I am still young and not yet high earning, but I don’t have any debt. As much as my financial principles say first look at ETFs in Tax Free, the urge of not letting such an opportunity go is peeking my interest. We reference Craig Gradidge's excellent BBBEE Power Hour in this discussion. Moya This will sound clichéd, but you guys have totally altered the way I view money and financial advisors (sneaky little shits). I’m a medic, recently qualified specialist at age 33. With all this education I was schooled in finance by my junior/minion at work. With the hierarchy in the medical fraternity you can imagine how this felt. He introduced me to ETFs,TFSAs and the Fat Wallet podcast. My mom recently retired when I came across all this new info. She was a professional nurse and her retirement fund was the government “dinosaur” pension fund. Her fund has paid out the ⅓ (she still refuses to disclose how much it is regardless of how much I flaunt this new knowledge) and the remaining 2/3 into a living annuity that pays her monthly. She wants to invest a big bulk of that ⅓. She anticipates being around for more than 20 years, my gran died at 102, so it’s understandable. What products would you suggest for that money? Gregg Base – Emergency Fund – 40% Next tier – ETFs and Bonds – 35% Top tier – Equities – 25% Do I need to sell some of my equities to free up cash to do the rebalancing – I could take some profits from some equities and also sell some of the losers? What would you advise? How do I invest directly into Inflation-linked Government Bonds where the maturity period of that bond is in line with when I want to retire - for example a Govt Bond that matures in 20 years time? Is this a wise investment as part of diversification? Is it better to invest into a bond ETF as opposed to directly into the bond – what is the difference? Darren I want to plan for certain savings goals, like yearly veterinary council fees, car maintenance, local holiday trips and overseas holidays. Let’s say I would like to save R1000/month in total for all of the above savings goals together. Do I buy different ETFs for each different goals or do I take the R1000 and split it between different ETFs. I feel it is quite overwhelming choosing them? Boitomelo I will most likely continue with the Ashburton 1200 only or maybe add a local one as well and have only 2 ETFs. In my current EE normal account, I have the Ashburton 1200 and the Satrix Divi Plus. What do you guys think of that ETF? I have been wondering if I should swap it for the Satrix Top 40 or just leave the Ashburton and sell out the DIVI. Pierre Over the last year I’ve closed unnecessary bank accounts, halved my monthly contribution to a managed collective investment scheme, run by my financial advisor, and I am now investing it myself in an ETF portfolio via Easy Equities. I’ve also moved my TFSA from my financial advisor’s product to Easy Equities. I manage my tax better and I have a hands-on approach when it comes to my personal and business affairs, instead of just leaving it to “the professionals”. I’ve been thinking about moving my RA from Discovery to 10X to decrease fees. I raised the issue with my advisor and received a response that I couldn’t make head or tail of, except that I shouldn’t move. Armed with the knowledge from the Fat Wallet Show, I scrutinised my policy documents and came up with the following: I actually have 2 RAs! (never knew that) The first is called the Discovery Retirement Optimiser RA. I started contributing in March 2017 when I was 34 (please don’t freak out, I built up a sizeable GEPF pension while I was doing in-service training). Discovery reports that the Internal rate of return with their built-in benefits since I started contributing has been 5.21%. Without their benefits has been 4.08%. The TER on this investment is 1.92% and transaction costs are 0.18%, so total investment charge is 2.1%. I suspect my financial advisor must also take a fee, but he’s been beating around the bush to tell me. The gimmicks: if I match my monthly RA contribution to my monthly Discovery Life insurance policy premium, then Discovery say they’ll pay me back an Accrued Life Plan Optimiser which is equal to my insurance premiums paid up to 65. This will be paid back in 10 annual payments over 10 years after retirement. So far, I stand to get just under R50 000 back over 10 years after 65 (if I purchase a Discovery Retirement Income Plan at retirement). Discovery reports that an early exit fee will be just under R15 000, and of course you lose the Accrued Life Plan Optimiser. The second RA is called the Discovery Core RA. I invested a lump sum of R100,000 in Feb 2017. The policy is now worth just under R110,000. The Discovery reported internal rates of return with and without benefits are similar to the first RA, as are the fees. The bells and whistles: Discovery “gives” you a Boost Accelerator of 20% of your investment to use to pay your administration fees. This Boost Accelerator diminishes by R2 for every R1 admin fees paid. When the policy reaches 10 years, Discovery will pay you what’s left. I have just over R14 000 at the moment left after 3 years of admin fees — by my reckoning Discovery and I will be “quits” in 10 years, so I won’t see a cent of the Boost Accelerator, but I would have scored on fees. Again, I’m sure my financial advisor is claiming some kind of fee, but I don’t know what. Kristia will understand my feeling of "Is die kool die sous werd?" If I take the knock and move the Discovery Retirement Optimiser RA to 10X, I’ll be able to catch up the losses in fees before retirement and don’t have to worry about matching my life insurance premium, blah blah. I’ll keep the Discovery Core RA, because I don’t pay fees, and threaten my financial advisor to take my business elsewhere if he doesn’t tell me exactly what his fee for this policy is. Would you agree? Brecht Would it maybe be better to make the policy paid up and just leave it and then open up a new one or is it still worth moving it? "Shareholder fee is calculated as 10% of gross investment growth (before management fee and tax). Although it is called a shareholder fee, these days we refer to it as a growth fee, calculated on the growth of the portfolio. Below are the ongoing fees on the policy: Policy Fee = R26.82 pm Allocation charge = 10.25% of each premium"  

The world is changing so quickly that talking about the pace of change is starting to feel a bit clichéd. We measure optimisation and innovation by software updates, not generations. This allows us to customise our lives to a great degree. From time to time we need to check whether rules of thumb of previous generations still apply to the world as it looks at the moment. Most of the time, large systems and institutions struggle to keep up with how quickly the world changes. One improvement often allows for improvements in other fields. In this episode we continue to discuss how we can think differently about retirement. We talk about why it’s important to shift our focus from retirement age to financial independence. We also dream about different ways to think about tax. If you’re new, this episode might feel a bit too hardcore for you. Feel free to start with one that’s more relatable. We just couldn’t help ourselves. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Slade Imagine SARS offered a scheme whereby a taxpayer could invest as much money as they wanted into the markets and enjoy all the profits and dividends tax free, but upon death all remaining assets would be left to SARS?     Of course there would be finer details to work out like: Does it all go to the remaining spouse until their death then to SARS? Or 50% to SARS and 50% to remaining spouse? For those without children or suitable heirs, it would be a great option to unlock the value in the assets that we inevitably can’t take with us.   Stephen I want to minimise the drawdown on equities during a recession. My question is, how best could this be tackled? Would I need two Living Annuities or are there products out there that would do this for me? I know I could opt for the ABSA Volatility ETFs but I want the pure offshore exposure. John When you invest in an RA, you are really buying a pension. I know you can take up to one third in cash BUT with the other two thirds, you still have to buy a pension! At what point over the age of 55 do you take your pension. I suggest when your payout equates to R195,850 p.a (before tax) or R16,320 per month (before tax). After tax is becomes R13,385 per month. One (under 65 years) can earn up to R75,750 and not pay tax, but above this amount one pays tax at the rate of 18% up to R195,750. Above this amount the next tax bracket is 26% (way too high). If you are under 55, monitor the tax tables to find the revised numbers for when you reach 55. If you own a pension you will pay tax so keep the tax as low as possible. Have enough cash to give you R23,800 interest per year, because that's the amount of tax-free interest you can earn. At this point you have a virtually certain monthly salary of R15,365 after tax. ( R13,385+R1,980) If your dividend yield is 2.4% after tax you earn R2,000 per month for every R1m invested. For CGT - If like Simon you are not going to leave anything behind, cash in R40,000 p.a or another R3,330 per month.  Hey! now if you need even more money your CGT is around 11%. TFSA - the last place to fleece money and it's tax free. It is as important to have a budget and know and control your spending as it is to invest. When amounts from points 1-5 exceed expenses, financial independence happens. ( If you are cautious add an extra 25%) Lastly, when you reach FI you don't have to RE but you do have the choice on what to do. Santosh I finally scheduled a meeting with 10X, following your show's continual compliments on their products, fees and market approach. I had expected a "hard sell", but was pleasantly surprised when the consensus was "stick with what you're doing, no need to move". This shows true integrity from both the advisor and 10X. While we are not doing business currently, it has given me the confidence to keep 10X as one of my top two choices if ever the need to appoint a product and service provider in the future. Bonolo I live with my parents and I am a field worker. They live in the townships of Pretoria north and I work in Pretoria East, Centurion and Mpumalanga (once a month). I had an original plan of saving up the money I have left and the incentives I get quarterly in a money market fund until I am 30 years old. I’ve estimated that I'll be able to buy a townhouse cash or at least have 70%-80% deposit. I work in a very high stress job and unstable in terms of employment, so that's why don't see myself paying for a house longer than five years. I could rent but I am also a firm follower of retiring early so I MUST have a home when the time to retire (early) comes and renting doesn't satisfy that part of the plan. I also wanna chuck the money I have left over in index funds and figure my shit out when I am 30, but I don't want to feel like I am watching paint dry. I know there will be a time I'll certainly break because it would feel like I am doing nothing with my life. Also, I don't think I want to live with my folks (they are really cool roomies) that long. Do you think I can retire on just my provident and tfsa at age 45? Should I focus the money I have left over on getting shelter and invest the extra money after sorting out a fully paid shelter?

Diversification is an important part of risk management in a portfolio. Unfortunately, as with all things finance, there’s no simple diversification solution. This week, we address two diversification concerns: being too diversified and not being diversified enough. In my own portfolio, I pay attention to three diversification criteria, namely assets, regions and sectors. Since I want my portfolio to grow as much as possible, I prefer equities as an asset class. I don’t diversify this much, since I understand the risks involved and I have enough time to recover from market events. To diversify across regions, I choose equity-only investment products that invest in multiple regions. ETFs with world-wide exposure are excellent vehicles for regional diversification. In terms of sectoral diversification, I prefer investment products that invest in sectors relative to their importance in the overall market at the moment. I do this by avoiding sector-specific investments. My single ETF strategy also takes care of my diversification needs. When I can no longer afford single asset class exposure, I’ll have to start including assets that are less risky. For now, one ETF rules them all. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Bhiri Can it be wrong to be too diversified? My portfolio is probably made up of 75/25 between ETFs and pure direct shares. The 25% shares I am not worried about as, as I get older this percentage will only get smaller and most of my investments will be in ETFs. I'm 37 now. I have the ASHT40, GIVRES, STXIND, S&P500, STXNDQ, SYGWD ETFs and also the STXPRO and SYGLB in my TFSA. Stefan I was doing some housekeeping on my two ETF portfolios. I ran a report on all dividends received in the 2018 calendar year. Even though my PTXTEN from a capital appreciation perspective is deep in the red, I was really happy with the total div received compared to all the other ETFs in my portfolio. My other property ETFs are not performing as well. For example CoreShares S&P Global Prop did about 50% of what my ptx 10 did. Which other ETFs have a similar yield? I would like to diversify and buy more etfs but with yield in mind for this particular portfolio. I’d also prefer etfs that are more geared towards global exposure.  It doesn’t have to be property. Matthew I have taken a more active approach to my TFSA and am now sorting out my TFSA with EasyEquites. Now that I have gained the confidence to self manage my TFSA, I am wondering if I should do the same with my RAs? Between a Retirement Annuity (RA) and a Tax Free Savings Account (TFSA), which should be prioritised? Is managing your own Retirement Annuity through a site like EasyEquities a viable option? I noticed the RAs have fact sheets and it feels similar to TFSA. The fees are also under one percent which is way cheaper than with my current provider. Do I have to take into account Reg 28 when I am investing on the platform? I currently assume all available options are all Reg 28 compliant and I can just invest where I desire. Are there any investment strategies with regards to a RA? I am only away of appropriate risk e.g. high risk early and move to low risk near retirement. Could a RA be seen as an alternative to life insurance (assuming living annuity)? E.g. Take life insurance for the first 5 years of your working life and after that, cancel the life insurance as the RA will pay out to beneficiaries to an equivalent life insurance? RAs will pay out on serious ill-health / Disability. Is this not an income protector or are there scenarios where an income protector would still be needed as the RA will not cover? Also, would you even recommend an income protector? Jonathan My mother, who moved overseas, sold her primary residence. She has around R1.4m sitting in cash. She is 55 years old, has just enough money to live off from alternative income. Listening to your show, buying another property to rent out seems like a bad idea. She has a place to stay and enough money to live off. She would like to know what is the best thing to do with the money as she grew up thinking buying property is the only good thing to do with large sums of cash. Karabo 10x is relatively new and my friend asked what would happen to the monies invested with the fund manager should they go bust. Is there a way we can "insure" our investments against funds managers going down. Cliff I have a few debit orders with EE and I want to be sure that when buying on those predetermined monthly dates I am not penalised by buying at inflated prices (when market maker is offline). How would you suggest I go about this? Nerina pointed out the cost of debit orders. Steve ‪If we ask our financial adviser to drop his fees - and rather pay for his/her time - what rate is reasonable? And how much time per year ? I have only a basic RA and basic cover (disability / income protection) - under the financial advisor’s care. I doubt it’s more than 2-3 hours per year? ‬ For my actual meetings with my adviser I am paying close to 20k per year - last five years are hardly beating cash - with a pricey platform (AG).    Don’t want to be insulting but short of cancelling and moving to 10x I thought I would offer to pay per  hour and see if anything changes? Doug My wife and I max out our TFSAs and have been for the last two years. I have a pension fund through my work which is relatively fixed. My wife works for herself so, based on advice at the time, opened up an Allan Gray (bleh, fees) Unit Trust. We have ceased contributing to the fund but are unsure of what to do with the amount sitting there (approximately R120k). We have a home loan and are well ahead of curve there - likely to be paid off in about 10 years or so. What do we do with the R120K? One option was plowing it all into the home loan to reduce our debt. That would sure feel great but then our only retirement savings would be our TFSAs and my pension fund from work. This feels a bit light and the R120k was initially set aside as part of a retirement investment plan. The second option we considered was putting this amount into some low cost ETFs on easy equities as a discretionary investment. The third option was some sort of a split (80/20) between ETFs and the home loan. Is there something else I am missing? With the potential of kids in the future we are unsure of our ability to push as aggressively into investing or the loan.

I’ve only ever known debt as the wrathful destroyer of wealth and happiness. Lately, however, I’ve come to realise debt can be a powerful tool in your financial arsenal - if you treat it with respect. Someone recently explained the logic behind maxing out his child’s tax-free account instead of saving for her education. If a single year’s tax-free contribution can cover much of your child’s living expenses in retirement, imagine what 15 years’ worth can do. Giving a tax-free account time to grow will have greater benefits in the long run than if she started contributing when she started working. Instead, she can use her starter salary to pay back low-interest study debt with her retirement taken care of. It’s genius. This conversation got me wondering whether I’m making the most of the debt I have available. My home loan is currently the dumping ground for all my savings. This brings down my repayment period and guarantees a higher interest rate on cash savings than any bank can offer me. In this episode we discuss how low interest debt instruments like student loans and home loans can be used to inch us forward financially. We discuss why cars and clothing accounts won’t form part of this strategy and try to figure out when a credit card can help. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Alexander My studies are financed by my parents’ home loan that has an interest rate of 9%. This interest rate is still currently better than student loan interest rates I could obtain (10%+). The idea is that I’ll start to repay my parents as soon as I start working. I calculated that I’d most likely graduate with R350,000 to R400,000 student debt owed to my parents. Should I use the very little free cash I have from my monthly allowance, vacation work and mentoring remuneration to: Contribute to my all-ETF TFSA at EasyEquities? or Contribute to my savings account with TymeBank (at a 10% interest rate) to pay off my student debts sooner when I graduate? I know the amounts I’m investing/saving now might be insignificant relative to the massive amount of student debt. But I’d still like to know what is better: investing in your TFSA or attacking student loan debt as soon as possible? Clarke My wife and I are in the process of finalising plans to build our dream home. We’ve saved up about 50% of the funds required, which is sitting in a money market account. We hope to get close to 90% building loan from the bank which would enable us to use very little of our own cash in the initial stages of the build. Hopefully we can pour that money into the loan as required in order to keep interest payments to a minimum while having access to the bond if required. I’m currently working on an exact schedule of cash flows, but I would require to draw down our investment periodically over the next 7-9 months in order to keep the loan amount to a minimum. Which investment would you advise I could look into apart from money market accounts or fixed deposits that might yield greater returns without substantial additional risk? Siphathisile When I did my articles 2017-2019, I went to the SARS website and answered questions to see if I need to file a tax return. The website said I didn't need to, I'm guessing because I earned too little. Now that I am a qualified professional I know I will have to and I have no clue where to begin...stories about long queues at the SARS offices make me keep procrastinating on going there. My company offered to pay half my medical aid. Should this affect my PAYE tax amount? Am I paying tax on my gross amount or on my (Gross plus medical benefits) ? I asking because the difference in the amount is nearly R500 and that hurts. Am I liable to pay UIF since I am not a permanent resident and I am not a citizen of south africa? Will I be able to claim if I was ever unemployed in South Africa? Shaunton Do you think it would be more beneficial to add more contributions to my RA or do you think I must open an easy equities ETF account if I want to save more over and above my TFSA and RA? Steve shared an excellent article. Reduce your tax bill in the current tax year Reduce your tax bill in the next tax year or in future tax years (any unused portion carries over indefinitely) Reduce your tax bill when you withdraw or retire from a retirement fund Help you to get tax back from SARS on your living annuity income when you file your tax return Reduce the tax bill on cash your beneficiaries may choose to take from your retirement fund or living annuity on your death Francois has an idea for a calculator to work out how much money you have left until you die. It should show you how your savings grow on a daily basis! So what must it do? You tell it how old you are and when is your birthday. You tell it to what age more or less you intend living. 8, 90,100 You tell it what your balance is of all your money and assets. It then works out how many days are left from your current day to that age and it calculates how much money you can spend per day up to that age. If you don't spend any money today, tomorrow your daily spend automatically increases since you did not spend anything today or you received interest overnight or whatever. You see your balance grow NOT monthly, but daily! Later you add on expenditures and it automatically calculates your new daily balance and so on. MacGyver I have a TFSA through FNB. I max it out every year, it's the first money I put away. However, it sits in cash in this FNB TSFA. How do I go about transferring this to Easy Equities Tax Free account so that I may invest in ETFs instead of it simply sitting in cash in my FNB account? Register here to attend Stealthy Wealth’s meet-ups.

I learned a lot of important financial concepts from the FIRE (financially independent, retire early) movement. The most useful is the difference between retirement and financial independence. The days of companies supporting retired employees in retirement are a distant memory. If you are plugged in to your finances, this is great news. It means there’s no correlation between your age and how long you have to work. We focus instead on financial independence. All of us have a magic money number. The great news is that our number is entirely in our control, because it’s based on our spending. Simply put, your monthly spending times 300 gets you in the ballpark of your FIRE number. That formula works because of the 4% rule, which our friend Stealthy Wealth lays out in this post. Basically, 4% is how much of your portfolio you should be able to cash in every year to allow your capital to grow by inflation. That means your portfolio never shrinks, so you never run out of money. If you accept the 4% rule, you have to reject some age-old ideas about asset allocation as you approach retirement. In retirement planning, we are often advised to deduct our current age from 100 or 120, depending on what you suspect about your longevity. The number remaining is the percentage of your portfolio that should be in equity. Unfortunately that means a person who is 50 years old will have half their portfolio in low risk, low growth assets. The 4% rule is unlikely to apply to such a conservative portfolio, since it’s unlikely to yield high enough above-inflation returns. Remember, you can only use whatever you earn above inflation to keep your capital in tact. If inflation is 6% and your portfolio only grows at 7%, you can only use 1% of your capital. Unless you have a huge amount of money, that won’t be enough to sustain you for a year. In this podcast, we brainstorm new ways to think about how to set up a portfolio as you approach financial independence. We work on the premise that you need between five and 10 years’ worth of living expenses in low-risk assets on day one, so you have the option of not drawing down your portfolio during a market crash. We offer more questions than solutions in this one. We are excited to hear what you have contribute. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Colin I signed up for a Just One Lap's ETF portfolio subscription account over two years ago and have been using the recommendation for my TFSA. There are supposed to be subscription fees payable after the first free year, but I have never been approached to pay any fees to keep my subscription account active and my login still works! I am concerned however that the portfolios I see when logged in are perhaps not the most current, because I have not paid subscription fees! This concern is brought about by comments I have heard on the Fat Wallet podcasts, that make me wonder whether the current  > 10 year portfolio (that has holdings: CSEW40 40%, SYGWD 40%, PTXTEN 20%) is the current recommended portfolio. For example Simon often mentions on the podcast that the Signia MCSI World ETF have much higher costs that the Satrix equivalent, and given Just One Lap's emphasis on watching and reducing costs where possible, that makes me wonder why the SYGWD is still in the >10 year portfolio and whether I am seeing updated portfolios. Margaret The recent discussions about CoreShares changing their index made me want understand more of the underlying methodology of the underlying index. Indices for one country seem relatively simple (e.g. S&P 500, our Top 40 index), but if you want to go for the one ETF to rule them all strategy you have to have more complexity. I see there's the Ashburton 1200 and the MSCI world that track the global markets. Could you explain how these indices are created? Are there any indexes that track emerging markets over the world? BRICS? Latin America and Africa? Kristia’s ETF analysis checklist:   Asset classes: are you buying shares, bonds, property or a combination? Regional exposure: where the companies in the index operate The investment universe: is it the whole market or only a sub-sector of the market, like technology Methodology: how the index is weighted. Sector exposure: what types of companies are in the idex Cost: at the moment TER is the most universal indicator   Philip A financial adviser suggested we take out life insurance on our parents as a future investment. My parents agreed and I have a little under R5m cover for about R2750 p/m. The policy is now eight years old and the payment amount only adjusts for inflation. So does the payout. a) It's my understanding that I will not pay tax on this payout. b) I hope I don't lose my dear mother for the next 30 years! And even if she lives until 90, my calculation is that the contribution will never exceed the payout. To me this seems like a good investment as part of a bigger portfolio (RA in addition to my Work pension, Standard Securities -started trading on the lazy system {yay me! I'm a trader!} etc). Are there any pitfalls I am missing, or can I tell my sister to consider the same type of policy? I guess I just want a sanity check here. NC van Heerden Over the past year I’ve listened to all of your podcasts since inception-sometimes obsessively. Luckily I started listening only a year after I started working before I had the time to make poor financial decisions. Following the great advice you have been giving, I have: -          Started a maxing my TFSA which I spilt 70/30 between STXWDM and STXEMG -          I have created a sizeable emergency fund, which already saved me on one occasion -          Started some discretionary investments in the ETF space -          Moved my RA from a advisor-fee stacked unit trust to 10X. I’ve stopped contributing to this fund to keep the opportunity to move overseas without Mr SARS having his cut – these funds are currently going into my discretionary investment (thank you to everyone who did all those calculations about if the RA vs discretionary) I currently have a contract until the end of 2019. Thereafter there is a high possibility of hopefully only a few months of (f)unemployment. At that time I am hoping to cover my expenses by working as a locum while waiting for a post to open up. Luckily I have no debts – thank you just one lap. In preparation I want to try saving a bit more money into my emergency fund this year. I’m currently using FNB’s money maximizer account (decent-ish) interest rates but 100k minimum and monthly fees, but it has easy access via the FNB app (which I use anyway) and I can move money immediately). Since I will be adding some more money into my emergency fund I was looking at  at saving it somewhere with a better interest rate. According to tigersonagoldenleash.co.za at the moment the best interest rate seems to come from Tyme Bank (10% after invested for more than three months and taking a 10 day notice on withdrawal – downside is a maximum investment of 100K). Does that seem sustainable on business grounds? I always have the uncomfortable feeling that something seems too good to be true (looking at you Absa with 13.5 percent interest and then fine printing it as simple interest). I’m also considering African bank as it seems a bit more established. Please also advise if you think there would be a better place to park some extra emergency fund money for the next few months. Rudolph Do dividend yields rise or fall in a boom or a recession? Hannes You’ve mentioned a few times already that buying your house was a mistake and you'd never do it again. I would love for you to elaborate exactly the reasons why you believe it was a mistake, in as much detail as you can. I find it difficult to believe its a financial mistake when you are planning on paying it off in five-ish years, paying very little interest because of that, and having the benefit of not having a rent / bond payment after said five years. To me the pros of this far outweigh the cons.

I apologise to Four Cousins for saying they probably add bubbles using a SodaStream machine. I've learned my lesson and vow to buy a bottle should I see one in store. Investing in listed companies is a great way to learn about investment risk. It teaches us that sometimes the market isn’t rewarding at all and that individual shares can do better or worse than the average. We also accept that bad market periods are generally followed by periods of growth. We develop respect for the fact that no company operates in a vacuum. The economy is a complex system that can impact the performance of individual companies in surprising ways. We learn all of this while also thinking about the companies or products we invest in. We have to keep it in mind, because we are stock market participants from the moment we buy a single share. When it comes to unlisted investments, the risks change. The biggest risk is not being able to find a buyer for the investment. In addition to providing a secondary market to buy and sell shares, the stock exchange requires a degree of due diligence from companies, adding a further layer of security. While unlisted companies can be good investments, it can be hard to keep track of the market in which they operate, to be sure that they comply with the law and to get truthful information at regular intervals. The case of the Highveld Syndication Scheme that Liezl invested in is a great example of the types of risks we take in an unlisted environment. While the company initially operated legitimately and offered great returns, a management change resulted in great losses for investors. Was there any way for an individual to predict this change? Unlikely. In this episode we discuss some options when you’ve made a bad investment. We talk about some of the risks of unlisted investments and how to know when to get out. Read more about the Highveld Syndication Scheme here. Liezl I invested in the Highveld Syndication Scheme (HS22) when I was still young and dumb. We opted for a settlement arrangement a couple of years back to get at least 55% of our initial capital back over a 3-year period. That did not materialise. In the beginning of March we received a letter offering us APF (Accelerated Property Fund) shares to the value of 25% of our initial capital amount as a final settlement by Nic Georgiou. The catch (of course there is one) is the shares are offered at NAV price (R7.50) and not market value which is around R3.40. The highest ever price recorded in 2016 was just under R7.00 A second catch is the CEO of APF being Michael Georgiou. I also believe the share price will even drop further once these shares are allocated and everyone hits the sell button on day 1. One tiny silver lining is the anticipated opening of the Fourways Mall this year which forms part of the property portfolio. I'm thinking of just taking the settlement, get it over with and play a bit of monopoly? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Jonathan Thank you for such an incredible podcast. I feel on top of my financial life, and it is truly because of the idea of "don't get financial advice, get financial education". I'm happy to say that your podcast has been the cornerstone of my financial education and continues to reinforce the principles that I need to focus on. This question is something I've wanted to ask you for a long time. You always say we don't talk about Japan, and it truly is the single area which I feel you and Simon fail your listeners in. One of the most important financial principles is to confront the truth and then deal with it. Basically, I think you owe it to your listeners to TALK ABOUT JAPAN. This video sent by Dhiraj explains a bit of the economics of Japan.  Mike We bought a townhouse and were lucky enough to afford to keep it when we bought a house when we had our kids. While it has appreciated 40% in value in the six years we've owned it, beating SA equity markets over the time, it's been pretty flat the last two years. I am wondering whether we should sell it, settle the bond (we don't pay any tax on net rental income yet), and invest the R1m or so we'll have left after fees into low-cost ETFs. The property is located in a great suburb, but it's only 1km from our current house, so I worry about concentration risk. The net yield after all costs is also not great at around 6% based on current market value (9% on original purchase price), but what's nagging me is that at some point the property market must bottom out and Newlands would be one of the first areas to start growing well above inflation again. Brecht I’ve had a Momentum RA policy since 2002. The fees are 2%. The penalties on a R160,000 policy are R30,000 if I want to move to another provider. Do I move this fund or just stick it out because of the high penalty? My thinking is I will make that loss back and some more if I can move this fund to a better growth product and less fees? I’ve had a Discovery RA for the last 10 years. It has only brought me growth of 1.89% pa and the fees are in the range of 2.5% - 3%. I am expecting a fee payback in April which will at least boost it a little, but the returns will still be shocking. On top of this I have 2 other preservation funds with Discovery that have done around 6.5% pa respectively over the last 10 years. What shocked me even more is that 60% of my combined Discovery portfolio is in cash. I haven't found out the penalty cost of moving the RA as yet but definitely need to move them and especially into a more Equity driven fund. Is it possible to combine the two RAs into one fund? Is it possible to move different preservation funds into one and is it wise to that? Brandon Are there rigorous studies (literature) available that address your premise that advisors add approximately zero value. I'm asking because it seems logical to me that your conclusion rests on that premise being true. My concern is that if there were say, a number of comprehensive global studies that arrived at the opposite conclusion, would that not have a significant impact on the financial advice that you deliver on your platform? Are there global studies that examine the question, do advisors add so called alpha -- put simply, would an average individual working alongside a professional competent advisor, outperform that same individual, operating on their own in a parallel universe. If it were true that the net effect (after fees) of working with an advisor were positive, the compounding arguments you make in your podcasts would work in precisely the opposite direction. We mention the SPIVA reports, the Morningstar research, as well as the Berkshire Hathaway newsletter: Berkshire Hathaway letter on fees Theo doesn’t agree that a home is just a lifestyle asset. When staying in a paid up home you are not paying rent, so your paid up property is saving you the equivalent rental. It is indeed an asset, although you are not earning a yield you are saving opportunity cost of paying rent. The rent also increases every year which makes the benefit of owning your own asset even more beneficial. Sandile Heading into 2019 I've set serious objectives around how manage my money, which has been a lovely journey so far. I've become the biggest cheapskate, focusing all my efforts on saving as much as possible. My next step is building a long-term investment strategy, I've received pricing from my advisor. I am beginning to question every piece of his advice due to the insurance matter. He is suggesting I invest in Allan Gray Balanced fund and Coronation Balanced Fund. Last year he recommended Allan Gray and the Investec opportunity fund. I have looked at each fund in detail and the confusing element is 1) fees and structure. For someone who is new to the game it definitely is overwhelming. 2) Most of these fund invest in the same companies? I'd also like to invest in ETF funds but I see there a plenty options to choose from. Bruno Would it make sense to duplicate the same investment strategy for both of us in a TFSA? In other words, purchase the same ETFs for both of us.

Money is inextricably linked to every aspect of our lives. Every milestone and setback is either helped or hindered by our financial situation. When we plan for life events like weddings, babies, retirement or death, we also think about their financial impact. Most of us fall short in planning for things we don’t like thinking about. When our nightmares become a reality, the last thing we want to worry about is money. This is normally what insurance is for. Sadly the insurance industry is a flakey ally. In this week’s show, we discuss the financial impact of debilitating sickness. We talk about the preparations you should think about when you’re healthy, as well as some options for people who are already dealing with this difficult reality. Louis Over the last couple of years I went from buying a new, heavily financed car every one or two years, to (almost) owning one car for four years and the other for 10+ years. I scaled down after parting ways with a major client. I decided to pay off all debt except my house. I saved the R8,000 I would have paid on my car each month and in 2.5 years had the money earning interest in my bond. I started investing in the stock market and also have a number of ETFs, including a CoreShares tax free account that actually gave me a good return over the last three years. We adopted at the ripe young age of 45, which changed my outlook on money. My wife was diagnosed with MS last year. Suddenly all the insurance policies and annuities became important as we had to become a single income family.   We took out a combined policy with life cover and LIVING LIFESTYLE COVER (with all the PLUSES, which Liberty say they gave us for free). According to what my current broker and I could deduct - upon diagnosis we should receive 25% of our insured value. This is not the case, though. Liberty has their own definition of MS and you should tick a number of boxes. Even though my wife had several problems relating to MS, we were not entitled to any payment. Not once did Liberty make contact with my wife’s neurologist, doctor or anyone else. My wife had a relapse during the year. At first Liberty again refused any claim without making contact with anyone. Eventually they paid 25% according to their sliding scale. Now that my wife stopped working, I’ve had to employ a neurologist to advise me in order to decide on further action. In our situation we will survive on my income, taking into account retirement provision might be a problem. What do other people do when the sole breadwinner is in the same situation? Secondly I checked the annuity we have been paying for the last 15+ years and realised that the return was just over 6% for the period after cost. The obvious thing to do was to cancel, for which the charge is 5%. They say that after 15 years they have not recovered all their cost. There is a contribution charge of 4.5% and then they charge a management fee of almost 2% on top of that. I wrote to the pension fund adjudicator and after waiting almost seven months and requesting feedback a number of times, I received feedback basically saying they can charge up to 20%. I am moving the money in any case as I am sure we will be able to do better somewhere else. R14,000 on a R280,000 value. If you deduct the R14,000 my real growth over the period is probably very close to 0%. What is the best fund with a moderate to high risk to try and make up for lost years? We already have investments in Allan Gray Balanced and similar funds. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Gareth The problem with dread disease cover is the companies’ definitions of their sicknesses. I unfortunately had the same claim disappointment when my wife was diagnosed with Crohn’s disease, I then only found out that they pay out 25% of the dread disease assured amount. The same goes for MS and most autoimmune diseases. We pay discovery R12,000 pm on the top Medical aid so they can pay R30,000pm for her medicine. Liberty should’ve asked for medical reports etc from the doctor as part of the claim process. I always say that dread disease is a nice to have, same as capital disability, but the most important benefit to have is income protection. The income protection doesn’t look at your illness but more at your ability to do your specified occupation. It is more expensive but will pay out in a lot more cases. Win of the week: Riani, who is 13, and her sister Juané, who is 7. Their mom tells me they already know what the ALSI is. Brendon I’m able to invest R15,000 a month. Should I go down the ETF or individual share route? Do I incorporate property ETFs too? Should I open an EasyEquities account or with another company? Steve I’m still left wondering what to buy, especially for my TFSA. There just doesn’t seem to be any right or wrong answer? All things considered, what would be your preferences if you wanted exposure to the following: US Markets? World Market - Developed? World Market - Developed & Emerging? South Africa? My understanding is that the US leads the world economy so what are the chances of their markets slowing down while the rest of the world starts ticking? If that’s unlikely, surely one could just as well stick with the US? Donal I did a spreadsheet to work out the tax for the two scenarios and I then backtracked and worked out the present value. There's not a huge difference. The tax man would get almost the same amount of tax from me eventually even if I leave the pension alone! I've listened to you guys saying many times we should clear our debt as fast as possible. I currently have a large car loan at prime + 0.9%. I change my car approx every 2.5 years. In that time I'll generally only have paid off half the loan. My trade-in value usually just covers the outstanding amount and then I need to get a new loan for the full value of the next car and the cycle starts all over again. I commute to work and drive approx 1,000km per week. So after 2.5 years I've clocked up around 120,000km. That's around the time that things start to go pear-shaped with a car. I could pay extra into the loan and reduce the capital quicker. Let's say, for example, instead of paying into my TFSA I put R2750 per month into my car loan. So, like I do, I've run a spreadsheet and I've found that after 18 months (which is when I will change again) my capital balance will be R60k less than if I didn't pay in the extra. So the loan on my next car will be R60k better off. This sounds great, but the problem then is that my TFSA capital doesn't grow! And if I continue to do this every time I buy a car I'll then my TFSA will always suffer. Eventually I'll be in the situation where my initial loan amount will be small enough that I'll be able to pay off my car loan before I have to change my car again. In that period I can catch up on savings for a few months. But I reckon it's going to take about five more car changes to get to that stage! By then I would almost have my TFSA maxed to R500k and I should be sitting back with my feet up watching it grow and grow! The thought of not investing in my TFSA for the next 10 years is extremely painful and seems to be counter-intuitive. But should I just suck it up and rather focus on clearing my car loan every month? Sabata You guys were slagging retirement annuities as if they are lepers!  Any unused contributions to an RA can be carried forward, which you mentioned somewhat unconvincingly.   This is not a 'small benefit', as you stated.  These unclaimed contributions can be carried forward all the way to retirement.  By then you probably won't be investing for retirement. You can use these to increase your tax-free lump sum you're allowed to withdraw, or to reduce the tax payable during retirement. Say you retire with R 50,000 per month. Tax payable would be R 12,582.25 per month.  Let's say you have enough unclaimed contributions banked. You could then claim your 27.5% of taxable income as an RA contribution. This would reduce your taxable income to R 36,250 even though you will no longer be making these contributions.  Your tax would be R 7,521.25, a saving of R 5,061 per month! That's worth a lot of bubbles, especially if you drink Four Cousins! About your diplomat who is based in Botswana, is she exempt from RSA tax because she is out of the country for more than 183 days, or is it because of her occupation?  I think it's the former. Rieneke I have a slightly different take on the issue. Use life cover as life cover when you need it, but change the purpose to inheritance when you no longer need it. You often take out life cover with a young family as you have to provide for them should something happen to you. As the kids then leave home or you no longer have dependants, the life cover is cancelled. Especially older folks who might no longer be able to afford the cover. In that case, offer it to your children as an investment. You have low premiums, having started young. Taking it out with the purpose of inheritance when you're older is too expensive and taking it out with this purpose when you're young is also expensive due to time and as your fortunes change, might also not be able to sustain it, in which case it was wasted. Ros I'm keen to move my emergency fund from a Money Market account to TymeBank. This seems like a no-brainer - If I understand their Ts & Cs correctly, once your money had been in a GoalSave account for 90 days, you get 10% interest for a 10-day notice period, up to a maximum of R100 000. I mentioned this to my Mom and she was very concerned that the bank could go under, a-la African Bank or VBS. What are your thoughts on this? Stealthy Wealth’s FIRE-people are organising get-togethers in Durban, Cape Town and Port Elizabeth. Find out more here.

When you’re just starting out on your investment journey, dividends seem like much ado about nothing. That’s because dividends get paid per share. If you don’t have many of those, dividend amounts can be laughably small. It’s hard to get excited about R25. However, long-time rich-ass shareholders will tell you dividends become way more fun the longer you invest. It’s a good idea to have your dividend strategy in place while you’re only getting a R25 twice a year. In this episode, we share some options for your dividends. Sheldon from Twitter When looking to invest in equity with the aim of receiving dividends. How much should the price action influence your decision? I.e. if price action is bearish/flat but the equity pays decent dividends, how does one ensure they don't lose money. Morore from The Fat Wallet Community What is the best strategy for reinvesting dividends within a TFSA? Do you reinvest in the ETF that paid out? Do you use the dividends to buy the cheapest ETF at the time within your portfolio? To keep the "right" balance, do you reinvest them in terms of your predetermined allocation strategy? Caroline I was using the strategies above, but then I decided to reinvest the dividends back into the ETFs that earned them to get a better idea of the ETFs overall performance. Win of the week: Gerard has a tip on avoiding the huge spreads on EasyEquities. On the Buy screen where you fill in the amount you want to buy, click on "What's been happening to STX40 in the market". This will show you a graph, and three prices - Last Price, Selling At, Buying At. You want to make sure your Last Price and Buying At price are close together. If Buying At is much more expensive than Last Price, then odds are the Market Maker is offline, and you should rather come back later and try again. EasyEquities is not a perfect system, but it is cheaper than most... just don't get burnt with this annoying thing. Tash I had an opportunity to work in Germany and have been here since 2012 on a temporary residence permit. I'm on the compulsory pension system and have an RA to squeeze the tax man back. I plan to be here for the long run, but home is where the heart is and I would want to spend lots of time in South Africa when I retire. I’ve opened a TFSA with EasyEquities in 2018, because we don't have such a wow savings initiative in Germany. Here the tax man does his best to grab deep into your wallet at every opportunity. That said I want to have a long-term savings plan in South Africa. German interest rates are laughable and the savings plans are even worse. I listened to Simon's recent lecture at the JSE and one of the first things he explained about the TFSA is that you have to be a South African resident. The term “South African resident” is coming under scrutiny with the new emigration laws. Will my TFSA be valid and inviolable if I remain a South African citizen, with a residential address ? I maxed out my 2018 contribution and plan to do the same till I hit the R500,000 limit. What implications are there for a TFSA if you spend most of your time outside South Africa and your main income is earned in Germany? The Bank’s Cash Cow I’ve gotten myself into a debt hole, and it’s completely my own fault. I'm trying to figure out which one I should pay off first, and if i should consider debt rescue. I thought I should pay off credit card, then motorcycle, then college, then car. Gerard I watched a lot of Simon's trading videos in 2016. I wasn't planning on trading, just thought I might learn some stuff. Using Simon's Lazy System, I back-tested some of the things I hold, and the signals there are pretty clear for when to sell. It probably would've have meant that 2018 would've been a positive year for my TFSA. In one or two of the videos Simon states that when he hits 100K in his TFSA, he will start trading in the Tax free account. I'm now interested in starting to trade my TFSA, but there is an alarm bell going off in my head: Why does Simon, who is an experienced trader, not trading his TFSA and recommending that it's probably better not to ? Sarah If you want to sell some of your shares, to the precise degree that you can get R40,000 of capital gains in a year, and no more: How do you know how many shares to sell? The online platforms will give you a form AFTER 28 Feb telling you how much capital gains you had on that year’s sales, but that is too late to inform your selling decision. In Cape Town, rental prices on average increase by 10% per year. House prices (excluding the Atlantic seaboard) increase at more like 6%. What does this mean for rental prices 10 or 20 years from now? Does it mean that renting will become inhibitive at some point? Do you think the market will balance itself? You mention that moving in a bit early and paying occupational rent before the transfer goes through. Can you explain a bit more why that would be a beneficial thing to do? My guess is that if you move in a month or so before the transfer goes through and you discover things like leaks, cockroaches, etc. it will be too late to change the terms of sale at that point anyway, due to the ‘voetstoots’ understanding.

The tax-free investment case is so appealing, it’s almost always a good idea to do your tax-free investing before anything else. Even fancy algorithms like this one finds that. Sadly, life happens to our money and a full tax-free allocation isn’t always possible. This week, we help a father of four figure out how to balance his educational priorities with his tax-free allocations. The good news is there’s no one right answer. You have many options, including pausing your tax-free contributions and taking it up again later, as Njabulo pointed out in this podcast. The bad news is sometimes two options have more or less the same benefits and shortcomings. In that case, it’s time for the soft sciences. I always talk about the importance of knowing what you want your money to do. Since Tinus chose to have four children, we can assume his family and children are his top priority. His finances should reflect that. Secondly, a great education will empower his children and offer them a greater likelihood of being financially secure themselves. Tax-free is important, but it’s not the be all and end all. Tinus I try to max the contributions for myself, my wife and my four kids every year, even if it means I need to sell from my existing portfolio to get the required cash. I hope that I’ll be able to teach my children enough about finances that they’ll handle their TFSAs with care once they turn 18. My initial idea was that they would pay for their own studies from the TFSA, but it would probably not be very smart to start withdrawing from the TFSA as the real opportunity of compound growth is just massive if they can keep the investment going. Projecting the value of a maximum annual contribution up to the R500,000 level and 8% annual return, the account at age of 18 would sit at around R1.2m. This R1.2m becomes R31m by the age of 60, which should allow them a comfortable retirement from the TFSA alone. Surely this “asset” in the child’s balance sheet would make getting a study loan much easier if required, especially if the TFSA is then moved to a provider that also give study loans (type of a soft security). How do you balance the contributions made to your child’s TFSA and provide for their studies? I’m leaning towards maxing out the TFSA and face the music to pay for studies when the time comes. I have always believed in choosing stocks with good momentum. For this reason, I initially chose the Satrix Momentum Unit Trust for two of my children’s TFSAs and I’ve been contributing to them all along with TFSAs at Satrix directly. I noticed that there is now a Satrix Momentum ETF, that seems to be exactly the same as the unit trust, just lower cost. ABSA NewFunds also have a momentum-based ETF. I am considering moving these two kids TFSAs over to EasyEquities for easier admin and future flexibility, but would like to stick to a momentum type fund for now. How do these options compare (the methodologies are not the same as is evident from the current holdings in each fund). For my two youngest children I chose the Sygnia 4th industrial fund (mainly because it sounded cool and I thought choosing technology for my 0 and two-year-old can’t be a bad idea). Their investments have done very well (just lucky timing to be honest). From your recent podcast I could pick up that you are not a massive fan of this fund (it invests in guns etc) and I know that there are performance fees as well. What would be other options in the technology space, just a simple Nasdaq ETF? Find our house view on tech ETFs here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.   Win of the week is Hannes for sharing a great car financing tip. For anyone interested in calculating car affordability (because some of us love cars and it’s also our hobby, not just a means of transport), Dave Ramsey has a cool rule stating that you can afford the car ONLY if you can tick off all three of the following: - You are able to pay a minimum of 20% deposit on the car. - You are able to finance it for a maximum of four years (48 months). - The monthly repayment (after 20% deposit and a max four-year term) is less than or equal to 10% of your gross monthly salary. I've done the math like this and it removes a lot of the thinking involved in buying a car, especially if you're a petrolhead. Use it / don't use it. :) Alistair I received my very first dividend from my Ashburton 1200 in my TFSA today (yay), but I was quite shocked to see I paid 26.76% tax. That seems like an extremely high price to pay for a tax free account - I was under the impression it would be much lower. I do know we are subject to foreign dividend tax, but considering this is how much tax one is paying... is it even efficient to put ETFs like the Ashburton 1200 in a TFSA? Surely (if your finances allowed it) it would be significantly better to fill your tax free with local ETFs and all foreign ones outside of it? Or is the advantage of not having to pay capital gains tax so great that it completely out-shadows the tax on dividends (and the growth that taxed amount would have had)? I'm curious what difference this tax would make over a period of 40 years, conservatively assuming the growth of the Ashburton 1200 was the same as that of the Satrix 40 (and assuming dividends are reinvested). Anne I have an offshore investment with Allan Gray. The money split between Orbis Sicav global balanced fund and Nedgroup Investments Core Global fund. I wanted to make an additional contribution, and had a relook at the fees. TER 1.08 and admin fee of 0.5%. It the investment worth the fees? Should I rather stick to ETF in EasyEquities? Ned inherited R2m. With such a large amount of money, the fear of investing is damn real. My biggest fear is that I find myself fiddling around with my money until I find myself in a “ah fuck” situation. As a result, I have over R1.9m just sitting in cash. I realise this is a bad thing and I plan to move it all to EasyEquities, minus the emergency fund. The real fear comes in with my discretionary investments. I’m 29 and a major career improvement is imminent if all goes well. This will bring with it a MASSIVE change in salary. The plan is to continue dumping all my excess salary into tax free and thereafter discretionary investments. I’m not too sure about an RA at this stage as this is something else I’ve been putting off. The only real investments I have outside of the tax free are about R18k in Ashburton 1200, top 40 and mid cap ETFs through FNB which I’ve been contributing to since about 2014/15. Investment fear is a very real, very scary thing. It just gets worse when there’s more money. I realise now how important it is to start early and when you don’t have so much money to stress over. I wish more people would realise that investing isn’t only for rich people. It’s the best thing you can do for yourself. John In SA we have the Top 40, so an equal weight equates to 2.5% per share. Our biggest share is Naspers which is about 22.5% of the index, so Naspers is 9 times bigger than the equal weight. (22.5 divided by 2.5) In the USA they have the S&P500 so an equal weight is 0.2% per share. The biggest share is Apple which is about 3.6% of the index, so Apple is 18 times bigger than the equal weight. On a relative basis Apple is twice as concentrated as compared to Naspers in our market. Now I am guessing but I believe most of the data to validate the equal weight model has come from the USA and not from SA. This could mean the the equal weight model is not effective in SA. When the expects say "over the long term shares have outperformed the other asset classes" I guess that they use the the overall index to validate their statement. I guess they are not referring to some bespoke index with smart beta components. To me any "smart or not so smart beta" is moving away from passive investing towards active investing even if the costs are lower. Passive investing should be no more complicated than reproducing the index. Is it cheaper for CoreShares to change the methodology of an ETF compared to launching a brand new ETF with a different methodology? My guess is that it is. I believe that CoreShares must stick with their model or front up and tell the market their model is broken. Martin I am a 26-year-old Mountain Guide living in Somerset West. I have a wife and a one 1.5 year old little girl dinosaur. My wife doesn’t work. I am busy studying and I hate traffic so I leave home at 04:30 most mornings to avoid traffic to Cape Town where I then have 1.5 hours to listen to your shows and do other studies while I wait for my clients to arrive. I finish work at 11:00 and can spend most of the rest of the day with my wife and daughter. Recently I started my own business and make a reasonable income during the summer months and then eat only putu in winter. I save a fair amount of my income, mostly because we live very basic with no debt. Anyway my questions are the following: I don’t plan on living in South Africa for very long, another four years, at most. What impact will this have on my TFSA? Will I be able to keep it growing and fill it while we travel? I don’t plan on emigrating anywhere, so my bank accounts should stay in SA for the moment. Would it be smart to start investing in a RA if I’m not going to be in SA. Can I transfer my RA across borders later in life?   I know you did that blog post on the global property ETF, but I was wondering if that is a good investment into my TFSA?  I thought I will only get tax exemption on local property like the satrix property ETF. Will I get dividends on those two global ETFs? What Property ETFs should I be looking at?

This is not the first time I’ve heard people buying insurance products to leave money to loved ones who aren’t financially dependent. In cases of premature death, it’s genius (aside from the dying). However, insurance companies are money printing machines because they understand how to harness probability. When you take out a life insurance policy, the insurance company works out how many years of contributions they’re likely to get from you before you hop off your mortal coil. They do with your money what you should be doing with it - they invest it. They understand money today is worth more than money tomorrow. If this didn’t work, the insurance industry would not exist. Lady Kabelo is thinking about life insurance. It would only be to give my folks, my sister and my partner a nice lump sum when I die, not because they depend on me financially. I just feel tired of black people dying poor, leaving relatives to scrounge to bury us. I want to leave them with money to bury me and then mourn with bubbles or, if they listen to me, put the lump sum in a retirement fund for future comfort. You could argue that I should invest that money and they will inherit that. But if I die next year, it wouldn't have grown to a considerable amount. Life insurance would pay out a nice amount between the four of them. Is my thought process as crazy as I think it sounds, or would this fall into the category of making your money align to your values? I love my people and if I can put some money aside now so they get some money when I die, why not? Win of the week: Cheryl from The Fat Wallet Community. Nedbank offers a Greenbacks shop card which allows you to draw your Greenback value in cash from any Nedbank ATM. You could then use this cash to buy your bubbles. I draw mine once a year in December and use this money towards Christmas. I try to get Christmas for free - using Dischem, PnPay points and greenbacks to pay for gifts and christmas lunch shopping. Not 100% achieved but getting closer every year. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Jacob I have a debt problem that I need to address, but my wife is not helping. She is also in debt and her business is not making enough money. How do I convince her to start a financial plan so that we can address our debt problem in order to be able to buy a house? Gerhard Just listened to Simon’s JSE direct around the changes in CSEW40. The question I was waiting for but that never came, is what will the impact be on the TER of the ETF if they make the change. It doesn’t help they smooth the ride, but in the end you lose because of fees. Bella I had been investing R500 per month with Discovery Retirement Optimiser Endowment policy for the past 10 years. It grew by 13% in that time. To say disappointed is an understatement, seeing that I’m just 10 years away from retirement age. I’ve decided to take the plunge and invest in ETFs with the proceeds from my unit trusts and endowment policy. I’ve recently transferred my RA to etfSA and also opened a tax-free account. I’m contributing  R1500 p.m towards Coreshares Global Dividend Aristocrat, Coreshares S&P 500, Satrix Emerging Market, Ashburton Global 1200. Should I open up a discretionary account (with EasyEquities perhaps)? I’m looking at offshore ETFs but unsure on what that spread of the funds should look like.  I also have an investment property but my tenant has lost his job and is paying a lot less than the amount I’m asking for, and I’m not sure for how long he will even be able to keep this up for. Should I just consider selling and investing these proceeds as well? Martinus My 14-year old car said its final goodbye and had to get a new car sooner than I expected. I only had 50% of the cash on hand to purchase the new car, then I had to to either take out a loan for the reminder, or take money out of my TFSA or a paid up RA. I figured the wiser choice was the loan since drawing from the capital of a TFSA so early hamstrings your future growth. Considering a high interest car loan, would it be wiser over the long term (20+ years) to put that R2750 pm that would go to a TFSA to paying down the loan and then miss out on the TFSA allotment for a year? My math shows that if I pay an additional R2500 a month on my car loan I'd pay it off 21 months early, saving me R24150 in interest and R1449 in fees. I'm leaning towards paying off the loan, because it’s the first time in my life I have debt and I really don't like it. Boitomelo the Diplomat I am looking at increasing my RA contribution. I started with a low amount 2 years ago. I’ve read that 27.5% is the maximum tax benefit I can get towards my annual RA contribution. Is this 27.5% of my contributions to the RA, or of my taxable income? If it’s based on my taxable income, how does a person in my position determine what my maximum RA contribution would be since I do not pay income tax? Secondly, given that my contracts will expire in 6.5 years and that I’ll be without formal employment, is increasing an RA a good idea given that I’ll only access it at 55? It leaves me with an 11-year access gap. I will be looking for a job and other alternative sources of creating income, one of which will be to provide editing and French translation services which I can’t currently do. I know that freelancing is not easy and that one should be sufficiently financially prepared for it. Should I rather keep the RA contribution as is with a 5% annual escalation, and look into alternative investments options for purposes of creating an income for that 11-year gap at the end of my official ‘formal’ working life? If so, what investment vehicles would you recommend? Tristan I think you said you use your tax refund for tax-free deposit. What about adding it back to your RA each year? Wouldn't that have a cumulative refund benefit? Going into the tax free account means no more instant rewards, you have to wait a decade. My half-thought out idea is to try hit 27.5% each year, e.g. dump in and top-up any bonuses. My thinking is that it'll be easier in future years because of maxing out my refunds. The end result should be the same as if my bonus was deposited directly into my RA rather then losing much to tax.

Survivors of a battle with the Debt Monster already got a nasty introduction to the world of fees. A combination of account fees and interest on debt will leave you poorer every time. This baptism of fire may have been unpleasant, but it’s not a lesson you’re soon to forget. Those most vulnerable to the wealth-destroying effect of fees are those new to the financial world. When you don’t have much money and a brush with debt hasn’t yet alerted you to the grimy side of the financial system, a 1% fee on a small transaction is unlikely to set off alarm bells. On a R300 investment, a 1% is only R3. What could you possibly buy with that? Beware, dear lambs, this is how they get you. In this week’s episode of The Fat Wallet Show, we try to show you why you should care about fees very much. We run the gamut - from expensive, ego-stroking bank accounts to total investment costs in ETF products. You might be disappointed to find that we can’t offer cut and dry solutions to fees. A lack of consistency in reporting among financial institutions makes it almost impossible to do a side-by-side comparison of fees. Instead, we try to steer you in the general direction of clarity. We reference this document. Kelly I’ve just received my first salary and am extremely eager to make my first investments into TFSA ETFs, however the more I started thinking about life expenses the more I realised that there are a couple of other financial planning decisions that I still need to make. I would like your advice relating to the following matters: Which bank account for day to day activities? Investec approached us first year trainees with the young professionals’ private banking account. It has a monthly fee of R295 with no additional charges. It gives you reward points and access to airport lounges and all sorts of shiny bells and whistles. In what ratio would you advise me to invest my savings into an emergency fund and TSFA ETFs? Also, in which bank account would you advise me to keep this emergency fund? I am aware of the extreme importance of saving for retirement, and am unsure of whether I should be contributing to a pension fund as well as TFSA ETFs or if focusing only on TFSA ETFs for now will be sufficient.  What is your opinion on this? As I am young, I would like to focus on high risk, high return (hopefully), equity ETFS. I have considered the Satrix Top 40, as it is a known favourite and I can “catch up” on the time I have lost due to the sideways market with the hope of a more favourable market in the near future. I have also considered the Ashburton Global 1200 and Satrix MSCI World ETFs. The new ABSA low volatility ETFs also caught my attention but I am concerned that the risk on these ETFs are too low? Will you please advise? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Flipi Any change in your opinions about 10x as a good RA choice? Would Stanlib's new TFSA be as good as any other? I have some investments with them and it would be convenient to simply move the money across in the next few days. Other Gerhard I opened a TFSA account for each of my daughters and did my first transfer. I did the instruction on their website and the trade was done 09:15 in the morning. I bought the Satrix MSCI World ETF and the trade price was R39.16 per share. From another trading system I use on a personal level I couldn't see this price trade anytime during the day. The highest price traded was R38.65 for the day, which means that over and above the normal small trading fee I paid to EasyEquities I also paid R0.51 or 1.32% of the share price. I invested R10,000 and the total transaction cost according to their break down was R37.40. But I got charged R39.16 per share instead of R38.65 (assuming the highest price for the day) and therefore I paid another R130.24 in "transaction charges". The total transaction charges therefore R167.64. If I did the same size transaction on Investec's trading platform I would have paid R151.72 in charges. Did I do something wrong here? Always Abundant In 2002 we bought into an Executive Redemption bond offered by a UK-based Life Assurance Co via the International arm of a large South African financial institution. This was sold to us by our financial advisor (at the time) as a way to maintain our offshore diversification. In 2012 we applied for a full withdrawal in order to close the policy. We were able to redeem everything other than 1 of the funds (a UK-based Property fund) which had gone bust. We accepted our losses, which were considerable, and forgot all about it. Recently we received a letter from the International Arm of the local company informing us that the annual fees on the policy had gone up. I obtained online access to the account and noticed that the Property fund in question had eventually liquidated in 2018. The small amount that was generated from the liquidation had gone towards paying these fixed annual fees. But since the fees were charged continually, there is now in a significant amount owing (1.5K USD). The policy is worth nothing but the fees continue to accumulate even though we had submitted the withdrawal form years ago. No one has informed us about the fees owing. What are our rights in this case? Surely there must be some kind of Consumer Protection laws to protect us from being liable for these fees? What should be our course of action, if any? Win of the week: Phasane 2018/2019 Tax Year has been, surprisingly, a good year for me. I finished paying off my car, not planning to buy any car until 2023. The only debt remaining is the bond. I discovered the Fat Wallet Podcast and the Just One Lap community in general. I listened to all Fat Wallet episodes (the weekly wait is now killing me). I moved my RA from Liberty to 10X, a process that started late in October 2018 and about to be wrapped up as I write this mail (waiting for some Trustees what what signature but 10X have kept me informed every step of the way). By the way, I started with my RA contributions to 10X in November and contributed to both Liberty and 10X that month. Although I wanted to do more, I contributed 16 600 ZAR to my TFSA (up from the R4 620 that I contributed the previous Tax Year). I am comforted by the fact that I have built my emergency fund to levels I am comfortable, from 0 - 4 months worth of living expenses (in Simon's own words, "that makes me sleep well at night"). 2019/2020 goals Contribute the max amount to the TFSA, this is important considering TIME in the market. Add one more month of living expenses to the emergency fund. My normal RA contributions will continue, this is a top up to the work pension fund. Everything else remaining, including change from the F##k it monthly budget, goes to the Bond. I am planning to settle the Bond in 2022 (9 years from the registration date)

Tax rebates, bonuses and inheritances really throw us for a loop. Most of us have every cent of our salary allocated to some higher purpose, but the moment we find ourselves with a big hunk of cash, we get in our own heads. We all know what we should do with the money, except because this is magical unicorn money we don’t. We get questions about lump sum investments so often that we decided it’s time to devote an entire episode to it. In short: the math says invest it all at once as soon as possible. If your emotions tell you to do otherwise, however, you should probably pay attention to them first. We talk about our friend Hendrik’s blog tigersonagoldenleash.co.za in this episode. Andrew I just received 10 months worth of salary as a bonus. I currently have money invested in my portfolio. I’m trying to decide how to go about investing my bonus. Should I chuck the entire amount in now? (Keep in mind my TFSA is maxed out for 2018, and I plan on investing R33 000 on 1 March) or should I average it out over a few months? Also keep in mind that I have no debt. Win of the week: Nadia I listened to the show about my question and I just want to say thanks a million! You guys helped a lot with my decision and I have decided not to get involved with Forex trading. I first need to focus on my TFSA and make sure I understand all the ETFs I have chosen to invest in. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. David Love the show. I have a question for you relating to picking a Global ETF. I have an Easy Equities Account and have access to investing in ETFs listed on the NYSE. I was looking at the Vanguard Total World Stock ETF on the USD account and comparing it to the Ashburton 1200 on the ZAR account. The TER is significantly cheaper for the Vanguard ETF – 0.1% vs. 0.45%. The weighting of the constituents of each ETF are quite similar although the Vanguard has over 8,000 stocks where the Ashburton has over 1,200 stocks which makes it attractive to have more exposure globally. My feeling is that in the long run, it’s probably worth moving all my investment offshore (into USD) into the Vanguard ETF if I follow the concept of one ETF to rule them all because of the low cost of running the ETF. What risks other than a strengthen Rand or having a Will in place in the USA to transfer the funds in the event of death would you foresee? How would the tax on dividends / Capital Gains be affected? Hannes I recently received a severance package. This money is considered "tax free income" because of a SARS tax directive, which seems to be common with severance packages. It’s been lying in a savings account, and I'd like to know what you think is the most tax-efficient way to put that money to work. I don't have any investments and no emergency fund. The savings referred to above is currently my emergency fund. The only debt I have is car debt, a monthly expense of R2400. No bond either. The amount is just enough to max out my TFSA for the 2018 tax year ending in February as well as settle my car debt completely, but then I have no more savings / emergency fund left at all. However I can quickly build up an emergency fund, or to rather contribute aggressively to my car debt with a monthly contribution if I decide to not settle. It seems crazy dropping a huge amount on my car debt to settle it considering the small monthly repayment, but it's also something I want to get rid of ASAP as it allows for more savings, less essential expenses and more cashflow when I'm rid of the repayment. The risk of course is that I will be stuck without savings / emergency fund for a few months until I can build it up again. I do have a credit card. Not quite sure what the best course of action is. Should I rather leave the debt as is and invest with this "tax free income"? Minnaar I would like to understand how a property-based ETF actually distributes the income that it gets from rentals? How does the ETF distribute this to holders of the product? Is it in the form of a dividend? Can you explain like I am 5 why some people think investing in REIT properties are a good idea in a TFSA? Dave I discovered that you can buy REITSs via unit trusts, exchange traded funds or standalones directly from your stockbroker or financial advisor or a site like EasyEquities.  I can see a sort of hierarchy here but just don’t get it. Are earnings from REITs rental income or dividends? I can appreciate that if held in a property owning company the earnings would be in divs.  But if held by a unit trust how would rental earnings be paid? Phil I love this podcast and this a wonderful public service you're offering to all South Africa. Even though I'm in the UK and a lot of the advice can't be directly applied the thinking still applies and continues to push my thinking. I want to share stuff that changed my financial life which was given a wake-up call after I took a massive hit on RA when I financially emigrated and was confronted with just how far behind I was. Painful stuff, and wish I had a podcast like yours to point me in the right direction at the time. I wanted to share some references I use in the UK that I think would be very useful for reference in your offering to the public as well: - The go-to reddit (I know, don't take advice from unknown muppets, but it's good) for me is  /r/ukpersonalfinance/. In particular I love the UK Personal Finance Flowchart and it's interactive version (which is opensource on github btw...). This flowchart is awesome for visualising where you are on the maturity scale. Super helped my wife with her "O, fok!" moment. - The second source I love is  moneysavingexpert.com. It's a bit of a marketing-hidden-like-advice site, but it's got some gold-level guides on finance basics for people who were never shown how the basics work. - The more extreme sites are FIRE the based, but drastically shifted my thinking on what retirement means, in particular @firevlondon on twitter is an interesting feed I follow with monevator.com to frame my thinking on passive investment.   Melissa I already have some investments with Easy Equities, so just decided to move some funds around so that I can put the full R33 000 in for the 2018 tax year. I am a bit confused about the limit of R33 000 and the fees involved. When I bought my TFSA ETFs the admin/brokerage fees were deducted and my investment amount only shows as R32 877 (R123 admin fee). I know it is a small difference, but I would like to utilise the full R33 000 that I am allowed for the year. Easy equities however does not allow me to invest any more funds into this account. Do you have any clarity whether this R33k limit includes the administration fees? André I heard you say you had to re-open your FNB account because you have and FNB flexi bond. Not sure what the exact reason is but thought I will share this. You do not need an FNB account to withdraw from your FNB bond. I also have an FNB flexi bond and I nominated an account at a different institution and I have withdrawn from the bond directly into that account. Fanie I’m nearly 70 and earn the biggest part of my income from the following ETFs: PREFTX, PTXTEN and STPROP. You mentioned that because PREFTX consist of many banking pref shares there is a risk should we get downgraded to junk status by all the  rating agencies. I understand that a junk grading will affect our total banking system negatively in that interest rates will go up. What do you think will be the effect of a downgrade on my income from PREFTX. Chris What stops me from opening a tax free savings account with a overseas fund managers like JP Morgan, Investco, Black Rock etc? What are the tax implications for me as a non-resident in an international based etf tfsa? What are the risks and is it something worth investigating? Conette I am 55 and work for a big bank group, with lots of good benefits. My emergency funds sorted out and bond debt almost covered. I want to open a Tax Free Savings (ETFs) account with Easy Equities . I please need your assistance in my ETF selection? I intend not to 'touch' the investment in the next 15 to 20 years. Jo I am in the process of shifting my RA around and moving away from unit trusts and into ETFs. I started investing in an RA as soon as I started working, but unfortunately I thought they were very one size fits all and so it's all sitting in unit trusts with fees of around 3.8%. While digging more into finance I came across a TED talk by a doctor in Australia who pointed out that most people's retirement funds are invested in British American Tobacco (BAT). So I looked up the current funds I am invested in and my current unit trust, my work provident fund and the new ETF I was looking into for my RA all invest more than 1% into BAT. This is pretty disappointing to me. I can guarantee that a large percentage of the general populace wouldn't invest in tobacco if they had the option. And yet they are unwittingly helping fund the industry. I have tried to do some googling for green funds in SA but haven't really come across anything. I realize that I could just build my own RA by picking shares but would much rather choose an ETF. I would also not like to pay exorbitant fees just to avoid investing in unethical companies. Maybe I will have to suck it up and offset my investment in BAT with charitable donations to cancer research. ;) Jon-Luke Is it possible to transfer ETFs that you already own into your Tax Free Savings without having to sell them first? Rudolph wants to know if yield rise or fall with quantitative easing.

The longer we do this, the more evidence we find in favour of doing tax-free investments before any other kind of investing. To do that, you need to understand why paying no tax makes a huge difference to how much money you end up with. You also need to understand that there’s a difference between tax-free accounts and ordinary investment accounts. Lastly, you need to know why it’s important to buy an investment product within a tax-free investment account. This week’s episode of The Fat Wallet Show is audio from our annual tax-free investment presentation. In it, Simon Brown explains everything you need to know about tax-free investments and shares some ideas on choosing the right type of product. Find our conversation on tax-free investing here.

This community is all about not leaving money on the table. Buying and selling shares at the right time can have a long-term impact on the performance of your portfolio. This week we discuss two questions relating to timing buying and selling shares and ETFs. Win of the week: Mukhtaar, for solving the tax on REIT issue. In the latest podcast there was a question whether listed property distributions are treated as interest income or taxed as normal income. I can confirm that it is taxed as normal income and the interest exemption does not apply. You can see that an exemption only applied to interest income. The REIT income was just added to my other income without exemption. There is no deduction for this. For this reason, I try to keep all my listed property exposure in a TFIA! Clean swearing bleeped out show is below. https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_135_20190218_bleeped.mp3 Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Warren responded to Nadia’s question about learning how to trade Forex from last week: There’s a great site called Babypips where she can learn everything. Also there’s a company called Oanda based in the UK which I’ve been trading on for 6 years and all is legit. No minimums or admin fees. Paul also had some feedback. Best thing I heard this week, "if you want to know if forex trading is for you, withdraw R2000 from an ATM, and burn it. If you can't, then you can't do forex trading either" - courtesy of Simon Pateman Brown. I wish I heard this phrase a few years ago, when I was also sold the yacht and bubbles lie and 'burned' a couple of thousands trying my hand at forex trading. Stephen I'm toying with the idea of moving all of my ETFs across both my normal and tax-free portfolios into a Bond ETF (Newfunds Govi ETF). The idea would be to leave my investment in a more stable environment and then move them back into my original portfolio when the market is low. My current portfolio across both my normal and tax-free accounts holds: Ashburton Global 1200 (20% of normal) Coreshares Global Divtrax (20% of normal) Satrix Nasdaq 100 (in both - 20% of normal and 33% of tax-free) Satrix MSCI Emerging Markets (33% of tax-free) Satrix S&P 500 (33% of tax-free) On my normal accounts, I haven't made enough to warrant Capital Gains - I moved from single shares to ETFs in my normal account after Steinhoff and also not realising I should have sold Dis-Chem in the high 30's! It was then that I realised that I was like a gambler - talking about the gains but not about the losses! At the moment the only single shares I have are Naspers and Steinhoff (only because I can't bare to accept defeat along with my own single concentration stupidity). Is this an advisable approach? I want to be fluid for when the recession opportunities arise. Or, should I be looking elsewhere for a stable return during market downturns? Morné I decided to convert my portfolio from single company shares to ETFs, mostly to avoid risks and not to have to follow shares religiously for opportunities. My approach is to slowly sell my single company shares as they move into the green or break even and then use the money to buy ETFs. This is only for my SA account since I already decided to focus on ETFs before I opened my US EE account. I was delighted to see that the ETFs I thus far chose are also rated highly in your podcasts. As I am selling my single stocks, the cash I have available for ETFs is growing. However, the cash in both my SA and US accounts are earning basically zero interest. This irritates me greatly. My dilemma now is when to buy an ETF? Do I wait for a price drop or do I buy at any price when I find an ETF that I like, since I am investing for the long term? The same goes for the ETFs that I already own. Should I wait for price drops or keep on adding to them from month to month regardless of the price? Gerard is also taking control of his finances in a big way. Four years ago we had a lot of credit card debt, month to month living, always "broke". I discovered MMM and FIRE, took control of my expenses and now have multiple savings and investment accounts and no more debt. It took about tw years to get rid of the most debt (house almost done) - and since then just building investment accounts. Last year I decided to start adding extra monies to the EasyEquities taxable account, and bought about 40 shares to simulate my own index, based on Coreshares TOP50. One morning I logged into EE and decided this is just too much admin, for such little long term reward - just pay the TER, buy ETFs and stop stressing about this (Re-balancing and buying 40 shares every month gets annoying quickly) . I then sold everything not really understanding the tax consequences. Now I'm sitting with my first ever TAX event - +-R300 in realised gains, not big money. Would I be able to put this through as a CGT, as my intent is for this account it to be long term holdings - or is it just better to declare the small profit I made as income?   I can't yet prove it as long term, other than showing SARS my retirement planning spreadsheet  - so on such a small amount of profit, I just think I'll do it as income declaration. My one major worry is, is that if I declare this as income this year will SARS always see this account as a trading account, or is it a per tax event thing ? Our Tax Elf De Wet has decided to give up a cushy corporate to take his Tax Elving more seriously. He’s also significantly downscaling his life. He has some big questions about what to do with his money now that he’s in the wild. He sent a monster email so we’ll be dealing with each topic separately over the next few weeks. I’m looking to save a percentage of all income per month (both me and my wife) for tax purposes. Anywhere between 25% and 31%. What is the best use of this money during the period I have access to it? This normally sat in my bond / home loan. André, our new minimalist contributor, had a great insight. The lower your savings rate is, the higher rate of return you'll need to get. The lower your savings rate is, the more important time horizon becomes. Wayne has some legacy active funds and wants to know what to do. I am invested in The Allan Gray Orbis Global Equity Feeder A with a TER of 2.16% ( I just threw up in my mouth). I have a large amount going to this monthly. It was a great idea before ETFs came along that could give me access to world stocks. I am also now invested in Sygnia MSCI world in my TFSA with a TER of .68%. Should I be looking to disinvest or stop the monthly payments in Orbis ( they had a shocking year 2018) and put the funds into my EE account and invest in the Satrix or Sygnia world ETFs? I am struggling to see the difference in investment strategy between the two options, The etf option definitely has a lower TER, and I do not know who to call for advice. Mary is 42 and discovered the FIRE idea last year. I started saving for my emergency fund. I was a bit uncertain whether that expense amount should cover the medical aid as well. If so, I should rethink mine because as of now I have about four months of expenses saved up. She holds: Satrix 40 The All bond index The S&P 500 and The property ETF My tax-free is in a bank account in cash up to now. I also have the Allan Gray equity unit trust. I was thinking of starting a tax free portfolio in ETFs and did not want a lot of extra individual ETFs. Is it better to put 100 % of the tax free allowance in the high equity balanced index fund from Satrix or to spread it around in different ones? We got a mail for Jorge! Can you please advise what is the best bond ETF (to reduce risk) to buy in a TFIA which will give the best return. What % of the TFIA should it be as I mainly have equity ETFs in the account at the moment? Karabo has investment properties for her kids. I have three properties that I bought in my early 20s as investments for my yet to be born children (I am 30yrs old this year). I bought the properties in my name but would like to move them to a trust. Is it possible to do so? Would it be wise to do so or should I rather register a company that will own the properties on behalf of my children? I still owe the bank on the properties. Always Abundant is starting to understand the impact of the exchange rate on their investments. 50% of my portfolio is invested in the Vanguard World ETF (VT) in USD. The other 50% is Local: Top 40 ETF (Satrix and Sygnia), Satrix indi, Sygnia local property index fund, some local unit trust funds (may include max 25% offshore from time to time), some individual SA shares. Recently, I realised that the exchange rate plays a bigger role than performance when it comes to the profitability of my offshore investments when converted back to ZAR. This is a scary thought as I have no plans to emigrate and have always needed to sell at an inopportune time (wrt the forex rate) So, I thought to find a suitable local ETF to counteract that risk. Unfortunately, it seems to me that, apart from mid-caps and local property perhaps, everything is impacted by the ZAR-USD exchange rate. Is this a logical concern or am I overlooking something at a time when everyone around me is investing offshore? If my concern is logical, what is a good investment for South Africans who do not wish to be exposed to currency risk? I would still like an equity-related return and low cost.

I’m often curious about the finances of people who want to take on some alternative way of making money in financial markets - be it trading or Bitcoin. More often than not, people who are convinced that a single asset or event will solve all their problems don’t yet have solid a financial foundation. Similarly, people who do have a strong handle on their finances tend to favour simplicity, as this interview with Patrick McKay illustrates. Just One Lap had its origins as a trading education platform. Even so, trading is not something we encourage most people to do. For one, the amount of money required to start a robust trading account can easily fund a real world small business. Secondly, all the psychological factors that make investing hard are present in trading, but on a daily basis under huge time constraints. Unless you have the time and money to devote your life to it, trading is probably not for you. A question about a Forex training platform from Nadia inspired a discussion about the realities of trading that most people don’t think about. We mention our Trading Boot Camp series, as well as this series of CFD Conversations. Clean swearing bleeped out show is below. https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_134_20190211_bleeped.mp3 Win of the week is Christiaan I am 17 years old and in Matric now. After listening to so many of your podcasts I have this vision of being financially independent before I am 35. I am in the process of opening a Tax free saving account at EasyEquities and the plan is to invest my money from the get go. I will have a good head start when I get to varsity next year as I will receive free tuition at UP and my parents own a house close to the Uni where I will be able to stay. I do odd jobs here and there and save all my money and receive a small amount of money from my parents as pocket money that I have to sustain myself, buy my own food at school and pay for extra murals. This amount is just under the amount I need to pay tax so I am good there. I worked out that it will take me just a little bit more than 15 years to max out my tax-free savings account if I pay the full R33,000 a year (will be maxed out when I am 33). My problem is, if I do this there will by no more money left for a RA. Is it necessary to open a RA now as I am not even 20 yet and don’t earn a huge amount of money? Or wait until I maxed out my TFSA and then move the budgeted money I used to put there to my RA? Nadia I want to please get your opinion on a company called XXX. I've been trying to get proper feedback on them for weeks now but I can't seem to get an answer. It's a company that trains people to trade Forex. You pay to access a number of training videos, live sessions, tools they use to trade etc. So it really sounds awesome and apparently the education side of it is really great. But then I find the google reviews that say that it is all a scam and that they just take your money... which is why I am confused. There are some people who say that it is a great product because they really go in depth to show you how trading is done etc. As far as I know, you pay a monthly subscription fee to be able to use the education platform and then also the tools and programs they use to trade. You can cancel at any time and they money you make from your trades belongs to you. The only way this company makes money is from the monthly subscription you pay. It's pretty expensive so i'm not sure if I should just go for it and see what happens or if I should forget about it. So yes... i'm pretty confused. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Our Tax Elf De Wet has decided to give up a cushy corporate to take his Tax Elving more seriously. I need a strong emergency fund (something which was not as important with my current job). I’m looking at having 6 to 12 months expenses saved up over time. Where do I invest this money? I’m looking to save half myself and keep half in my wife’s, as this makes issues on death easier (joint accounts get frozen and the like). This also potentially spreads the interest exemption. The plan is to save a percentage of all income on a monthly basis till I reach the threshold / top up as extra income comes in. Emergency Fund is the main goal in the first year working for myself. I will use some of Sam’s knowledge and save for various items in this fund – car related expenses, emergencies, and other non-fun stuff. We will have a separate fun fund (this will be managed by my wife as she is in charge of fun and I look after life). Like me, Seilatsatsi is trying to find the perfect balance between RA and bond contributions. They say: Finding your podcast has so far been the best find of 2019 following the best find of 2018 which was Stealthy's site when I started my FIRE movement. I don't have a company pension fund. I currently manage my own with an RA, a TFSA and an EE account. I pay more than double on my bond. One of your listeners noted that one can submit their RA contribution to HR and have the rebate on a monthly basis compared to once annually. With this option, I am wondering if I should work it out as below: Stop the extra bond contribution and redirect that to the RA. If the monthly rebate works through my employer, I can put the extra monthly tax break back into the bond. I am very disciplined and this would actually be done. Another Engineer has some questions regarding tax on property and RA emigration. You mentioned that one can transfer an RA offshore, to another type of pension, and I understood that you meant that you wouldn't have to pay the tax. I've looked it up, and one cannot 'transfer' an RA offshore before retirement; you can have it paid out in cash, take the tax knock, and then take it offshore, IF you have financially emigrated. However, if you have a work pension fund, it seems you can take the cash (minus tax) when you resign, without having to have financially emigrated. I assume after 55, if you wanted to cash it out, you also have to turn it to cash, take the tax knock (which will be less than before 55), and then take it out. You mentioned that listed property distributions are taxed as interest. I think it's actually taxed straight as income, not interest? Unless I'm not understanding what you meant. The property distributions are not part of your interest exemption etc, I think it gets added straight to your "gross income", with your salary etc. Tax Emigration - Part One Edward is currently living in Australia but planning to move back home soon. I currently live in Australia but will likely have to return to South Africa a few years from now to look after my parents. I want to start contributing to a tax free savings account but I don't have a South African address which is required for FICA. Is there any way to open a tax free savings account while living in another country? Could I maybe use my parents' address? Would EasyEquities be an option for my TFSA? Phemelo could relate to last week’s episode on starting over. The podcast "starting over" summarises what I have been trying to do from end of July to now. I thought I had a formula, the grand idea that was going to save me, namely to Increase my income by a huge margin. A prospective employer entertained my suggested offer of a huge increase in my annually CTC. In Dec 2018 I was flown to Cape Town for final interview. The interview went well, but then the phone call came on 18:38 Friday evening, telling me they “will not be advancing the offer". I was distraught and shattered. All my plans went out the window. This one job was supposed to take me to the promised land and now "I am starting over", but I remain positive. Darryn wants to know what account he should use to save for fun stuff. I struggle reading financial products at the best of times due to time and also pure laziness, my questions are: Is there a specific a account or company you use yourself for this? Can I just use a savings account on the 22/7 app? Are they good? Is there a specific type of account to use? If saving for a new car and a holiday to Cuba would you put those in separate accounts? Steve is planning to do some tax harvesting. I heard about the EasyEquities inter-account transfers function between normal accounts and TFSA, so I sold enough ETFs from my other account to transfer to TFSA. I know ETFs are not sold and converted instantly -  I figured T+2 or T+3. When the money didn’t appear, I logged a ticket. I got a reply that the money would only be cleared on 13 Feb, which would be 8 business days later. Is this normal and if so, why so long? I am building my kids’ education funds in ETFs,  but am mindful of the CGT I will need to pay when cashing in.   Considering there is a 40k per year allowance, I was planning on selling and rebasing the funds at times when the CGT liability would be close to the 40k. I am buying 6 ETFs per month for next 15 to 20 years. How would you suggest managing the CGT liability? I could keep a spreadsheet of each account and each ETF purchase ( x 3 per child per month etc – for 15 years ) -  or is there an easier way? For instance are the providers required to keep the CGT calculation updated for me? Always Abundant isn’t so sure about the investment potential of property. I've compared the listed property index (J253  - since STXPRO does not go as far back) against the Satrix 40 over a 10 year period and found that property has performed half as well as equities. If this is generally the case in the long term, are there any merits to investing in a listed property ETF other than for diversification? The reason i am considering this is the added tax advantage for listed property in a TFSA. Hannes wants to know why your friend who sold everything in 2008 missed out. In episode 124 Simon talks about an acquaintance who sold everything in 2008, and asked to re-buy a few months ago. In that episode he states that "she missed everything", but I'm confused about this. I understand there was a massive market swing over the past 11 years, but long term investing dictates that you should hold, so why would she have missed everything if she would have just held through the swing to end up where the market was X years ago due to recent poor performance? Am I missing something here? Join our Fat Wallet Community.

For us money nerds, February is not the month of love, but the Hallowed Month of Tax. What’s the best kind of tax, you wonder? The kind you don’t ever have to pay! In this bonus podcast, Wild and Tax-Free, we get some friends together to chat all things tax-free savings. Joining us in is Njabulo Nsibande, FIRE-man Patrick McKay, aspiring FIRE-man Stealthy Wealth and EasyEquities superstar Carly Barnes. Remember to join us for our annual tax-free presentation at the JSE here.

Since talking about money is my day job, it’s easy to assume that I have no financial anxieties. That’s not the case. Money speaks to such a primal part of our humanity. I think everyone is susceptible to a degree of fear around their ability to meet the basic needs of themselves and their families. Making big lifestyle changes always results in massive financial anxiety for me. Buying a house  - a lifestyle decision whose financial implications I always distrusted - had me on tenterhooks. Instead of throwing myself into the planning, I resorted to a small degree of avoidance during the stressful process of finalising the sale. When I was finally ready to look the beast in the eye, I was greatly relieved. Forgetting my previous budget and starting from scratch was a way of reminding myself that I was actually in control of the process. I could make decisions to ensure my financial comfort because of good decisions that I made in the past. Good for me! This episode is for those of you who recently underwent a big change that requires a new approach to your money. We talk about my own process and offer some ways for you to start over. Remember to let us know how it goes! P.S. Don’t forget to join us for our Power Hour on 21 February at the JSE in Johannesburg. Register here. Join our Fat Wallet community page here. Win of the week: Peter, who simply wrote: Love your show and don't miss any new posting. Also Ben, for sending a question and then figuring out the answer himself. Clean swearing bleeped out show is below. https://justonelap.com/wp-content/uploads/2019/02/TheFatWalletShow_133_20190204_bleeped.mp3 Lady Kabelo Can you explain the relationship between world/US ETFs and the rand in village idiot terms. If I buy the S&P500 and the rand weakens against the dollar, is this good for my investment? And vice versa. I assume the same would apply to the world, global property and emerging market etfs. Is this correct? From an investment perspective, when the rand weakens should I be happy or sad? Because the S&P does its own thing and the rand does its own thing, I can never tell what's going on and why. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Kgosi discovered he was being overcharged for his dread and disability cover. His cover came to almost R3,000 and he’s only 26. That’s too much. Brendan wanted to add to last week’s episode on getting your tax in order for the new year. There is also a donation to an s18A public benefit organisation (PBO) that listeners can consider making. Up to 10% of our taxable income is deductible for this purpose. SARS is effectively paying a portion (by reducing our taxable income and therefore the tax we will pay) of a donation we make to a cause that we care about. There is a list of S18A PBO’s on the SARS website. Hannes, who just turned 30, is feeling some anxiety over his finances. I quit my shitty-paying, toxic software job in 2015, dipped my hand into business which never took off, after which I settled on international stock trading in the US markets for two years. The reason for US markets? I felt like SA was lacking liquid, affordable stocks for active day trading, and at R50 per trade at Standard Bank at the time I thought I might as well try my hand across the pond. Before this endeavour I've never dealt with the financial markets, local or international, and I had no knowledge, so I put on my big boy pants and started learning and obsessing about the financial industry. I vastly underestimated the time and capital required to learn to be a consistently successful trader (especially in USD), and my money was slowly drained by education, "school fees", software costs, exchange fees and broker commissions over the two-year period. I retired from the US markets in late 2017 and subsequently cut all ties to the financial world and returned to my original career path and "stability". At the ripe age of almost-31 I'm in a financial position where I can start building a life, and start realizing my plan for long-term investing. As it stands now, I have no investments, no property, a small bit of manageable debt (relatively cheap car which is also my hobby), no RA, no TFSA, and R100k tax-free (tax directive) money in my savings account earning around 6%. On top of that, I realized that I will need to get on top of my parents finances as well. They have always earned a decent income due to my father's business, but they have neglected their retirement completely. They are both in their late 60's. My two older siblings do not work and rely on their husbands to support their families, so ultimately I will be the only one actively contributing to my parents retirement, all while trying to create a life for me and my hopefully-soon-to-be-wife. I've decided to sketch out a financial plan for myself, my girlfriend and my parents in an attempt to remove them from the grasp of their financial advisor in order to set a clear cut path to some sort of retirement. I've drafted a plan below, which I think makes financial sense and should start me off with a well balanced portfolio: Max out TFSA with R33k on 1 March 2019. (Leaving me with R66k left in regular savings). Keep R33k of the remaining R66k as the starting point to my emergency fund (which I'd like to grow to about R150k). Use the remaining R33k to invest immediately in ETFs / other "good" financial instruments (I could really use your input on what is considered great first investment financial instruments). Open an RA with 10X (need more research on this) and start contributing to that around R3k per month, unfortunately no contribution from my employer. Don't buy a house. Don't panic. Be patient. Reduce living costs even more (lean already). Try not to panic because I want to get married soon, have a honeymoon and travel. Did I mention don't panic? It's fine. Because my girlfriend (29) and I (30) are only starting our investment journeys this year, do you have any strategic paths you would recommend as the most efficient way to start ? is not happy about the Ashburton 1200’s TER. Chris Rheeder wrote in about it too I have heard you and Simon mention the Ashburton  Global 1200 several times as a solid, diversified, reasonably priced rand hedge ETF. However, while doing research recently I discovered that the TER for the aforementioned fund is now 1.33 percent! (See the latest MDD: https://www.ashburtoninvestments.com/docs/sa/ashburton-exchanged-traded-funds/ashburton-global-1200-tracker-fund/a-class) I recall that the initial TER was in the region of 0.45-0.55. In other words, the TER went up by more than 100 percent, which is ridiculous and highly annoying as I invested a fairly large sum of money based on the diversification and relatively low TER. I appreciate that prices do at times need to go up but this is just not cool. I just wanted to alert the community that this is no longer a low-cost option. Satrix, Sygnia and Stanlib offer much cheaper options that are fairly similar. Brendan is having trouble deciding on a vehicle for his retirement. When I joined the company I work at, we had a mandatory pension. At the time I said "Okay, cool!" and felt very grown up and responsible. However my contract of employment will soon expire. That means I will have to move my pension thingy. It's a Momentum product called funds at work. Upon realizing I have to move the pension thing, I started looking into the various options and I had no clue what is the right option for me. Retirement funds, plans, annuities, pensions - there seems to be thousands of options and I don't know which one to go for. Could you please provide some clarity on this fuckery? I was thinking I want to be with a place like 10X and I want to have my own personal contribution going off my account so that I can max out my tax break, but with all the other products out there and the various differences I thought it would make sense to hear what you have to say. My line of works means I will usually be hired by companies on mid-term contracts +- 5 years at a time and I thought maybe always having a personal retirement annuity would make these transfer periods easier and allow me to keep my money consolidated. Charmaine wants to sell some of her existing ETFs and buy new ones. She has DBXWD and Satrix40. She made a loss on the one and a profit on the other. She wants to know how to handle the selling off in terms of tax.

Tax is probably the only thing I managed to get right about my finances when I first started working. I had no idea what was going on, but I was sufficiently scared of the government to pay someone else to deal with it. The R800 rebate I got that year might as well have been a million bucks. I didn’t understand at the time why I was getting the money, but I was happy to roll with it. If you’ve never filled out a tax return form, this is the tax year to start. If you’re worried that you left it too long and SARS might take your things, pay someone to help you. A small fee paid to a tax professional is worth your peace of mind. Whether you like it or not, tax is much part of your financial planning as inflation and bank fees. You can hate it, but you still have to do it. Spend a little time on it and you’ll probably come to enjoy becoming efficient at it. If you’d prefer some guidance, we’ve heard great things about Tax Tim.              Win of the week: Zakithi from The Fat Wallet Community. Our community wizard Kay asked, “What's the one thing you did this week you're proud of or that made life better?” Zakithi said, “I am planning +preparing weekly menus for my family. More time with my kids+relaxing 😍” Nico wants to know when to call it quits. I bought some Warren Buffet and an Emperor International Baskets through Easy Equities. I have learned not to make assumptions like, if the bundle is called Warren Buffet, it should perform more or less like the namesake. I’m trying to be patient in my investments, but these two bundles are falling fast! I can’t take it anymore! Warren Buffet is down 18.64% and Emperor down 13.83%. When can I admit I made a mistake, cut my losses and try again, or should I close my eyes and stick it out (please don’t tell me the second one). Liam wants to know our reasoning behind investing our RA rebates in tax-free savings vehicles. I have noticed that you talk a lot about investing into RAs and then taking your tax rebate and investing this in your tax free savings account. I find this an interesting concept, I have always worked on the basis of investing the rebate in the RA and thus effectively compounding the tax rebate as I will get a further rebate on that. Could you please explain the logic behind investing the rebate in tax free savings rather, I am very new to tax free savings and have not given enough thought to how to best utilise them. Gerhard I've opened TFSAs for my three-year-old twins and I would like to add the maximum to their TFSA before the end of Feb 2019. I was thinking (and pls confirm if you agree): 1/3 - Satrix 40 ETF 1/3 - Ashburton 1200 1/3 - Sygnia Itrix Global Property ETF (or better REIT/Property ETF) Dominic is about to get some money. I am 25 years old and just entered the working world. I have an emergency fund in place in a flexible Capitec account and no debt. I try to live as cheaply as possible (but sticking to the structuring your paycheck suggestions is hard at my income level and age). I have been actively saving and have a provident fund at work that I contribute the maximum towards. I am about to inherit some money from a trust that will be maturing that I estimate will be around R325 000.00. I don’t have a RA yet but I am thinking about going for the 10x one after doing some research and listening to your debates about it. I would like to move my emergency fund into a 32 day notice at another bank as Capitec doesn’t offer them - probably FNB as I would get around 6.65% on it which is second best from my research without having the hassle of the Nedbank (6.75%) private bankers trying to convince me to bank with them. I haven’t got a tax free savings account and I’ve only recently started scratching the surface of this idea of ETFs and tax free accounts and what not. At my age what would you recommend I do with this money? I suspect in due course over the next 2-5 years I will be looking at things like paying for a wedding and buying a house (even though everyone says this is a bad idea, I haven’t quite made up my own mind about it so I would like to keep my options open).

Education is a tough nut to crack. It’s an investment, to be sure, but just like any other investment, the rewards need to outweigh the risks. Unlike other investments, however, risk and reward are extremely difficult to measure in education. Private school kids could be doing better later in life because of their education or because they come from wealthy families that have access to everything from better nutrition to more free time. Parents will spare no expense to give their kids whatever they can to ensure their future success. Does that mean private schooling should be the goal for every parent, no matter the cost? I’m not convinced. In this episode, Simon and I try to put our childlessness to good use to try and answer whether a single kid’s education should cost more than R100,000 per year. Our discussion was prompted by this excellent question from Edwin: I have three wonderful children and very high expectations that they will have better opportunities in life than I did. This I suppose is a normal aspiration for any parent. Is it worth spending large sums of cash to get my children premium private school education? The most expensive boarding schools cost over R200k per year and the premium day education can set one back about R100k per year. All figures per child! In the public system one can get away with costs that range between 50-70% less than this per child. Is it worth throwing everything at getting the kids this premium experience? Or maybe just get them an education that’s good enough with a focus on getting into a University rather? The opportunity cost vs saving and investment is high. I attended one of these premium establishments and having it on my CV means it has opened a lot of doors and served me well. However, some of my classmates are in jail. One became a bank robber. Just not sure. Is it worth it? Win of the week is Tshembi. I have been listening since September 2018 and you have inspired me to get started on my financial freedom journey.I’ve always wanted to be an investor, but it was hard to find the right information and I was always scared of losing money. Listening to your show has given me confidence and I have gained knowledge on different types of investments products. I like sharing the information with my younger brother, because I don't want him to be left behind. Thank you for making it easy for me to learn and to be able to teach others. The  OUTstanding money series of articles has really helped me. For my birthday last year I decided to buy myself assets (Ashburton top40 & Ashburton MidCap ETFs with FNB Tax free shares account) instead of a gift. I’m so proud of myself for taking the first step to my financial freedom. However I have an Easy Equities account and I’d like to move my FNB TFSA to EasyEquities because its cheaper and you always talk about it in the show. I also want to be able to buy Ashburton Global 1200 ETF to get the international market exposure and since i'm just starting out i think this is the best ETF to choose. Will I be taxed for Ashburton Global 1200 ETF on a TFSA since it gives the international market exposure? How do I go about transferring my TFSA from FNB to Easy Equities? Helen also wanted to know about moving her TFSA from Capitec to EE. Nico took out a policy to pay for his kids’ education and made a terrible discovery regarding his fees. He took out a Classic Saver Endowment Plan with Clientéle. He received his annual fee increase notification. Now that I know what to look for (thanks to your podcast) I saw that my fees are around 5.5%. I bought this policy 12 years ago through IFA, but about a year ago asked them to remove the IFA franchise fee of R65 and deposit that amount into the account as well (now directly from Clientele). I would like to have your input on the following.       My son will be in GR 11 next year (2019). Is it wise to move the money to an ETF now or should I keep the policy running?       If I must move the money, which funds would you suggest, keeping in mind the short time span until I will need it.       If I move, will the fees I save make a noticeable impact on the end amount?       I have an account with Easy Equities. Should I rather deposit extra money in that and leave the police as is? Donal needs to make a decision about his kids’ studies. I'm an Irish citizen who is now a Permanent Resident, married with kids and a homeowner (well actually I'm a bond owner!). I have a very decent job, a healthy pension plan and both my wife and I max out our TFSA allowances (thanks to you guys!). I'm approx 15-25 years from retirement depending on how patient I am and/or how rich I become in the meantime. I have concerns about my kids’ future prospects, especially when it comes to tertiary education. I'm planning for the worst case scenario that they have to go overseas for University. That brings the possibility that my wife and I may decide to move with them. I have been looking at starting to send some cash to Ireland on a monthly basis for investment for the next 15+ years so that we have a nest-egg for that possibility. Of course it's also a handy way of diversifying my current investment portfolio. I still hold an Irish bank account so I can easily use that account as my base for such an investment. My wife recently resigned from her job and started working with a new company. Her provident fund has now become available. I did get one of those light bulb moments and thought to myself - what a wonderful instant Irish nest egg this would be!! How cool would it be to just whack this lump sum over to my Irish account and invest it in an ETF so I don't have to worry my little head about sending monthly amounts over to Ireland for the next shitload of months! Am I crazy to even consider this or is it a good idea? I know there are a million and one different variables at play here which makes it such a difficult decision. For starters we would lose approximately R100,000 to tax if we were to withdraw the fund now. I know I would also be liable to pay CGT to SARS on any foreign investment growth. But the possibility of having an instant emergency fund available overseas is a nagging temptation that I can't get out of my head. Nakedi is 25, just completed her degree and got a three-year internship. She’s starting her career with some student debt in the bag. She needs help on planning her future. She has student debt from the National Student Financial Aid Scheme (NSFAS). I did the math on my salary and expected expenses which leaves me in the red which is something I don’t want.       NSFAS is quite reasonable when it comes to repayments and interest (at 80% of the repo rate), unlike a bank. Now should paying off my loan be top priority or start saving to build up my asset base?       The job requires that I have a car, which means more debt. I may do the work without a car for the first few months but as time goes by I will need it. In my current financial position it’s highly unlikely that I would qualify for car finance, so how do I go about building a good credit record without drowning in debt?   Don’t make the mistake I made here. Go second-hand immediately.         The job is in the corporate world which means formal wear, which means I have to go shopping.  Since my cash resources are limited I thought of getting a clothing account which means more debt, your thoughts?   Look up capsule wardrobes and put one together from second-hand clothes.           To avoid further costs I will staying at home but the house is in bad conditions so it will need major renovations which will require more money. Should I save up this or incur more debt?   A friend told me recently the best thing about staying in your own place is that you decide when you want to do things. Unless there’s a structural issue like a leaky roof or a burst pipe, this can wait.         Both parents are unemployed which means I must chip in to help around the house.   Have a discussion with your folks about their expenses now and agree what you’ll give them, instead of just giving money whenever. It makes it much easier to keep control of the money you have left. Since you live with them, just think of this as rent.         Lastly, every now and then everybody likes to go on a holiday, how do I save for this and still be able to invest for the long term. Any book recommendations on investing and personal finance, because there are thousands of books if not millions on the topic.   Manage Your Money Like a Fucking Grownup, by Sam Beckbessinger   Brian wants to know how his advanced voluntary contributions will be taxed. Advanced voluntary contributions is when you make additional contributions to your pension fund at work. How will advanced voluntary contributions paid into my defined contribution pension fund be treated in my tax breakdown once I retire? I expect to retire in 24 months. About ¼ of his pension fund is made up of AV contributions. If I cash in the allowed one third at retirement in full, will the AVC (which was after tax contribution) be tax free in this allowance? Ben is turning 30. He thinks it’s time to be a money ninja. I had an epiphany over the holiday in needing to take better charge of my finances. I came across your site and then the podcast which is amazing, thank you so much! I'm trying to work through about one episode per day properly with notes etc. but still have a loooooooong way to go. I've done the "normal" thing up until now, as I haven't had a clue how any of this works. I have two voluntary investments, one with PSG and one with STANLIB, an RA with STANLIB, and a joint company with high school friends where we contribute monthly and pool that into something or other at Allan Gray. I'm sitting with excess money in my savings account (over and above my emergency fund) that I need to decide what to do with. Of that I'll probably do the R33 000 into an easy equities TFSA and go with the Ashburton 1200 for now (one ETF only to monitor and figure out like you suggested in episode 91). I'll probably monitor that and when I'm more comfortable invest a similar amount elsewhere through easy equities. What's annoying me at this point are the fees on the managed investments. Do I keep either of these? As I see it I have four options: Keep both these investments and see how things are going forward, in terms of markets and my literacy, and take it from there; Move the PSG funds over to the STANLIB account for now where the fees aren't as much, and monitor as above; Move the PSG funds over to the easyEquities platform where I can manage them myself, or Drop both of these investments and reinvest elsewhere. Always Abundant has a great question about dividend ETFs. I have never taken the time to understand dividend-focused ETFs e.g. Coreshares Dividend Aristocrats ETF. However, since the dividends in a TFSA are not subject to DWT, I wonder if they would then have a greater impact on making a TFSA more profitable overall? If so, how much of it is too much i.e should it replace your General Equity ETF? He also wants to know how the rand depreciates against the dollar. I've heard people mention an accepted overall rate of depreciation of the ZAR against USD over x years in the future. I don't recall the details so if you know it please share? Is this known with certainty that is must happen? Or is there an equal chance that it could go the other way too? Nadia has a question about the nationalisation of the Reserve Bank. Could you please how investments would be affected? I have a RA and Unit Trust with 10x. I also have a Tax free savings with Easy Equity. If government takes over everything, what does this mean for these investments? Should we all be taking our money overseas instead or will it be safe?   I also have a fixed deposit at Capitec and savings at FNB and I know these will probably be vulnerable but I'm not too clued up on how things would go if the reserve bank was nationalized. Any clarity and advice from you guys would be super amazing! Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

That’s a wrap, folks! 2018 had a lot to teach us and none of it pleasant. In this episode Simon and I talk about some of the assumptions we have to challenge after this year. Mine borders on cynical: doing things by the book doesn’t always get you ahead. Nothing like buying a house to bring that idea home (if you’ll pardon the pun). At least we had an excellent time putting together The Fat Wallet Show. We can’t thank you enough for your support. Happy holidays! Here’s a link to Herman’s algorithm findings. Pierre also made a spreadsheet. I listen to the Fat Wallet Show every week and noted that some people ask the question to go direct investment or retirement annuity.  (I know TFSA account is always first to max out) Earlier this year I did a quick calc as I was wondering this also.  You can play around with the assumptions in the yellow cells as the answer will be different for everyone, but it should usually come to that direct investments are more favourable at the start and then later on you would want to switch to RA. Download the spreadsheet here. First Adam has a private banker. I'm with Absa and have had a private banker for a few years now. With the private banker comes the private facility which is now R515 per month (2019 fees). I have a Private One facility - so my all-in-one account. This credit facility - which is only available to legacy holders - has done me well, since I bought my previous house with it, and now have bought into a second one too (after paying off the first one). The private banker has been useful for the "odds and ends" and has indulged many basic requests (which I could do myself, but hey - she's there). Is it worth it - no, however the credit facility IS. The interest rate is very favourable so it's worth the R515 for the time being. Also, there's Absa Rewards. I still maintain it’s one of the best loyalty programs. You get cash back on all credit card purchases. The higher tiers have cash back on groceries from all major retailers where you can get back 6% - 20% on the upper Tiers. You need to jump through some hoops, but they are pretty reasonable (pay your salary into an Absa account, debit orders here, odd saving account there). Siphathisile is investing for her retired mom. I have about R300K that I want to invest short-term for my mother who is over 60. Do you think putting it in Capitec at about 7.5% interest in a fixed deposit account is decent? I could keep getting the interest then fix it for another year etc. I also came across FedBond, which is a participation bond offered by FedGroup at about 12% interest over 5 years with no fees. And what are participation bonds? I was drawn to this because I can get my interest monthly(I think) as i wait. Conrad has many irons in the fire. He wants to know how to proceed. After many years of listening to various people I did various things and I'm more frustrated than ever before. He has a budget, investments in three good ETFs (RAFI 40, MSCI Emerging Markets, Ashburton Investment Global 1200), Steinhoff and Sacoil (respectively down 84% and 78% since he bought) and dread and disability insurance. He doesn’t have an emergency fund or a TFSA. Listen to the podcasts on structuring your pay cheque about these. Do I sell all shares and investments clear debt and have an emergency fund? Do I stop with all investments and use my contributions towards debt and Emergency. I think Emergency must be top priority and the Tax Free. Actually I would go the other way around. My emergency fund is in a constant state of flux. You don’t need to have it fully funded and sitting there. Pat In the spirit of the fat wallet show, what does it mean when you say "the conditions of sale"? All the things you agreed he would fix if anything went wrong with the property in a certain period? Find the Inspect-a-Home article I mentioned here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes.

In finance, more options are always better. The more competition there is, the lower prices tend to go. With three new banks entering the market, we are sure to see banking costs come down. Is that reason enough to change banks? In this episode of The Fat Wallet Show, we consider when it’s a good idea to change banks and when it’s best to just stay put. We also spend some time talking about reward-driven costing. Rakhee I'm in the process of optimising costs. What bank do you suggest for daily transaction accounts i.e. savings/current account and credit card? Of course reliability, security and convenience are important factors here too. For my emergency fund I have a Money Market Fund that yields 7.8% currently. Can I do any better? Hugo What's your take on all the new banks in South Africa (Tyme, Discovery, Bank Zero) How do we trust them compared to the "Big 4"? How do we know they not another VBS? How safe would our money be? Win of the week is Julien. He had the following to say about tax and RAs. I believe the idea that "you don't pay tax now but you pay later" is misleading. Yes you will pay some tax, but in all likelihood you will pay much much less tax during retirement: 1) R500,000 of your retirement lump sum is tax free. 2) If you are 65 or older, the tax threshold increases from R75,750 to R117,300. 3) If you keep your standards of living the same, you will never need to draw your full gross income, because you won't be contributing to your RA anymore. You don't need to contribute to any other forms of investment/savings either. If you can save 35% of your net income now, in retirement your taxable income will be reduced by at least 35%. 4) The taxes you save before retirement come from your top tax brackets but the taxes that you pay after retirement are calculated from your bottom tax brackets. For example, if you earn R700,000 per year, your marginal rate is 39%. If you contribute R100,000 to your RA, you will save 39% of this amount: R39,000. If you retire at 55 and take R100,000 out of your living annuity, you will pay 0 tax on the first R75,750 and 18% tax on the last R24,250. This adds up to R4,365  - far less than the R39,000 you saved. 5) Not all of your post-retirement income needs to come from your RA. You can take advantage of your TFSA and the R40,000 exemption on capital gain to further reduce how much you need to take out of your living annuity. 6) As mentioned during the podcast, your cost of living can be lower during retirement if you have paid off your house, car, etc. 7) Let's not forget than money now is better than money tomorrow. You can invest your tax rebate and even if you need to pay some of it back, you get to keep the growth :) With a bit of planning you can pay way less tax after retirement compared to how much you get to save before. But most importantly, even without planning, using an RA is already very tax efficient. Leigh got divorced recently and wants to figure out how to move forward financially. With my divorce settlement I bought a one bedroom apartment in Paarl. I also have an apartment in a resort that we used in the summer holidays when we lived abroad. It is rented out by the resort. I own half my home. All these properties are paid for, the one in Paarl will be completed in June. The Paarl property was R610,000 and the predicted rental is R6,400.00 per month. I don’t work at the moment and I figured that at least I will have an income which I could put into my money market account as savings. Is there a better way to use my money? I need to get myself financially sorted very quickly. Tee has two RAs. She went to an advisor who put her in an Investec RA. She didn’t like that advisor and got another advisor through a family member who put her into an Echo Bonus RA with Sanlam. I would like to only have one RA and after listening to you guys on the show, I would like to remove the financial advisor from the equation if at all possible. Would you recommend moving the one to the other or move both to a 10x account or something like? I am still in the process of doing some research regarding the fees and benefits of the RAs, but just wanted to ask your opinions and expertise on the matter. I am still paying off a student loan and a car loan. And I am in the process of looking at my finances and budget so that I can start with an Emergency fund and then later on start investing. I am already 28 years old so any help at this point will be much appreciated. Frikkie has a question about blueberry tax. I didn’t follow your advice and invested in Blueberries, Honey & Solar Farming. How does the taxes work on these Investments?  Will it be taxed like Farming or Investing? Investing in farming usually allow upfront deductions. The market is getting Warren down. In October 2015 I resigned after a decade at the same organisation and transferred my sizeable provident fund into a preservation fund. The fund turned out to be far too conservative, so earlier this year I transferred it to 10X High Equity provident fund. It's now over three years later and not taking currency or inflation into account I am down R2,000 from where I started. I know this is long term view but if it can do so shit in three years, it could do even worse in 30 years. It would've actually been better under my mattress and far better in a bank account... I'd rather make around 8% then a loss. Anyone else feel like they've been royally f*cked? Subscribe to our RSS feed here. Subscribe or rate us in iTunes.  

  Save Squack's life! While the term “tax-free savings account” makes it seem like it’s a savings product, you shouldn’t think of them as savings accounts at all. There’s nothing to be done about the confusing name, but this week we explain why we shouldn’t use them to save cash. If you are under 65, the first R23,800 you earn in interest every year is exempt from tax. This is one of those little SARS gifts we really love. If your bank or savings vehicle offers you 6.75% in interest every year, you need R352,592 in cash before you start paying tax on your interest. Since you’re limited to a R33,000 tax-free contribution every year, it will take 10 years’ worth of contributions before you become liable for tax on the interest. In the case of share investments, you are liable for tax from the very first day. If you buy an ETF today and sell it tomorrow, you’ll have to pay tax on any profit you make right away - either in the form of income tax or capital gains. You also pay dividend withholding tax of 20% right from the first dividend. In your lifetime your share investments will cost a lot more in tax than cash savings. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Richard I’m 24 and maxing out my tax free savings account with FNB for the past two years. I’m earning 6.75% interest After listening to the podcast it seems like you guys favour tax free investment into an ETF where dividends are reinvested tax free. What are the main advantages of tax free investing vs saving and would you recommend moving my current account into an investing platform? I currently have an EasyEquities account, where I have my taxable investments. Win of the week is Adam the actuary. I've been listening since the start of the Fat Wallet Show when I was just a second year at university and now I am graduating from my actuarial sciences honours degree. This is in part to you guys. Thank you for helping me get my degree. Your simple explanations of financial concepts have helped me in a couple of courses and tests (why can’t you guys write textbooks??) Thank you for educating me. With your help, I have managed to support myself through university while building an emergency fund that has saved my ass in a couple of occasions!   Thank you for giving me confidence to stand up to my family to tell them that I am not going to be buying an apartment and that I am not getting myself into debt right out of university to buy a new car (I'm going to be driving my current one until I have to push it). Thank you for giving me a conscience. Your weekly chats about financial literacy and companies scamming their clients with unnecessary jargon and excessive fees have made me want to change the way insurance products are structured and made (Down with fees and nonsense). You have provided me the knowledge to wrestle control over my finances; knowledge that I never got from my parents. You have created a money conscious 22 year old that is ready to go into the working world and use your teachings. P.S. not all actuaries are boring Stefan I have a TFSA, a till death do us part ETF account, Till death do us part Share account, a share trading account and a derivative trading account. The company I work for does not offer any company benefits with regards to retirement investing. I was always under the impression that the only way you got a tax benefit for these is if it was part of your employment package and deducted from your income. From recent shows it sounds like If I got a retirement annuity on my own I would still get a tax break. Should I get something like this or just keep adding to the DIY account mentioned at the start of this mail? How do I get the tax break if there is one and which products do you recommend? Tax is the one area in my life that I am failing miserably in  and am pretty sure I am giving away a lot of free money due to my lack of knowledge. Herman wrote an algorithm to work out the tipping point where the tax you pay in retirement would be more than the tax you save contributing towards your retirement. He will write an article on his findings for justonelap.com in the next few months. Jan-Johan I'm considering making some of my monthly contributions into global property. I already have exposure in the local property market through the Proptrax 10 and Stanlib SA Property ETFs. My main reason for investing into property ETFs is the attractive yields. If Bloomberg is to be believed each global ETFs offer the following gross yields: Coreshares - 4.02%; Sygnia - 1.19%; Stanlib - 6.09%. Based on this, and after reviewing the costs of each ETF, I'm more inclined toward the Stanlib ETF. If I recall correctly you are invested in the Coreshares S&P Global property, is there anything specific than influenced your decision? I would really appreciate your input on my considerations. Gert made Kay a tax calculator. I was listening to your FWS #124 – Should we care about the bear? Kay asked the question about what percentage should be put aside for personal income tax. I’m hoping she will find the graph below useful: There seems to be a misconception that SARS’ income tax brackets are like treads on a stair and that R1.00 above a certain threshold would put you in a different tax “bracket” altogether to be taxed at a much higher rate. I’m no tax expert (yes, I’m a civil engineer), but if we use these tax tables published by SARS: … and calculate the tax liability as a percentage, the graph would look like this: The two lines are for persons under and over 65 years of age. It’s not 100% accurate, I know, but it’s good enough for Kay to estimate her tax. The idea is to find your yearly taxable income (gross income, less allowable expenses) on the vertical (Y) axis. Assume you earn a taxable income of R 25,000.00 per month x 12 = R 300,000.00 per year, like you said in the show Find R 300,000.00 on the vertical axis and follow the line horizontally until you meet the curve for persons under 65 (black line) From that intersect, follow the vertical line down to find your effective tax rate. You might need a ruler for this. Your effective tax rate would be 16%. Using the formula would give you an answer of R 62,332.00, or 16,09%. Close enough for a solution not requiring a calculator. You can see the difference in tax between those in retirement (over 65) and those still to retire. Now you can put a value to the phrase “lower tax bracket in retirement”. From the example above, a person over 65 would be taxed at a marginal rate of 13.52% as opposed to 16.09%. For the same income, a person over 65 would be paying ± R 7,700.00 (or ±16%) per year less than a person under 65. There is a third category, those over 75, but the graph becomes too complicated, so I left it out. There is not really a different tax “bracket” or table for the each of the age groups. SARS allows you a “primary”, “secondary” and “tertiary” rebate, depending on your age ( I was surprised to learn that a person earning R 100,000.00 per year would pay R 3,933.00 in tax, or 3.93%, even though the tax table reads 18% of income up to ±R 200,000.00. This is because the primary rebate allowed by SARS is R 14,067.00. The calc would be R 100,000.00 x 18% = R 18,000.00. Less the primary rebate of R 14,067.00 = R 3,933.00. This is why people earning less than R 78,150.00 (the Tax Threshold) pay no tax. R 78,150.00 x 18% = R 14,067.00. Less the primary rebate of R 14,067.00 = no tax. Of course, if the formula results in a negative answer, SARS does not give you anything back. The secondary rebate for those 65-75 is R 21,780.00. The tertiary rebate (>75) is R 24,354.00 It’s evident from the graph that our personal income tax is not really divided into “brackets” like “steps”, but a smooth curve with a gradually increasing slope. There is a “kink” in the graph at the R 195,850.00 mark where the 26% tier kicks in, but it is not nearly as pronounced as I thought it would be. It’s also a misconception that those earning over R 1,500,000.00 pays tax at a rate of 45%. True, the formula reads 45%, BUT the 45% only applies to the income EXCEEDING R 1,500,000.00. Do the calc and you’ll see a person earning R 1,800,00.00 after deductions, pays an effective rate of 36% or so. Or you could just write a “black box” Excel formula or use an online calculator to spit out an answer: SA income tax calculator Brian What should one do when newer and better ETF products become available, particularly within the TFSA space? This is assuming that one's investing methodology hasn't changed. Surely one would have to keep up to date with new products as they become available? Even a 0.1% reduction can make a difference over time.   For example, when I started listening to your podcast, I started splitting my monthly allowance between Satrix40, Satrix World, and Satrix Emerging Markets. Now that the Ashburton 1200 ETF has arrived which seems to bundle the World and EM into one, what do you suggest? Do I: Stop contributing to the others and start to the Ashburton? Sell the Satrix EM and World and put into Ashburton? Continue my allocations as before? Quinton When you get closer to retirement I presume one moves the funds out of the investments and into something less aggressive. Even if my Ahsburton 1200 had an annualised return of 15%, but the day before retirement the ZAR strengthens from R14 to the USD to say R7 to the USD, my portfolio takes a 50% knock. My investment portfolio could be worth less than the investments I have been making. I’ve done everything right, the portfolio has done excellent, its diversified, but the conversion rate has screwed me on 99 or am I missing something here? How long before you retire do you evaluate the market and decide to move it to a safer investment? Ryan I have group death and disability insurance with my employer. The disability benefit pays out 75% of your pensionable salary. The only debt I have is my bond. I worked hard in the last year to pay everything else off and I’m currently paying 80% more than the required amount into the bond. I have no kids or other dependents, and no plans to have any.   My wife brings in 22% of the household income and works from home, so she should be fine in the event of my death if she uses the life insurance payout of my employer to settle the bond and invests the rest in her TFSA account or RA. Seeing that I am not going to leave my employer in the foreseeable future, am I wasting money by paying for Life, disability, income continuation (almost a quarter of what I currently earn) and severe illness cover from Discovery. I hate how complicated they make their policies, and I am looking to cancel or move to a simpler product.  Any savings resulting from this change going into the bond. Ian I have a TFSA with Old Mutual & I want to move it now of course, obvious reasons. I registered with EasyEquities and now I have to choose an ETF. I am a very passive investor. I want to choose an ETF & never change from option again. I just want to make my contributions & 15 years later want to see my millions……lol. Can you please assist me in choosing a TFSA ETF that gives me good exposure to all markets & maximum returns in the long run, also paying dividends (will re-invest) & no surprise headaches. My wife also wants to open an account & wants to invest in same ETF that I choose. Here are the things you should consider: Asset class - equity vs property vs bonds/cash Regional exposure Sectors Companies Methodology - smart beta vs market cap weighted Carl I am considering moving my "young" portfolio from Old Mutual to EasyEquities due to cost. I am looking through the cost profile of EasyEquities and saw that they charge a 1% additional transaction fee for recurring investments through debit orders. If this is the case, is it not better to manually buy the share or ETF manually each month? I had a look at the cost structure on the EE platform and the only debit order fee I could find was R0. http://resources.easyequities.co.za/EasyEquities_CostProfile.pdf Dario The idea is to have 50% weighting in property ETFs and 50% in "growth" ETF's. I’ll sell the growth ETFs when i'm close to retirement and have 100% in property ETFs for the dividend payouts. I have a pension so I see my TFSA as an investing side hustle. I want my property ETFs to be local because paying tax on foreign dividends seems to be counter intuitive for a tax free account. I want my growth ETFs to be well-diversified and to not pay dividends… my thinking is that if the payout is dripped backed into the ETF then we save on some tax? My "growth" stocks are: - CoreShares Global DivTrax ETF - SYGNIA ITRIX MSCI US (because 'MERICA!) I believe in my strategy...but not quite sold on the ETFs I've selected. I don't want to reshuffle my TFSA but luckily I'm still in the infancy of my investing career so if there were a time...it would be now. Colin I am looking at an S&P 500 fund to my TFSA, however, I am unsure which manager I should go with. I know he deciding factor should be based on costs, however, I just need clarity if the TER is what your decision should be based on If they quote a management fee under the TER, must this cost also be factored in? Also, should factors like distribution frequency be considered (Satrix does not distribute, Coreshare & Sygnia distribute semi-annually),  different weightings in the various sectors and ETF size be taken into account when selecting the fund?

Kristia is on holiday, so we're rebroadcasting this very important show from May 2017 - the five concepts to make you rich. No show next week. ====== My biggest frustration in learning about the financial world is the expectation that I should understand concepts that nobody ever explained to me. A part of the reason why I got into so much debt is because I didn’t fully understand how interest applied to my financial situation. The other part of the reason is stupidity. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. The Fat Wallet Show is my attempt to level the playing field. Not only am I declaring, out and proud, that I don’t know everything. I’m also taking back the most important weapon against ignorance – the humble question. Because this show started out as my personal attempt to find answers, we started with concepts that I didn’t understand. In the process, we never covered things that I did understand. A lot of the questions I have about the financial world these days don’t have much to do with my personal finances. The interbank lending rate, for example, is not something that has an impact on my ability to make choices about my finances. Interest, on the other hand, is a core concept that informs almost all of my financial choices. There are, in my opinion, only five concepts you need to fully understand to take control of your money. In this podcast, Simon and I discuss those concepts and how they affect your finances. If we didn’t explain some of the concepts in a way that is easy for you to understand, find someone who can. These concepts might be the catalyst that launches a journey of financial curiosity. If not, they are enough to get you to retirement in one piece. Kris

Sorting out money between partners can be fraught, but it's a walk in the park compared to parents and siblings. We spend our formative years trying to secure the love and acceptance of the very people who we now have to say "no" to, which is why we are Money Enemy Number One. Your best chance at success is substituting emotions for numbers. If you are the person your family looks to for financial support (and you have no moral objections to helping out), the first number you should care about is what you can afford. This doesn't mean how much you have left over, but how much you are willing to give. You also have the option of paying directly for fixed expenses and letting them figure out the rest. Alternatively you can offer a cash amount, walk away and fight every urge in your body to give more if they run out. You don't have to say no to your family if you don't want to, but you are allowed to have boundaries. If all else fails, ask yourself what you would do if your kid made the same request. Devon’s mom told him he’ll have to take care of her his whole life. After paying off her debts, renovating her home and countless budget discussions, he's losing hope. I have had endless budget sit downs and fiscal meetings with my mother to try reign in her expenses, but after a few months the old habits come back. She’s very good at convincing herself whatever she buys is absolutely necessary. I listened to your podcast about talking to your partner, but I find having a talk with my mother far more difficult and emotional. Her house is paid off (just levy, water, electricity, medical aid and living expenses are needed) but she spends over R10,000 on groceries on just her and my sister at home plus clothes and other non-essentials, plus having a domestic worker twice a week and a gardener for a small garden and a pack of 5 dogs which obviously need to be fed (I tried everything to stop her at just having 3 max). How would you suggest approaching this firmly enough that it actually does stick with her and leads her to actually taking action to cut expenses? In essence how do you get this message across to someone doing their utmost to stay dependent on others to avoid the responsibility of their own financial position. I feel like I have tried absolutely everything and have spent so much energy and effort that I am at my breaking point. Emile Market commentators will say they would only buy a stock at a particular price level. For example, stock A is expensive at R100 but fair value at R80. Is this merely a reflection of the rand value of the P/E at different levels i.e. R100=P/E of 20 and R80=P/E of 16? Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   Wim Taxpayers get a R23k interest deduction. Wouldn't it be better to first max out this benefit, before going to TFSAs, because it’s already tax free! What is TFSAs offer the best returns? Can I expect more than e.g. a 32 day notice deposit or a 24 month fixed deposit somewhere? As far as I remember, the TFSAs have a lot of red-tape w.r.t. what to invest in and how much risk these funds may take on. Will this not mean lower returns?   Marina’s twin sister introduced her to the show. She has a question about ETFs. Stealthy mentioned that the smart beta indices try to outperform the market and rarely do so, and that is why he sticks with vanilla indices. She also read a Moneyweb article about the SPIVA report. Some are of the opinion that active funds rarely outperform the market but passive trackers can? What is your opinion on the matter? If active funds with competitive fees were to become available in the future, would you buy them? Lars Kroijer Investing Demystified series: https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK Frank sent a link to a podcast called How It Began, where they discuss the stock market after episode 123. https://itunes.apple.com/za/podcast/how-it-began-a-history-of-the-modern-world/id1221558103?mt=2&i=1000389611474 Mpilo wants to know what listed property is. They also want to know what a mutual property fund is. Psychedelic Nerd wants to double-check that they understand CGT: If I invested R5,000,000 into the market, and now it is worth R10,000,000 . I decide to withdraw R400,000 (i.e. a 4% drawdown rate) to live on for the year. Half of this (R200,000) is capital gains. So, after the R40,000 CGT allowance, I am due to pay CGT on 40% of R160,000, which is R64,000. I have the 2018 income tax free allowance of R75,750, which leaves me with no taxable income! So I keep the full R400,000. In this scenario, the CGT mentioned here is the only income for the year. Does this scenario sound right to you or am I getting some steps wrong? (If this is correct, over time I guess it will change as the percentage of the annual drawdown that is capital gains will probably become higher.) They also want to know what I mean by “cash” savings and if it’s a good idea to have an emergency fund in a money market account. Ivan made Kay a spreadsheet to calculate her tax liability in a year. Download the tax calculator here Kiril has a hella fancy car. He wants to know if he should speed up his repayments. I currently have an emergency fund, maxed out my TFSA for the year, contribute to a provident fund through work, and have zero debt except my fancy car. Whether owning a fancy car is a good idea is not part of this question. My designated installment is R7600, which I've upped to R8000. Should I increase this to R8600, and put in some sizeable lumps sums, eg. My tax refund? My interest rate is 10.5%, but Tito's jitters indicate this might rise in the coming year. Please, I'd really appreciate your advice. Promise wants to know who we prefer for TFSAs. Pierre If I sell out of a fund and incur a 360k capital gain which I will be taxed on, can I invest 360k straight into an RA and thus pay no CGT? No - but you can contribute 27.5% of your profit to your RA for the tax break. First point RISK = REWARD, pretty basic if you take more risk your return can be higher (or lower), take a small risk and you make a small return. Bonds have a very little risk so you get a small return BUT you are very sure you don't lose your investment. This is called the investment risk pyramid. Cash (no risk) Money on deposit in a bank which as a guarantee if a bank goes bust Bonds (low risk) 1)US treasury bonds 2)Developed markets 3)Emerging Markets Within each of these 3 sectors you get municipal and corporate debt too ETFs / Unit trust (medium risk) The more diversified the ETF/fund lower your risk should be, ie if you buy an ETF with only 30 shares and they are all banks it is less risky than buying one bank share but riskier than buying an ETF with 1200 shares in it across many sectors. Shares Within the share universe you get more and less "volatile" shares. Volatility means how a share price moves day to day around its average price over time in laymen terms. So a stock that is speculative like saying your Blue Label group moves in massive swings, something like a property stock which is run by a well managed reputable outfit which owns shopping centres and hard assets and receives their rental income from these properties every month will have a stable income and below volatility. Worst comes to worst the assets (buildings) are sold on their own and the shareholders in the stock can get their cash back. The assets are easy to value. Stocks are theoretically priced by their earnings, how much we are willing to pay for those earnings is called the price-earnings ratio, higher PE the more willing people are to pay for its earnings. Sometimes stock prices make very little sense. Example - Tesla, we all love Elon Musk, he is trying to change the world, he has very big ideas, he has shown potential BUT his company is not making that much money yet. People believe his dream and keep buying Tesla shares thus it has a very high PE. Very low earnings and high PE. Every sector has its own go to PE. Banks in SA generally below 12. Leverage / Speculative Funds/Small business/Bitcoin Risky stuff, could lose everything or double your money, need a lot of research and gut feel to know what's what. Not for the amateurs, no matter how good the tip was your buddy gave you or you ever heard at the gym. Ok so that how risk is priced in instruments next layer of risk is the country risk, it is generally expected that: US least risky (now) Developed markets (UK, Japan, Germany etc) Emerging markets (South Africa, Turkey, Russia etc) Junk Markets (Zim, Venezuela etc) Each of these countries has their own risk profile and within each you can buy a bond (least risky for that country) or you can buy a share (risky for that country) . If you buy a bond in say South Africa you might expect the same return as a medium risky share in a big developed market. Theoretically speaking, my idea to get the concept across. The risk is everything, the risk is priced in return, for a stock that return is measured in its earnings for a bond/cash in its return. So back to your story, why did my ETFs in SA do nothing but when the market fell I still fell along with it, should I have been hedged through my diversification? There are 2 parts to the answer. 1) Naspers makes up roughly a quarter of our Top40, Naspers is basically a company holding a share called Tencent, Tencent is basically the google plus facebook of China. It's gone up in a straight line for last 5 years. Dragging our TOP40 with it. If you take out Naspers/Tencent our markets has done sub9% maybe less... Why is that you might ask, unemployment, bad ANC policies, international investment firms selling South Africa as a brand, the land appropriation bill is a massive massive issue, firstly our banks are being sold off more intensely than I have ever seen in my 15 year career, you can get a big 4 bank stock now at a PE of 8 (side note at this rate it will be more tax efficient to buy a bank stock and get a better dividend yield on your money than the bank can offer you on the interest rate and the div yield is tax free!!). Banks own the bonds on the properties the ANC want to appropriate thus banks go to zero, the market has decided to rerate the risk on banks and the price went down, more risk bigger move in this case down.   Tech stocks have rerated after an incredible run the last few years, Tencent halved and with that the price of Naspers and thus the TOP40 or JSE and your ETFs. Buying the Top40 or DTOP is not a good diversification. I'll say that again, buying the TOP40 is not a good diversification. 2) The second part to the answer is more interesting, think of all the capital in the world flowing around like water freely. When there is a lot of capital it sloshes around the world, builds up at the riskiest places and even forms bubbles, think bitcoin. When is capital cheap? When interest rates are low, because anyone can borrow a lot and do with all that money what they want to. When was capital cheap, since the 08 crash, the Fed and other central banks took interest rates to ZERO percent, all that cash has been sloshing around the world and found new homes in the riskier assets and countries like you know who SOUTH AFRICA. For the last year or so the Fed has been slowly increasing its lending rate to try and normalize markets (or their market among things). The effect is like a giant sponge in America sucking up all the excess money they were out there in riskier assets. Starting at the riskiest and going down the pyramid to the least risky. So in our case, we are an emerging market check, we have are buyers of an ETF that's listed over equity check, we have bad economic policies check, there is talk of taking away peoples assets which banks have bonds overcheck. And there you are, your ETFs have rerated in risk to the new reality. I don't want to make you feel worse but that return you lose you have is in Rands, as we discussed above, a South African Rand bank account is riskier than a USA bank account, thus the rand is also being sold and more people are buying dollars. (if you can earn 3% risk-free in the US why buy an SA bank account and only make say 6% with all our inherent risk too). I have been a holder of 4 "hedge" funds over around 10 years. Over a decade plus they have been the standouts and I managed to get in quite early and trusted each of those outfits as I work in the industry and am well aware of what they do. That being said, you pay through your ears for this good return these guys get, there are also down times. I decided at the beginning of the year to start liquidating investments in these funds down to 25% and buying ETFs listed on the JSE but in foreign exchange and international markets. I like and have moved into Ashburton world bond index in USD, NASDAQ listed by Satrx, GLODIV dividend aristocrats international, SYG500 SP 500. All of these ETFs hedge me against any South African and Rand risk. My thinking is, I live in South Africa, I own my house in South Africa, I earn Rands in South Africa. South Africa is a tiny country on the tip of Africa, do you think if you approached someone in Japan or America and tell them you think it is a good diversification to buy TOP40 index ETF in a tiny country on the South tip of Africa. No ways! Buying SA listed ETFs like TOP40 ect is not being diversified, you are actually taking on a lot of risks, we now have the freedom and products to buy cheap, international ETFs on the JSE which gets you out of local currency, buy them and buy as many as you can. I wrote about how I plan to approach the maintenance to my new house in last week’s newsletter. I said I’ll probably under-budget. Dave had a great point about that. Your new project/s made me think of one of my favourite Project Management lecture points - don't stress the accuracy, stress the completeness.  If you budget R100 and it runs to R110 you are 10% out, but if you don't even put the item in the budget then you are in trouble. Quinton wants to run his ETF strategy past us. These are ETFs he’s buying in addition to his RA and TFSA. I don’t want to be to active as an investor, I’d like to select shares, then contribute monthly from now until retirement. He’s looking at Satrix Top 40, Satrix S&P500 and the Ashburton Global 1200 My idea is to buy each monthly. I am a minimalist and like keeping things simple, but also don't want to invest in the wrong portfolios, or be too diversified. If you think this is a good strategy, would you invest equal amounts into each or spread it more offshore (E.g. Satrix S&P500 and Ashburton 1200 = say 80%) and Satrix top 40 = 20%? I have received dividends in my TFSA account now, and was thinking on using those dividends to apply the same logic. What are your thoughts on the Satrix Emerging Markets, Nasdaq 100, or MSCI World index. Should one be considering any of these?

I had barely landed my first job when I bought a car. I had no deposit, no idea how interest worked and did whatever it took to get wheels. Thankfully my mother had recently bought a car exactly like mine. I assumed that I couldn’t afford anything bigger. In retrospect I probably could have gotten away with a much fancier car. Thank goodness for my own stupidity. I agreed to pay a fixed interest rate of 16.01%, paid the bare minimum instalment the entire time and ended up paying R138,527.46 for a car with a sticker price of R66,578.95. I also realised early on that I couldn’t really afford services and tyres. Thankfully I’ve learned a thing or two about money in the eleven years since I bought the car, which is why I still drive it. Terence almost fell into a car trap, but then came to his senses. Last year my double cab bakkie was stolen and after a few months, I replaced with a shiny new Ford Ranger. The insurance payout was only ¼ of the price of a new car. I got caught up in the hype, bells and whistles of a new car and proceeded to buy one of the high-end models. After a year, the first license renewal came and I went off to the Post Office to renew it. When they gave me the amount, I had to leave and draw more money, because the license was R1200. I was mortified and went home a different person. I calculated how much EXTRA this car is costing per month than if I bought a small second-hand car for R120,000 Interest Lost: R1,700 (R300k in a 32 notice account at 6.7% interest) Extra on Insurance R800 Extra on Fuel R400 Extra on Licensing R 40 That’s R 2940 p/m or R 35 280 p/a. 95% of the time I was in the car alone, so it made no sense at all to drive a car with 4-5 seats. I must’ve used the bells, whistles and ‘Voice commands’ 3 or 4 times, after that it was just a car. That was when I made the decision to sell the car. I’ve taken a hell of a financial knock. I’m now looking for a second hand two-seater bakkie to do my DIY projects. It would do the job just fine at a fraction of the cost. Having this BIG expensive bakkie wasn’t practical anymore because of the pressure experienced from three directions : Maintaining an expensive car. I think parts are priced at the “balancing point” where it’s extremely expensive but not enough to justify replacing the car. The government will charge more for fees, tax and fuels costs get you too. Thieves are out there to steal the expensive cars (mostly), because of the high resale value of the parts. A friend also decided to trade his car for a double cab because they went on a road trip and the car was a bit small for all the holiday goodies. That only makes sense if you go on holiday for 6 weeks or more a year. If I hired a car for 10 days with Thrifty car hire it would cost between R4,900 and R7,700 depending on the car I got. The most expensive option is about 22% of the savings per annum and the R27 580 saved for the year could then be Invested. I think hiring would be more fun, because I can choose a different car every time. This is only for self-drive holidays, because when you’re flying somewhere, you have to hire a car anyway. What would be the approximate financial gain in 10 years compared to the devaluation of the a car? I've made the mistake and taken a knock for it, so if anyone could benefit from this by thinking it through, running the numbers and making the right decision. Then my financial stupidity (loss) will not be in vain. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Matome is our winner. He took two years to sort out his finances, mailed an accountant for an answer (which he didn’t get), took two days to draft an email to us, found the answer and then sent us another email. Even though he found his answer and he’s now on the right track, I thought we could discuss his original question. He wanted to use his tax rebate to fund his TFSA, like I do. Are there different benefits (tax refunds) for the different savings vehicles like a pension fund VS a retirement annuity. He later discovered that his tax return doesn’t reflect his current pension contributions, because I enjoy the tax relief on a monthly basis. I’d recommend he finds out what that tax relief impact is and save that amount. Ben  I wanted to know what you think about Easy Equities' EasyFX facility? Is it worth using based on fees and is it worth it to convert some of my hard-earned randelas into dollars? Also, after the misleading campaign of ABSA's 13% interest product left a bad taste in my mouth I am considering government bonds even though I am fairly new to that. Is there a recommended platform where I can pick those up? Get Down Adam figured out insurance premiums aren’t as objective as he thought. In the spirit of decreasing my costs, I figured I would give OUTsurance a call. My car insurance was R900pm, which felt like too much. I got the insurance when I lived in the crime-infested city, so I figured now that I was being a rural doctor my costs should drop. I called them up and spoke to a lovely lady who registered my change of address and ran the magic computer. As it turns out, I now had to pay more. Crime isn’t a problem in the sticks, but potholes are. Needless to say I was quite sad. The agent transferred me to her supervisor. I explained to him I was a bit shook. I told him Momentum short term insurance had offered me a better deal. Suddenly the game changed. I was thanked for my brand loyalty, for being claim free and for being a happy person on the phone. Suddenly, the computer system had also had a change of heart. The supervisor told me he wouldn’t increase my premium. So that was nice. But then... he reduced my premium to R550pm (from R900) and asked me to continue being the good Outsurance customer I was. On top of that, he backdated the new premium by three months. Lesson is these companies make us pay made up amounts. There is money to be saved. Petrus has two very expensive pugs. I have two highly spoilt pugs, Oreo & Lili. We love them to bits and we don’t have kids so they are like our kids. However, a couple of things to consider: Pets are expensive (obvious one that I am sure you already considered) If you ever move to another country be prepared to spend a fortune to move them (cost me around R40k) unless you are willing to give them up or even worse (and people do this) have them put down. Having guests over is quite challenging as some people don’t like animals (makes me like them less). Biggest thing for us is how limiting pets are, you can’t just pack up and go somewhere. You have to always think about your pets. Shall you take them along (AirBnB should be pet friendly then), you cannot travel by air, you have to leave your pet with someone else or pay a premium for a decent kennel (in SA I highly recommend: http://www.skyviewkennels.co.za/) Don’t get me wrong, we absolutely love having Oreo & Lili in our lives, but the money is only a very small consideration for owning a pet. But if you get one, you’d better call him “ETF”… 😊 Wesley has a recommendation for independent financial advisors. I had some success with Roxburgh Trust. They allowed me to hire them for a review plus looking at some tax consequences on an hourly basis. Sabrina would like us to explain how timeshare works and whether it’s better than just going through an agent. Special shout-out to Coenraad and Christiaan for answering Darryn’s question about tax-free investing in the UK. The answer was ISA, in case someone else wanted to know. Also to Fried for sending some excellent advice to Wilhelm regarding medical insurance and pension funds for medical interns. Any other medical interns who are interested are welcome to hit me up for the mailer. Fat Wallet Community Page  

The world has gone mad with talk of a bear market. As someone whose experience of a bull market has to do with how much bullshit it is that the market makes money, facing a bear market seems especially unfair. In this episode we discuss what a bear market is, what it would look like in my portfolio and what I can possibly do about it. Win of the week is Kay, for being a Fat Wallet Community superstar and for taking charge big time. I'm stuck on tax. I don't understand it, I'm terrified of it. I'm a freelance artist in the film industry. I'm supposed to pay provisionally. I've never managed to save for my tax contribution, but I am earning more each year and I'm trying to keep money aside for tax. I'm mentally budgeting the amount to be about 25% of everything I earn (which seems an enormous amount to catch up to at this stage, but not impossible). 25% also might be too much or too little consideration depending on the earning category I fall into that year. I heard Kris say that she puts 12% aside for provisional tax - how does that work? Why is there a tax category for 0-195 850 but I apparently don't pay anything if I earn under 350k? How the flip? I don't mind saving too much since whatever I don't pay in tax will go to topping up other savings goals anyway, but I'd rather just know the workable percentage so it's not a big black hole of devil-math in my budget. Can I actually reduce my tax liability by contributing to my TFSA? As in, does making that money tax-free potentially put me in a different income tax bracket, like contributing to an RA would? Also Jonathan for sharing a great hack for emergency funds. I've been a bit insecure with my investment strategy in my relatively short investment journey but the show has reassured me that I'm heading in the right direction. You can't imagine how encouraging that has been to me.  But I've also have much to learn, so I'm definitely gonna be listening on! In episode 122 you discussed the balance between paying down debt and starting an emergency fund.   A potential first step is to build up a mini emergency fund, perhaps R5,000 to R10,000 before contributing more than the minimum towards the debt That gives you a buffer to cover small emergencies while you're paying down the debt. At some point you will have to grow the emergency fund to 3-6 months of living expenses as you rightly advocate, but it may be helpful to have a small emergency fund before you start to attack the debt. I'd like to hear your views on that. Alec has saved up a nice nest egg and is getting ready to make a move from Durban to Jozi. He wants to know what he should be doing about his ETFs. I’ve managed to accumulate just over R1m in investment savings through various actively-managed funds like Coronation and Sygnia in approximately 10 years. I recently started investing in a passive strategy through ABSA stockbrokers, before they changed their platform fees. NFENOM PTXTEN CSEW40 ASHGEQ ASHT40 I also have a tax-free savings with Satrix, and an RA with Liberty (which I am in the process of moving to a more cost effective fund). Should I continue investing some of my money in my actively managed funds? Should I wait to see what the market returns are, or should I just continuously buy? For e.g. should I buy 100K of NFENOM ETFs and wait to see the returns before I continue investing in that fund, or should I trust the market value will be higher at a much later date? Are there any other investment strategies I should be spending my money on (rental property, gold coins, or starting a side business)? Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Fried and his partner have R3m debt between them, including a buy-to-let property and some cars. How do I go about moving my Sanlam stuff away from them? I'm considering moving our RAs and my wife's TFSA to EasyEquities to manage it myself (only platform I care to know). Life insurance and income protector - I'm thinking of leaving it at Sanlam just because I don't know if I can move it? And if I do, are they going to take my blood again? I'm selling my "investment" house. Not sure if I should use the money to pay off my wife's car (interest rate of 11.15%) or use all to buy ETFs. The car's settlement amount is around 50% the pre-CGT money I'll get for the house. Trishen’s family is growing too big for their home. I have a two bed, two bath apartment in Sandton. As my family expands I’m looking to get something bigger. I am unsure whether to rent out my current place and potentially have an additional income in the future or sell it use the money as a deposit, lower my bond repayment then use the extra cash every month to invest in ETF REITS /shares. Johannes is getting a gift. I recently turned 21 and received R10,000 from my dad. I want to use this money to help cover my overseas trip (December 2019). I’ll be needing this money to buy a ticket/accommodation. I’ll probably buy my ticket in the second half of 2019. Where is a good place to "save" this money? I don't want it hanging in my bank account as I know I’ll use some of it. I also don't really want to invest in shares, as the volatility might cause a surprisingly loss in my capital at the time the money is needed. (8 months from now). I have seen some serious losses in my investment account this past year, including my South African ETFs. So I am a bit afraid of that. I’m considering putting it in an fixed deposit account at African Bank, seeing that they have great rates OR the ABSA NewFunds TRACI three-month ETF. What are your opinions and suggestions? Marc is worried that the CoreShares Dividend Aristocrat ETF’s returns are very unpredictable. The goal of the ETF is to provide a relatively stable income that should rise with inflation as the underlying companies earnings grow. If you had to buy this in your TFSA, how would the dividends of the international companies be taxed? Rui’s mom retired. Her adviser put her savings into unit trusts instead of a pension fund or RA. She has quite a bit of money due to the sale of her house, as well as a TFSA, which is only a small portion of her savings. Moving any of the funds will incur capital gains, which is tricky - she may save on fees, but it will hurt in the short-term. How does one proceed from here? Leave it as is, and just liquidate the funds as one needs to in order to live? Sell, move them all to EasyEquities, do something intelligent with them there? I'm beginning to think the only strategy that makes sense is to have a large cash buffer that you replenish via the income from the investments (whether it be dividend, selling some of the funds, or a combination of both.)  

There’s nothing intuitive about the stock market. Most of what we discuss on this show relies on a basic grasp of the stock market, which is possibly asking too much. Every year I learn something new about the market. When I do, I get this horrible sense that everyone else already knew that and thinks me dumb for not knowing it. Sound familiar? An email from Antoine made me realise we’ve never really devoted an episode to how the stock market works. This is one for your bookmarks folder. Here’s what we chat about: What is the stock market? What is it for? How does it work? Who are the players? How do you make money? Antoine is worried that the stock market is a Ponzi scheme.  A bank can lend 10 time more money than is physically available. So out of ten dollars virtual value available, nine dollars are a bet on future growth, not on actual value. The same holds true for bonds and capital investments. I'm really concerned that my children will become irrelevant, despite doing very well in maths and science. Investing in the almighty stock exchange might not save their souls. I'm hoping Simon might have something better than: "Because it worked for a hundred years." I heard that gospel before. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week is Sebushi for sending such a happy email. I have been listening to Fat Wallet for more than a year and encouraged my wife to listen as well. Last week she received an email from her employer Vodacom about their YeboYethu share and given three options to choose from. With the knowledge we received from Just One Lap, it was easy to make not only a choice, but an informed choice. Thank you guys for the your education it means a lot to me and my family. And thanks to Stealthy Wealth as I found about Kristia from his blog. From your Number One Fan whose Tax Free, RA and Investments are in order. Christiaan’s friends are worried about what a crash would mean for those close to retirement. My friends’ parents are in their 70s. They’ve managed their finances well, are still able to work and live off what they earn. They still save. They’re worried what a next crash might mean for their savings. What're your thoughts on the Warren Buffett approach in his will to his wife of 90% in the S&P 500 and 10% in bonds? Rob is about to receive an inheritance. I am married and on the verge of starting a family. We currently live in a townhouse which we are paying off. We both have RAs to to which we contribute monthly, and also invest the max each month into our TFSAs. We are about 3/4s of the way towards having a fully topped up emergency fund. I have also received a nice bump in my monthly pay and plan to invest as much of this as possible into EFTs. We do potentially want to look a buying a house as we will need the space with kids and it's nice to own somewhere with a garden. So basically my question is, what would be the best way to use this lump sum to insure financial security for a growing family? Would it be a good idea to try and pay off the bond on the townhouse and then rent it out and use the money to fund a bond on the house? Or buy a house cash and the rent out the townhouse as a passive income? If we go this route, would it better to keep it all under one bond? Or should we just sell the townhouse and buy the house and not worry about having a rental property? Or is the property idea just a bad one all around? Is the best use of the money to clear all our debt before we start worrying about investments? Should we just invest the money and use the interest to pay off debt? Where would be the best place to invest to avoid income tax? I have only recently started listening to your podcast so if there are other episodes that answer my questions then could you point me in the right direction? Jonathan sent such a great email.  Hi legends Give me a 3 minute for and a 3 minute against endowments, assuming fees aren't bad. Hooray! Tim wants to claim back a loss from SARS. I invested into a scheme that now appears to be a fake scheme (money does not get paid out) am I able to claim the loss against my tax return? If I had made a profit SARS would have asked their share, so surely the inverse must work and if so what proof would i need to substantiate this? I fortunately on put a bit of FU money in that I could lose (any loss sucks), unfortunately it seems others may have put a lot more in..., so once the dust has settled and I know the outcome ill send a mail as a lesson for all. Alexander has questions about investing for minors. He wants to know what would happen if family members contributed to a TFSA for a minor and accidentally went above the R33,000 limit. Would the platform block the transaction (I use EE) or would someone be liable to pay a fine (presumably the legal guardians of said child). It seems better to have a bank account people deposit into and distribute from there. We want to open an investment account for our godchild, not a TFSA. How would tax around this work? If anything is withdrawn before the child can be a registered tax payer (medical emergency or something), would the parents be responsible for the tax liability, or us? Shaunton wants to know how the 27.5% tax rebate works for people who work for themselves. Does this limit also apply if you have your own business, independent contractor? Or how does it work? Bongani is concerned about capital appreciation due to rand depreciation. Rand depreciation means capital gain for me as a south African investor on dollar-based ETFs. If I were to invest in a JSE-listed ETF, the rand depreciation would be considered capital gain and I would be liable for tax. If I buy the MSCI World etf from Vanguard as an offshore investment, would the rand depreciation also be considered capital gain and I be liable for capital gain tax? Kobus wants to know if higher tiers are worth the rewards. I’m trying to compare rewards programs of different credit cards. Is it worthwhile to go for a higher tier status so that you can get a bigger rebate on petrol? It seems that there is not one reward program that is the best. Is it best to ignore these reward programmes altogether?  

I blame the advertising industry for the idea that living a good life is somehow related to money. Much as I make my living thinking and talking about money, money for its own sake is pretty useless. Back in the bad old debt days, I tried to use money to make me happy. That not only landed me in trouble, it also didn’t work. When a friend sent me the Guardian article I talk about in this week’s episode, I had bad money days flashbacks. As Kay pointed out in the community group, the woman's language usage is very telling. I remember saying things like, “I think it costs”, “I guess it sets me back”. What bothers me most about this article is how this woman hasn’t made any choices about what she wants her money to do. She’s living someone else’s idea of a great life. I know it’s not an easy balance to strike, but a little thought can go a long way. Fried recently had a health scare which got him thinking about this balance too. I had a terminal illness scare recently. During that time, I really thought a lot about finances, about leaving money for loved ones and my daughter's future. If I died today, I know that my wife and daughter will be financially safe because of my life insurance policy (thank you SANLAM broker-man), the same thing if I don't die but can't work and earn an income anymore. What stuck in my mind is that if I died today, I haven't yet lived. No one plans to die, yet everyone does, and most, sooner than expected. Like you, I'd also like to live to 130, but we probably won't. It's very important to live during your breathing-time. And to do this while building a small fortune to carry you through retirement? How do you balance this?! Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Darryn, who wants to be a good uncle. My sister lives in the uk. They have three little boys. I don’t want to spend money on toys and amazon gifts and wanted to do a TFSA for them. They are unlikely to move back to SA. Are there any companies or banks that do this overseas (uk specific) and what methods would one go through? Any other advice on these type of matters? Chris is 24 and needs to choose between an RA and a TFSA. If I have R2500 to invest should I be maxing out a TFSA or putting money into an RA? And is only contributing to an RA when I'm 30 crazy? Generally more conservative over a 30 year period and generally more expensive than an Ashburton 1200. Iit seems like money in an ETF is the answer.  Is this a dangerous thought to only start putting money into an RA once I’m 30 – if I’m still contributing to a discretionary investment? Do the tax implications of share incentive schemes leave you in a dangerous cash flow position? If you earn R600 000 and your employer offers you R500 000 worth of share incentives vesting in 3 years’ time. You have a long term view on the company and wouldn’t want to cash in for at least a couple years after the vesting period. Effectively in 3 years’ time you are going to have to cough up extra (roughly) R150 000 in cash to SARS, but you are going not going to have any extra cash to show for your bonus? That would probably force the majority of people to sell their shares as soon as they vest just to cover this? Sheila shared an anecdote about bonuses gone wrong on The Fat Wallet Community on Facebook. In UK in early 1960s, Dad expected his discretionary birthday annual bonus .. the Company had a financial bad year and they cancelled. Guess who cancelled Summer Holidays that year. Still a bitter memory as I had bragged at school that we were going to Spain. I've never banked on a bonus or commission in my life though .. lesson learned. Frank considers himself reasonably financially literate, but he needs help. I have been managing my money from a young age using what I have read and learned to guide me. I got RAs, Preservation funds, Provident funds, share portfolios, tax free savings, paid off house, an emergency fund etc I have done all the spreadsheets, calculated future value on the growth of my portfolio and what I believe to need to live when I retire. I'm worried that I will be blindsided later in life, because of a knowledge gap, or not truly understanding tax treatments, error in my calculation which will result in a gap at retirement. I have 25 years to retirement and now seems to be a good time to do a proper evaluation of my position. When looking for a truly independent advisor that aren't aligned to product providers and will have my best interests at heart, I am battling to find one and don't know where to look, as the internet is failing me. I am clear what I need from them. Review my plan and calculations and tell me if I'm on the right track. Need Reassurance Not sell me a product, if I'm short something tell me and source it. What is the real tax implication of what I'm doing, so that I'm not surprised at retirement And start a conversation about options of how would I structure my investments at retirement Any advice you can give me to find an advisor would be great, better if you could give a set of names of people in Johannesburg that I could approach. Or if there is an alternative that I haven't considered that may help me answer my questions. Matthew has an excellent question about buy-it-for-life shares. In the last minute of episode 117 you say that you should hold and never sell. How do you actually realize or extract the money from the portfolio? If you never sell, your money is just a figure on paper? So when do you actually make the money from your investments? We haven’t heard from Sabatha in a while, and now he’s back with an excellent answer to a question we received a long time ago. We spoke about Greg moving his RA in episode 118. The explanation for Sanlam's waiting period doesn't make sense.  However, the waiting period may be valid if the investment was by debit order. With most banks, an investor can unilaterally reverse a debit order within 30 days.  Thereafter, you need the cooperation of the receiving entity. When you decide to move your RA, don't forget to cancel the debit order instruction.  You might think it's a given, but it's not. Sanlam will transfer your RA AND continue with the debit order investment as if nothing has changed!  Buggers. Anonymous has been appointed the executor of their grandparents’ estate, which is in a trust. They really want to do a good job of it. After episode 118 on inheritance I was reminded that my uncle and I are the executors of my grandparents’ estate, which is in a trust. It's not a lot of money and there's a good few people between aunts and uncles and cousins, so no unexpected R3mil coming our way. That said, I'd still like to do it right and I don't know where to begin? Shane This Ashburton Global 1200 ETF is the bomb. In my days of TFSA investing, I've never picked a selection of ETFs very successfully, but since your 'One ETF to Rule them all'... show 85 I sold all the 'fluff' ETFs that I knew nothing about, and swapped it for the Global. Since then, it's up almost 20%... INSANE! I finally see a profit margin on my EasyEquities account, and have a portfolio that's beating inflation. I’m busy reading Sam's book Manage your Money like a Fucking Grownup - and it's amazing, but I wanted to run something by you to find out what would happen... If South Africa's economy DID tank (think, Venezuela)... and I had a large portion of my savings in my TFSA... and it was in the Global 1200... because it's a local index, would that be affected by an economic collapse? Or because its invested in global stocks, would it be protected... and what would it do if it was protected (like... would it go up by a bunch)? José wants to know if there are marijuana shares or ETFs we can invest in from South Africa. He mailed after the concourt ruling that it’s legal to smoke and grow pot at home. But remember it was possible to invest in these shares before it was legal here. Robyn is in a tight spot with her family. I listened to your 108th episode and when the supporting family topic came up, I had tears streaming down my face. I come from a single parent family, and I am 31. My 2 siblings are 12 and 14 years older than I am. My mom recently had strokes and can no longer work and my brother has simply turned his back on any responsibility. My sister earns a pittance and lives with my mom and relied heavily on my mom to feed, clothe and house her. My mom also made the fatal mistake of cashing in her entire provident fund over a decade ago and spent it on clothes, gifts, furniture, etc, so she survives now on her tiny SASSA pension. All the responsibility falls into my lap. I don't have that many dreams, but because of my poverty-stricken childhood, my main focuses are to have children and raise them in a financially sound household, and to build security and comfort for myself and family (ie: not to feed the cycle of poverty). Now I am paying for a hospital plan for my mom each month of R1607 and I need to keep cash on hand because they're in a position where disaster is a regular thing. I agreed to put away R1000 per month into a Capitec savings account and if they need it, they have to justify why, etc before I simply hand over the cash (they have always been poor, and are the opposite of me - I tend to never spend anything on myself, whereas they go crazy on luxuries and then can't pay rent). My husband and I already pay R600 into our access bond each month (which is also serving as our emergency fund, which is still FAR from our goal). I plan to downgrade my medical aid to a hospital plan and pocket the savings of R500 and add that to the access bond (thanks Stealthy Wealth!), and now I am wondering if my family's R1000 pm should also go in there? I figure that if I'm going to be sacrificing this cash in future, I may as well make it work in my favour while I can. Is there such a thing as over-saving in an access bond? Are there real risks to this? Also, can I include saving for my family as part of my spending/saving ratio, or am I fooling myself by doing this? Liefie has reached retirement age and now wants to take some money offshore. I am over 55 and I receive capital and interest monthly from the sale of my business and should receive it for the next 3.5 years.  So paying tax on the interest. I am still saving in case I live to 90 plus.   I want to do a lump sum payment into an RA for tax efficiency. I want it to be invested 100% offshore so it will have to be a living annuity and I will draw down 2%. (I have transferred my life savings in RAs to S&P 500 through Momentum). I can’t contribute directly into a living annuity, it has to go to a "normal" RA and then transferred(!). During the previous tax year I almost had my head explode in frustration to get this done.  It was easy to make an RA contribution to 10X, but 10X doesn’t cater for ancients like me to do what I have described above. So I then had to transfer from 10X to Momentum to get into a living annuity invested offshore.   So far this year I have postponed doing anything about it.  Do you know about a streamlined route to do this? Is it a bad idea?

It took just over two years to pay back my debt. Debt servicing became such a part of my lifestyle that I was completely unprepared for the last payment. I knew, on some theoretical level, what I wanted to do with my money once the debt was gone. However, a part of me thought it would never happen. I was worried about debt for so many years that I wasn’t prepared for the day I didn’t have any. It was disorienting. In this episode, we try to prepare you for the next phase of your money that is currently crawling towards you. Keep this episode saved somewhere. It’s a roadmap that will get you to the next step. We do a “what next” for each of the below phases of your money life:   Debt Recently settled debt Starting out at 0 Emergency fund in tact RA in tact ETFs bought Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Matome discovered us through Stealthy Wealth. I’ve only recently discovered your podcasts (well actually a few months back but I have been listening to many of the oldies of both the Fat Wallet & JSE Direct) & just want to give you guys a BIG shout out for all the great stuff you are doing.  I have learnt SO MUCH!!! & now I am taking my finances into my control. I was actually introduced to Stealthy Wealth from a friend, a real miser, but great guy and through his blog I learnt about you guys. So here I am! I suppose one of my greatest learnings from you guys is that your retirement planning has nothing to do with your income, but everything to do with your expenses. That’s better than real gold!  It doesn’t take millions make it, but you can make millions by knowing that one little sentence! AWESOME STUFF RIGHT THERE. This is the first of my many mails I will be sending you guys & I am seriously looking forward to learning more, making bigger & better decisions. Also Phasane for taking charge of his RA situation. After listening to a number of your podcasts, I finally gathered enough strength to look at what I signed up for on 13 November 2013. These suckers would be charging me an ongoing commission of 5.7% from year 5. How did I sign up for this? I'm glad I learned about your fat wallet podcast when I did. Chris submitted an awesome spreadsheet. He’s wondering about his investment strategy, specifically a growth strategy vs a dividend strategy. What makes this hard is the dividend withholding tax, which he bypassed by focussing on a tax-free environment. Dividend vs Growth Justine Burnelli is selling a house and downscaling big time. We've decided to move to sunny Durban and are selling our house. We bought six years ago in a good area so we've had strong growth. Any tips on selling a home? We're going with one of those online fixed-fee estate agents. We're planning on renting a much smaller place in Durbs since we came to the realization that there were rooms in our current house that were basically unused. That leaves us in a bit of a conundrum: how does one get rid of all this stuff? Have a garage sale? But who wants a slightly used toaster? movingon.co.za What does one do with this massive pile of cash once the house gets sold? I'd just like to park the money someplace until we can figure out where to find a more permanent home for it. Feeling really uncomfortable dealing with 7-digit numbers. I'd like to think I'm financially savvy enough to know what to do, but am still feeling out of my depth. Small mistakes could result in big sums of money going to fees and taxes. Was thinking along the lines of the TRACI or gov retail bonds. What other short term 3-year cash-like instruments are there, besides these two and fixed term deposits at the bank? If I do invest the house sale proceeds into the MAPPS Protect ETF, will the market allow such a large transaction? Would the market maker simply, automatically create new shares, or would the price just shoot through the roof until all the shares available have been bought up. What then happens when i want to sell one day? Is an ETF liquid enough to allow transactions of say 5-10% of its market cap to take place? Wim is making the most of rewards programmes.  My wife and I are at Investec and we have decided to use our rewards to re-invest in Financial products on rewards program. We have invested almost R30 000 rand over last 5 years in a global Investec equity feeder. We get R500 voucher for every 10 000 points. Only snag is you have to buy Investec product and have at least R10 000 rand in product. (Lump sum) Initially used money from extra money in home bond. Our cards are credit card but use it as debit card. All reward point goes directly into investing not spending. Nicole recently scrutinised her retirement fees. She is 52 and she can move her RA without penalty at 55. I have learnt a lot from your show. Like everyone else I just wish I had had these insights 10, 20 or 30 years ago. For this reason, I am opening TFSA for my children and for every R100 they deposit, I will deposit R150 and then help them to invest it in an index tracker fund. I contacted my provider (PPS) for a breakdown of fees and found out that I am paying 2% effective annual cost. I told my advisor I’ve been sensitized to the importance of fees and I want to stop contributing to it and just let it sit there (I am 52 - I could move it with no penalties I presume at 55 years old). Despite this being an old generation RA, it has done surprisingly well by my calculations. But still - the 2% fees is concerning for me long term. Anyway, my financial advisor returned with a counter suggestion to decrease my EAC by moving from PPS to AIMS. I am feeling frustrated, as this suggestion comes only after I say that I am going to stop contributing to my PPS RA due to high fees. I received the below comment of my financial advisor: "Going direct to an asset manager is not necessarily cheaper. By going direct, the asset manager will always place you in a more expensive Class. Class A is more expensive than Class B,C and D for example" We also got an RA question from Robyn, who is in the unfortunate position of having to take care of grown-up family members. I’d like to open an RA or TFSA for my sister, as I do not think she will have nearly enough to retire on. She is 45. I also cannot trust her with money, so I would like to make investments in her name, but preferably that I control, since it is my money in there anyway. Would you suggest an RA or a TFSA? Nduh is from Durban. He is 30 and started investing three years ago. He’s considering a few moves. I've been investing R2000/month in TFSA since the first month it was introduced with etfSA.  They are charging me 1% and I want to run away because its means it’s going to cost R1000 per year once I have R100,000. My TFSA with etfSA is an all equity account d other R750 monthly is in property (local & offshore) with our DARLING EASYEQUITIES. I want to move this R100K to easyequities. Etfsa invested in a number of ETFs. Should I sell all the ETFs after moving to EasyEquities and create something simply that I will understand or keep them? I recently bought a brand new second hand car on finance and this thing of paying interest stressed me as a result I cancelled a monthly debit order(R1000) to my RA (sygnia) and diverted it to pay extra on my car. I have provident fund with my employer where i contribute 18.5% since the age of 24. What your take on this move? Clara wrote us about a year ago about a rental flat in Cape Town.  We sold our home near Cape Town and have moved to the EU with our kids and cats and dog. I was very interested to listen to your episode with Patrick McKay because he discussed investing overseas, which is something I need to learn about, having sold our house in SA and not yet being ready to buy in Europe (if we ever do). How do we go about applying for a tax clearance certificate, and do you think I can do it myself or should I hire a tax elf in SA to do it for me? (I have been filing SA taxes myself, but I don't feel very good at it!) As far as I can tell, I still have to pay SARS tax on any income earned in SA (interest) even though I'm not a resident. Does that sound right? Ros noticed a new fee. This can’t be good. On a recent statement of mine from Absa Stockbrokers, I noticed a line item "ETF Fee" for each of the 4 Sygnia Itrix ETFs that I hold. It was the first time I'd seen such an item. I emailed Absa about it, and they pointed me to Sygnia. Sygnia replied: "The ETF fee item refers to fund fees accumulated between the last two distributions. This period would have been 6 months for most funds, if not all. The fee accumulates monthly and only gets deducted off the distribution. The ETF fee has always been applied but may be been deducted in the background by your service provider." Can you shed any light on this? Farhan is 30 and really wants his money offshore. I save between 10% and 25% of my salary monthly, which is split between: House: R1.1M with 600k debt (10.25 rate) Allan Gray RA EE account EE TFSA Investec 3 year investment: 100 in, 159 out in 2021 280k debt on a car (cough cough) 10.5 rate - should pay it off in a couple years. Should I pause all investment and just pay off my car? Or do I make good headway but accept 10.5% cost of debt in exchange for portfolio growth? I don't have a lot of faith in the rand, so have been moving my liquid investments into ETFs with global exposure. That said, I’m very aware that the vast majority of my investment is tied up in my house. Do you think pushing every bit of my portfolio into foreign exposure ETFs is a bad idea? Or a great one? Why? Wicus made such a good call to save money.  I’m doing my articles and decided to move in with my parents next year until I finish it. I’m going to save R5 000.00 per month because I no longer going to pay any rent. I’m very privileged that I don’t have any debt and all the money I save I can use it to benefit for my future. I already opened a tax free and balanced fund at Allan Gray but only recently discovered that the transaction fees are going to hurt me in the future. Do I need to move my tax free because I’m planning to use that money when I am 70 years old so still have 46 years left to build that investment. How do I save the money I’m going to save staying with my parents. I want to save the money for between 8-10 years and want to use that money for a deposit to buy a house in the future.  

Expecting a large amount of money for months on end can only make you crazy. I’ve never been paid a bonus, so I’ve never had to endure months of spending and re-spending the same amount of money. Just thinking about it makes me antsy. Nothing sane can come of it. This week, we talk about the dangers of spending money before you receive it. If you’re trapped in a debt-to-bonus loop, you want to listen to this episode. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Denzil, who went to work on his financial situation. Since we last chatted, my RA has been moved. I've opened TFSAs for both my kids and opened a TFSA for the wife. Can I contribute the full R33k per year into my wife’s TFSA on her behalf with no tax Implications? I assume I can as spousal contributions are exempt from tax implications, right? My wife is a housewife and has no RA. She is 32 and I’d like to get this going for her. However, I’d like to know if we can use this as a tax benefit on my side, or on her side even though she doesn’t earn an income? She might start working part-time next year, so she will have some income. If she doesn’t have an income, how can we structure this to get the best tax benefit possible? Sabrina I am 32 with no pension fund, so where can I invest? How much should I invest to retire comfortably? What fund can give great returns? WC wants us to discuss bonds. Can you discuss bonds and bond ETFs? Although I have relatively ok knowledge on shares I am a total novice on bonds. With the inverse correlation between price and yields, when is a good time to buy an ETF like BND? This is purely for diversifying my investments. Bosman isn’t sure where his interest goes in the time it takes for transactions to clear. I have an account with Standard Bank OST and transfer a chunk of my salary from my Capitec account every month. From the time I make the payment from the Capitec account to the time the money appears in OST, who earns interest on that cash? Also, if I do an instant payment with Capitec at say 13h00, do I earn interest for a part of the day from Capitec and then the rest of the day from OST? Jan recently sold a rental property that earned him a nice chunk of rental income every month. He’d like the profits he made to cover his monthly expenses. I used the money to pay for some monthly expenses. What is the best way to invest the capital to give me an income to pay for the ongoing expenses? And perhaps some growth? I sold the property for R1,5m and I can invest R1.4m. I have monthly expenses of R10,000 to cover. Douglas wants to know where to grow money for other people. We’ve been putting aside money for our house managers each month for a few years. We had intended putting the money into Satrix each month, but because of FICA and administrative issues we put the money in a savings account. We have lump sums of about R7500 and R12500. I want to put these into investments that will pay out on their 60th birthdays - between 6 and 12 years from now. Where could I invest this money that will provide a secure return that won’t eliminate half the capital in commissions? I’m sure there are parents saving for their kids, or other folk like us, who have the same problem. Pat wants to know how to invest tax-free. I hear you guys talking about ETFs, EasyEquities and tax free savings accounts. I know I need to put R33,000 every year into a tax-free savings account, but I'm stuck on the next step. So I open a TFSA and then what's the next step? I must open an EasyEquities account? I'm confused on how all that works. Mainly just the next step after opening a TFSA. Garth wants to know if Simon is financially free. Simon knows a lot of random things about finance and has been in the game almost as long as I have been alive. I keep on hearing him talk about buying shares when they were tiny, now have grown 300 and more %. Join the Fat Wallet community group on Facebook.

Since my first investment in Mach 2014, the market has done nothing. Inflation, on the other hand, has done enough. My time in the market is making me progressively poorer. I don’t care for it. In this episode, Simon and I discuss what we can do while the market does nothing. It’s awful, but it does provide a bit of breathing room to pad that emergency fund, figure out how different asset classes behave in different market conditions and really delve into sector exposure in a portfolio. It’s also a great time to accumulate units in the eternal hope that the market will one day find its will to live. PS. There's a Fat Wallet community page now. You can join here. Win of the week is Laurentius Wyngaard. He wins, because his name is epic. He also wins because he asked a very important question. How do I go about investing in the TFSA EFTs? I have a Satrix 40 ETF and had to invest through Satrix, but where do I access the ones you've listed? I also want to send a shout-out to Gideon, who is 26 and has all his ducks in a row. In his email he said something that struck me: "Being a CA I am familiar with most of the concepts, your podcasts and Sam's book has just given me a new perspective on how to implement the theory!" Vincent has great retirement questions. With life expectancy increasing, could you out-live the 2/3 annuity? This is where drawdown rates come in. In a living annuity you have control over how much you can draw down. What happens to that money when you pass away two years after retiring with regard to estate, beneficiaries and tax? Could you ever invest too much in an RA, should the focus be to first max out tax friendly investments [RA & TFSA] then trade? Our friend Herman from Pyfin is working on an algorithm that will help us eventually answer this question. There is a tipping point and once he knows the answer I hope it makes him very rich. He also wants to know our opinion on the rand in 40 years.  The drawback of the compulsory annuity after retirement is that you will never see the entire 2/3 value being utilized or have full access to it. Someone is keeping the money you worked very hard/smart for and there could be massive tax deductions with payout to beneficiaries or issues with access in the event of emergencies. Retirement annuities are there to help people who struggle to save. The tax incentives are there to encourage us. It this is the only saving you do, keep doing it. If you are a more sophisticated investor, you might want to look at a combination of options. Aiden has a suggestion for the rebalancing of the Listener Love index. How about on its anniversary we rebalance it by removing only one company and replacing it with another “loved” share. The reason for removal could be based on a hierarchy of what all the companies did over this last year. Something like : Committed a crime/ fraud and have been caught out There is a lot of smoke but no fire, yet. Impending merger / acquisition / delisting Poor performance / management over the past year Lost a LOT of money We’ve fallen out of love In most cases a company that commits number one will also have committed number 2, 4, 5 and 6 by the time we rebalance. I vote for Steinhoff to come out, and a vote for Tawana (lithium producers - i mean come on - Batteries hellloooo) to come in. Tim also has some suggestions. For one, he wants us to change the name to the JOLLI index, which stands for The index of love that is not jolly. He wants to include Foschini, Aspen and Bidvest and votes to remove Blue Label, Brait, Gemfields, Lewis and Steinhoff. Petrus in Germany is thinking about breaking into the German property market.  If it makes you feel any better, a small starter flat in Munich will set you back around 600k Euro!  Oh, and the banks want a 20% deposit! What vehicle are you using to save up for your deposit and why? I know you are a government retail bond fan, but what about ETFs? Apart from the risk of low, no or negative returns, is there any other reason why you would not invest in ETF for something more short term like a deposit for your first property?     Darryn is a vet who is starting to take a closer look at some of the products he got sold when he was a student. I’ve been sold a few products such as an endowment, RA (Liberty) and an income protection (by FMI) but I am still in the process of researching all these products. Any advice on these products from liberty and FMI? For now I'm just paying off my debt and plan to have this done but mid next year. Then look forward to investing after that. I’ve heard PPS have a profit share account and that Discovery has paybacks if you got medical aid with them (Which I do, and happy there). Does it really matter which one I'm on? Do you think it would be better to be on either PPS or Discovery because of those perks, taking into consideration if their monthly premiums all all the same? When your emergency fund is hefty enough, you can get rid of income protection. Our friend Charmaine alerted me to something horrifying. When you pay fees on a sliding scale (when they say you pay less for investments over a certain amount) you actually still pay the higher amount on the investments before you reach the threshold.  It’s also worth noting that the fees you see on your table EXCLUDES the TER and VAT. On the first R500 000 0.65% On the amount from R500 001 — R1 000 000 0.50% On the amount over R1 000 000 0.35% We got feedback from Dr. Woof on the marriage thing. His situation inspired a series of articles I wrote for our OUTstanding Money feature. After the podcast, we had a straight talk about the whole wedding thing. We are already living together and are effectively married in terms of financial obligations, cooking and cleaning. We’ve decided to hold off on the wedding for now and save until we can both afford the wedding we want i.e. "Platinum wedding". I have finished reading Sam Beckbessinger’s book and encouraged her to read it also. So we are starting our #couplegoal wedding. I am so grateful for your advice that one should be open and honest about money matters with your partner. We are much happier after the serious chat and it is all about managing one another's expectations. I have also downloaded the OUTvest app because you can request contributions on the app. Instead of Birthday and Christmas gifts, I am going to request contributions for the wedding fund. Instead of wedding gifts, people can contribute to the fund.  We already have most household items, so effectively we just require a wedding. Anonymous is worried about EasyEquities as part of Purple Group. Purple Group isn't doing so well because of GT247 and Emperor Asset Management. Emperor has had assets under management halved. How will the continued losses of GT247 and Emperor be contained so that the losses don't 'spill over' to EasyEquities, which was 'saved' by the investment from Sanlam.

I liked the idea of doing a podcast on inheriting a large sum of money. I’ve dreamed about that kind of good fortune many times, as I’m sure you have. I hope this episode allows you to daydream about the kind of life you would lead if someone left you a small fortune. (Hopefully someone you’ll miss fondly, but not deeply. It’s hard to be happy about anything with a broken heart.) I’ve said this before, but the most important question you ever have to answer about your money is, “What do I want my money to do?” If you can’t answer that question, your financial life will always feel somewhat unsatisfying. I’ve written about it here. It’s especially important to be armed with the answer to that question when you inherit a small fortune. To be safe, perhaps think of the the answer now. You never know what might happen tomorrow. If you’re not sure what you want money for, you’ll likely watch it disappear before you can work out your strategy. Ken inherited R3m. Here’s his story. Upon hearing you get an unexpected inheritance you really don't know what to do. Googling to look for podcasts really didn't bring up too many good ideas. Most articles very generically state that you need to pay off any debt, pay of your house, have an emergency fund etc etc etc. I'm in my early 30s. I'm self-employed. At this stage I'm single, no children so I don't have to take anyone else into consideration. I earn a decent salary, I have no debt. I despise debt and was raised in a house where debt was the sworn enemy. Even buying my house a few years ago I felt sick that I had to borrow money. My house is paid off.  Obviously there are maintenance costs and levies, but I'd rather do this than pay off a bond. I have money invested in Satrix. I only started contributing to ETFs and not just my RA about two years ago. Before that I made some lump sum deposits when I could. Due to trying to diversify I now own way too many different ETFs, but I'm now more focused on why I buy certain ETFs. I have an RA with a life insurer (not 10x at this stage). I have an emergency fund in an interest-bearing 24hr notice account. I'm currently saving for a new car in a multi-deposit fixed term savings account at Capitec with 7.6% interest. I don't intend buying a new car with the inheritance. I drive what you'll call a “sensible car”. I lead a pretty simple life. Fat Wallet has definitely reminded me that keeping your costs down is the best investment you will ever make. I do have a few vices that money gets spent on but I've been fortunate to do so over the last few years. I intend for the inheritance to provide me with lasting security. Most of it will be invested and I will continue to rely on my own financial strategy (which is basically ETFs) to build my wealth. I will probably spend about R200,000 of it on a trip of a lifetime - this is ridiculous, but given my circumstances I feel it can be justified. I'm thinking a lot about offshore investments due to the current conditions and political uncertainty in our country. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Jenny Pigeon, who wrote back in episode 92. She got in touch with her friend and advisor after that episode and managed to renegotiate her fees. “My advisor subsequently dropped her initial fee and halved her annual fee. So this was a good outcome for me.” But she wrote us a great email that made my day: I’ve started a happiness journal and there is a 21 day instruction to send out letters to friends and people that have had a positive effect on your life. It struck me that my happiness levels have really moved up since I have become a regular listener. I think the reason is the sense of empowerment, enthusiasm and curiosity  that this kind of information imparts. You and Simon turn dry subject matter into something very digestible. Thank you for making a positive contribution to my happiness. Gerhard’s wife is about to become an entrepreneur. They are trying to figure out what to do about her pension. My wife is leaving the comfort of a steady income and starting her own thing. She has a pension with her current employer. When she leaves her job that pension will be paid out to her; what in your opinion will be the best option? Here is the list of what we have made while lying in bed awake at three in the morning:       Pay of our debt and start the new adventure with a clean slate       Use that money it to fund the start-up       Open an Easy Equities account for her and save it in RA Carel wants to know where his fees go when he buys a share. What are the transaction fees when doing a trade on the JSE? Does all of it go to JSE? Is JSE Ltd a private company, i.e. would they charge as much as the market would allow, or are there other factors involved? I personally think that transaction fees are the biggest barrier to entry to the JSE. How much of this is physical labour (infrastructure maintenance) and how much of it is just settlement trust? Francois wants to know if it’s worth moving an RA for a few percentage point saving. I am wondering if it’s worth changing my RA provider again? I’m currently with etfsaRA, paying 1% fees. Easy Equities RA charge 0.6% exl. Vat. Will it be worth changing to save 0.3% on fees? Will I pay a penalty if transferred? A few years ago I section 14 transferred from Sanlam RA to etfsaRA (after listening to Simon). They penalised me, but well worth the saving in fees. Here's the spreadsheet Hendrik made for us to help you figure it out. Miles is upset about fee sliding scales. Why do the likes of Allan Gray, PPS, 10x and most other fund managers charge lower platform fees the more the client invests? Surely the admin will be the same for a R100,000 client and a R3,000,000 client? So prejudiced IMHO. They have us by the proverbial genitals  and it really makes me the moer in. Greg has been paying over 4% for his Sanlam RA, so he decided to move it. When he requested the move, they refused to move the last contribution he made. This week I broke the news to my Sanlam RA "financial advisor" that I want to transfer to 10x. I was given a quote. Surprisingly it said there's only a 0.13% about transfer charge, but my previous monthly contribution of R5000 was also outstanding. I queried why this R5000 was deducted and they said it had been received, but did not yet reflect on the system due to the general standard 25 days clearance period and that it would not be deducted from my transferable amount. I could be wrong, but 25 days clearance period just sounds like taking the piss, to me. So I asked them to then amend the quote to therefore say that this R5000 will not be deducted from my transferable amount. They said they can't do that since the system does not give them that option and "let’s see mid next with a new quotation." Jaco is earning dollars abroad. He’s got some offshore accounts and local accounts. I have Isle of Man account and transfer most of money into this account. I still have monthly obligations in SA and have to transfer some money to SA. My financial situation is as follows: I have two paid-off properties from which I earn a monthly income. I have a TFSA for both me and my wife. I have dollars invested in the Prescient Global Funds (Integrity) in an offshore account in Ireland through SA Integrity Asset management I have money invested with Allan Gray in various unit trusts. I have dollars in Sasfin offshore funds I have two RAs - OM and Sanlam. I also have some rands in shares, but feel that I need to get out of it. The money in Isle of Man account will be invested into the First world hybrid real estate fund through Marriott The other money I want to invest offshore, but not through a broker in SA. I am interested in investing with Vanguard World - It appears to be a great fund and everyone invests in it. How do I invest in this fund from Saudi Arabia? I want to buy Apple shares but don’t know a broker overseas - any advice? I am not paying income tax at the moment apart from the tax on the rental income. Other income is not taxable at the moment due to me being out of the country. How do I invest the rest of the income I have in the Isle of man account? Any other advice on how and where to invest would be appreciated. This is the Moneyweb article I was referring to in the podcast.  Ian has made some great changes to his personal portfolio since listening to the show. He’s considering a few more and wants to know if he should have a pension fund and a provident fund or just one or the other. The funds are both administered by the same company, and our group requires us to be on them so I can't move. Nipun has some ETFs in the US and has questions about the impact on his estate. I have a Webtrader account with Standard Bank and have purchased USD denominated ETFs listed in the US in this account. Would estate taxes be paid for this investment in SA or US & the rate of tax? I understand that assets over $60000 are taxed in the US. Do I require a Will in the US or is my SA Will applicable? What’s the most tax efficient way to invest offshore, can I continue with Webtrader of find another vehicle for investments?

It is the job of a salesperson to convince you you can't live without the thing they're selling. This is as much true in personal finance as in consumer products. If engaging with your money scares you too much, your only hope is finding someone whose approach to your money happens to be legitimate, effective and affordable. If you hope to manage your own money, collecting information on the best thing to do with your money is also tricky. If you ask someone with a vested interest in a product, they are going to try to convince you it's the best product. If you ask someone who recently over-committed to a certain type of investment, they are going to try to convince themselves it's the best decision by trying to convince you it's the best decision. This week's episode of The Fat Wallet Show is very special for two reasons. First, we recorded it live at the JSE as part of our JSE Power Hour series. Secondly, One Lappers Njabulo Nsibande and De Wet de Villiers joined us as guests. Our hope for this episode is to illustrate that there are many ways to construct an investment portfolio and all of them can be right. De Wet doesn't manage his own investment portfolio and he's happy with that. Njabulo manages three investment portfolios and he's happy with each one. What matters most is that you understand your portfolio, that you have a strategy and that you remember what it is. We're all making it up as we go. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Roxanne. A year ago I was retrenched, sitting on my couch, wondering how I was going to get through the next month as I was living pay check to pay check. My husband was earning a gross income of R18,000 a month and things were looking grim. We had medical bills, store accounts and a student loan. A truck had also hit the side of my car - we had reached rock bottom. I started listening to your podcast all day, every day. My family started to think I had joined a cult! I started putting a plan in place and started working on my FINANCIAL INDEPENDENCE to not be at the mercy of any employer, bank or creditor again! Since then I have done the following: Found a new job and career path Started an emergency fund Drew up a budget and started budgeting every single rand! I discovered EasyEquities thanks to your show and started investing I have paid off R40,000 in debt. I still have a student loan of R33,000 left which I am attacking - Balls to the wall on this one! I cut up my credit card and lived without it. I cut up all my store cards and have lived without those. I never thought the day would come for this. I have eaten a lot of peanut butter and 2 min noodles - thanks Shoprite! Used every student discount I can find. Shoprite is good with this But where to from here!? I would like to invest in a tax free account but don't know where to start - if I choose the coreshares S&P 500 - how do I work out the fees I would be paying? The naspers weighting in the Top 40 index makes me weary. How much insurance is enough insurance? Life cover, dread disease cover, home contents insurance, retrenchment cover, car insurance, gap cover, cellphone insurance, pet insurance - why are there so many products!!

A friend recently discovered a financially dependent parent had a huge amount of credit card debt. This revelation turned the dinner table conversation to the financial health of our parents. Of the seven of us, only two weren’t worried about their parents’ financial future. Naturally we proceeded to drink heavily.  I find it much harder to speak to family members about money than to anyone else. Our parents managed to raise functional, financially secure members of society. After that significant achievement it can’t be easy to admit that you need help from the sprouts you raised. I hope this week’s episode will provide a glimmer of hope if you happen to find yourself in a similar situation with your parents. Nothing can be done about the late hour, we admit, but if you can find a way to speak to your parent about their situation (I haven’t yet worked this out), you might just be able to find a creative solution. Ruben asked: My father is turning 60 next year with no pension/investments or even a house. I estimate he could work for another 5-10 years at his own business. How can I invest to help him with income for retirement? Twitter Daniele asked: I pay my mom rent. Should I put it in a TFSA for her instead? She has a company pension fund so this would supplement it. I am having a hard time convincing her that it is still a good idea to invest in a TFSA even though she is nearing retirement.  She works for a bank’s investment arm. Would they allow her to open up an account with another provider like EasyEquitites? The TFSA and UT fund options (no ETFs) for her bank are pathetic (fees). Get Down Adam  I am 32, I graduated as a doctor two years ago. Financial people with various levels of qualification and pizazz came to sell us their products. The bottom line was that you had to have started investing at 24 (which was the age of my peers). I was already 6 years behind so I went into panic mode.  Two years into the real working world again, I’ve paid off my student loan of R110,000. I only have about R60,000 left on my car loan. I have sadly given up on buying coffees, and I’m back to that instant coffee shit. I limit my spending as far as possible. 22seven is my most used app.  Because I didn’t understand what was happening when I started my investment journey, I signed up for a Liberty RA investing in Liberty Medium Equity (C) as well as a Stanlib Tax Free Global Equities Feeder (A). I recently bought the Coronation Market Plus Fund simply because they had a promotional sign up bonus of 10% which I thought couldn’t hurt.  I own a flat with my sister (which our parents bought for us). We rent it out and receive about R6,000 income a month from that. Recently we have been putting R500 a month into Easy Equities and playing around with ETFs. I have tiny amounts in: Cloud Atlas AMI RealEstate exSA Ashburton Global 1200 Satrix Top40 Stanlib S&P500 Stanlib Global Government Bonds I also have fuck you money shares/FSR in: Netcare (what a disaster) Montauk Energy Capitec We also have some cash stashed in an ABSA fixed deposit to cover maintenance etc.  My own emergency funds are modest for now, but I’m building in a 32 day fixed deposit in FNB.  Am I playing with too many variables? Are there too many ETFs?  How do I know if I have saved enough?  What’s the difference between building a portfolio and just sommer buying shit and hoping you’re right? Please fix me, or at the very least tell me I can drink decent coffee again. Frank shared a great graph he found of a married couple’s shared finances. I’ll include a link in the show notes. There’s a line item in the graph called “blackmagicfuckery” which is how they account for money that fell through the cracks.  Jorge wants to know if he can withdraw profits from his tax-free account without affecting his lifetime limit. Jon-Luke is a freelancer in his 40s. He has no debt except for a house he’d like to renovate. He works in TV when there is work, but the industry has been going through a dry spell. He had money saved for renovations on his house, but he’s had to use all of that last year when work dried up. He aims for an emergency fund of 8% of his portfolio, but he’s currently sitting at just over 2.5%.  In the next few years I can envision a bumpy ride in my chosen profession.  The probability is high that I may need to draw my emergency fund down again it won’t last as long as I need it to.  Should I do what I would have done in the past and go into my overdraft and credit cards or should I draw out of my Share Portfolio? Keep in mind that this would be for short term periods of 3 to 9 months. My instinct would be to leave my shares alone and give them the chance to grow. I am also on a strict plan to downscale my spending and to save more… My goal is to be saving 25% of my earnings by the end of next year, but getting there is a bit of a delicate process especially considering the current conditions in the Film Industry.  Also I am loathe to sell my current house until I’ve had a chance to do the renovations I planned. There’s some money to be made here for sure! G-Boi has taken his expensive RA by the horns. I’ve moved my RA from Sanlam to EE and opened a TFSA with EE. Should I max out my TFSA, then contribute to my RA? Or equally contribute to both my RA and TFSA. You and Simon made me feel so shit about the RA trap, at least I made the move to EE so that I can control it and don’t have to pay 4% Ter every year. Luvuyo wants to know if we think rewards programmes are worthwhile.  Do you think certain rewards points is to your benefit financially? I have an Investec Account which gives decent rewards points (obviously not as great as ebucks that everyone tells me about), a Dischem, Clicks, Woolies & a The Entertainer account and I only buy clothing through a family member that works at a clothing store at a massive discount.  Do you think that using discount and reward offerings can materially affect keeping lifestyle costs low so that you free up funds to invest or am I just a cheapskate that gets slightly marginal benefits from the above? Johannes wants to know if I’ll do a spreadsheet on all the costs involved in purchasing a home. I’d be happy to do this if the purchase goes through. So far I’ve spent R453 on sectional title and title deed reports. If the home loan gets approved, I’ll spend a further  R2,875 on an inspection. That brings me to R3,300 before anything has actually happened.

It’s finally done. I’ve submitted the offer, the owner accepted it. Pending the approval of my home loan, I’ve bought a house. The process has been dreadful and not one I’d like to repeat. I’m very sensitive to where my money goes and what I’d like it to do in the future. Making a decision involving hundreds of thousands of rands was never going to be easy.  The worst part was not knowing whether I could trust the information I was getting. It’s a negotiation between a buyer and a seller, mediated by a third party who has a vested interest. I only have a superficial idea of what I actually signed on for.  If you are about to embark on this journey, I recommend visiting the Estate Agency Affairs Board website and downloading the Code of Conduct. This document inadvertently tells you all the fast ones agents like to pull. It also gives you a sense of what you are entitled to as a buyer (and seller). I wish I read this before I started. I made liberal use of the South African Property Transfer Guide reports. I bought four, in total. I knew exactly who the seller was, how much he paid for the unit, what the other units in the complex were going for and how much churn the complex had seen recently. It also helped me figure out the agent showing me a different unit was being duplicitous; think Photoshopped pictures and unregistered agents. Lastly, I want to point you to the tool I found an hour too late, submitted by Adam. This company does a comprehensive inspection of the home you’re about to sink your fortune into. If you are seriously considering buying a place, pay a company like this before you commit.  My house hunting stirred some ideas and questions for you too. In this podcast we share some tips and tricks and help a few listeners figure out how best to buy or sell. Sally has a question about a second property. She didn’t buy it as an investment property initially, but then her circumstances changed. At first she wasn’t sure if she should keep it or sell it, but in the time it took us to get to her question, she’s had some closure. I’ve always been of the mind that an investment in property is a good thing and never really looked into it any deeper (in terms of returns etc).  I was mostly covering costs currently and figured I’ll have extra income once the property has been paid off.  First, I did the Stealthy spreadsheet, with all the actual money that went in and out of this property over the years.  The returns are sitting around 8-10%, which is not great.  I’ve actually been extremely lucky with tenants, and had no vacancies with this place, but who knows how long that luck will last!  Then I looked at retirement numbers.  My cost of living with the income is lower, thus the number I need to reach is lower,  and could potentially reach it in 15 years.  Without the income,  my retirement number is a bit higher, but without the property I would have more disposable income. If I’m disciplined, I could actually reach the higher number in just under 14 years.  Due to the amount of money in and out of the bond, the amount of cash from the sale will not be huge, but on the plus side, I won’t have a bond to pay off. I am thinking I may now put it on the market and buy some nice passive property etfs. I’m in no rush to sell, so that’s in my favour. I understand it may take time to sell, which isn’t an issue either.  What do you think? Have I missed anything critical,  or do you have further arguments for keeping versus selling? Christiaan shared a bond calculator. It shows: How your monthly contribution would change if the interest rate changes. How many times you’ll be paying the property if you just paid the bond amount. 2.36 times in my case, which means if I paid cash I could buy two of those places for the price of a bond How additional payments would affect your payment term. For example, my planned additional payment would shave 14 years off my bond repayment. Bond calculator spreadsheetDownload Antoine says: The emotional temptation of owning your own property is that it gives you control to fix broken things. However it’s not easy to deal with contractors. Although I can do a lot of these things myself, I don’t have time and it doesn’t make financial sense to spend time on these things. So in a sense I have to rely and deal with the quality of someone else’s work. Before you buy, reframe the problem and think about all the choices you have if you want to move to a different location or province at the drop of a hat. This might help elevate the emotional anxiety. Then decide to buy a house because it makes rational financial sense or decide to just rent a different apartment. If you have a lot of time on your hands to fix things at the house yourself (and you actually enjoy doing stuff like this.) Buying and renovating might be reframed as a “second” job. @chi_gunda and I had a conversation about what a bond does to our overall net worth. Both of us will have more liabilities than assets due to our home loans. I listened to the Fat wallet podcast this week, couldn’t believe you were even considering liquidating your tax free account,  I kept screaming ‘nooooooooo, Kristia, don’t do it’ to myself. Rudabager Lassie von Tigerbalm figured out a great way to consider the financial impact of buying. I’m on a bit of a present-value mission right now. One calculation you owe yourself is to consider what the extra monthly costs of a house are worth by retirement, when adding in compound growth. That’s the real cost. At least if you buy it you know beforehand, rather than screaming into the night later. Cliff has his financial situation completely under control and wants to know what percentage of his portfolio should go towards buying a home. I am invested in and contribute monthly to ETFs, equities both domestic and abroad, tax free savings, an RA. I’ve even dabbled in some cryptos. I also have about 25% in cash which I have in a money market acc that I can draw from if I see a good buying opportunity that I like. When the day comes where I want to buy an apartment/house, what % of my portfolio should I contribute towards buying a house?  I wouldn’t want to sell any of my equity holdings and I would prefer to buy in full with cash.  But that would also not be a wise decision because I would be putting all my eggs in one basket.  When it comes to buying would you recommend contributing 50% of my portfolio towards the purchase of the house and mortgaging the other 50% or putting down the minimum 10%, pay a larger monthly mortgage and have less disposable income to invest in the market every month?  I live in cape town where the price of a two-bedroom apartment is around ~R2m. I’m also considering what Simon said last week where cash is king when buying property. Stealthy Wealth once wrote an article about the cost of living in Cape Town. http://www.stealthywealth.co.za/2017/06/living-in-cape-town-definition-of.html Get Down Adam, who is a doctor and apparently a late bloomer, wants to know about buy-to-let. I just want to remind Adam that people live much longer, so finding your career later in life is probably a good thing. I come from a family where money wasn’t discussed and property is king.  From what you say on the podcast, property is a less smart investment these days and I get that but I also HATE paying rent, even if the maths makes sense. I’m having trouble shaking the emotional connection to property.  I have my eye on a piece of land that could potentially fit three small townhouses.  No one else has built there because there is an issue with access, but the land borders my parents’ property and they would sell me access. The issue is the land is over-valued for something you can’t use. The seller doesn’t know that I could potentially use it so I could get a deal. I could theoretically build three, let two and live in one.  Is this a dangerous game? I know property itself is a nightmare, but there’s a big part of me telling me this is a sneaky opportunity.  The not-get-down Adam also wrote us about inspecting a home before you buy it. Unfortunately I got it an hour after signing an offer to purchase.  You mention checking cracks, mould, damp etc. before buying a place. My personal experience has been to enlist the professionals here such as Inspect-a-home. I’ve used these guys twice for both my places and I actually had their investigation as part of the “subject to” criteria before purchasing. They do a full inspection and will identify faulty wiring, mold, cracks etc. with a neat little report that really helps.

Lesegisha once again showed us the error of our ways. In a last-minute attempt, he managed to save the Listener Love Index from pure obliteration. Here’s his argument: Although it’s been down 5% on average and around 10% lately, it’s still a good example of diversification considering how far down Pallinghurst and Steinhoff have been. Shares like Kumba that are up by really healthy margins are a good testament that there are also some good picks, which easily could’ve been missed. My main qualm (and lesson) is that we are killing it after just one year. Typically a market cycle lasts about seven years, so it makes sense that over a one-year period a portfolio is underperforming. It may seem like a trivial point but here’s the magic in it. The law of probability and averages says that the method we used will underperform over half the time and then overperform the other half, giving us an average return over the market cycle. I concede there’s no telling where in the cycle we entered, so it could get worse before it gets better or it really could just go bad. Equally so it can shoot the lights out. The most important variable then becomes time. The Love Index shows that by our nature we are impatient with our stock investments if we can ditch them after a year (arguably most of us had given up months ago lol), while we can put up with a bad pension fund or retirement annuity to retirement. "I think we measured a long-distance run using a 100m stopwatch. I would’ve loved to see how the index performs over a longer period (minimum 5-7 years) and I probably will be tracking it on the side. I’m almost certain the dogs in the portfolio won’t recover but a lot of the good-ish companies will outperform the market, especially if dividends are factored." Shortly after recording, Rudabager also made a plea in favour of our unloved index, “I think the love index was perfect. It was made up of votes from motivated investors who might imagine they have some insights. It was still a mess. That's a much more valuable lesson than it crushing the STX40 and a bunch of people deciding to put all their money on it.” As a result we now have two competing indices. It’s been a year since we made the Love Index, so it’s due a rebalance. If we get 17 votes to remove a company, it goes. 17 votes for a new company gets it in. The Zack One Lap Index In this episode, Zack Bezuidenhoudt compiles an index of beauty. I use the opportunity to ask almost every index question I've had for a year. It's a wonderful time.

Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   The question that inspired this week’s show is one of my favourites: what exactly happens to the money when you buy a share? Who gets it? How do companies deal with shares in their books? We talk about the mechanics of buying a share. We discuss the differences between the primary and secondary markets for shares, where the concept of share buying came from and how shares get from person to person. It’s fascinating! Thanks very much for all the great iTunes reviews and messages of support we get every week. It’s wonderful to be reminded that our work has a real impact. Cindy van Heerden wins for being a Van Heerden and for writing us a lovely upbeat email. Flip, you guys. Jissie. So much love! I have been binge listening to the Fat Wallet Show the past two weeks! Some episodes I listen to twice because they are just soooo good. Firstly, I am so impressed with the quality of your podcast. I listen to a lot of podcasts, which are mostly American. The quality of sound, content and lekker hosts are important and boy oh boy does your show deliver. I feel happy and a little bit proud that such a top notch show is South African. I am still so clueless about a lot financial topics, but I am slowly learning. So I don't have any questions yet (you are a show about questions after all). I just wanted to say thank you for encouraging us to do the smart thing. I am paying off my crap-credit-card debt and am putting away a R100 each month for my emergency fund until I pay off my debt and can put away more. Also, I just got an increase and instead of buying more shit - I am using it to pay off my debt faster! Yay for finances. It is all I think about since I started listening. I think every and all South Africans should listen to your podcast. I think this is just what South Africa needs - proper education that will help our youth become money-smart. Thank you. Thank you. Thank you! PS - Kristia, I love your surname ;) Yours too Simon! Brown like chuckles. PPS - I am a Graphic Designer. Don't know if you've had any of those yet. Wim wins for taking charge of his finances in a very serious way. He already started the process of moving his RA to a cheaper provider, but he’s still struggling with that process. Your advice on finding more places to save money has led me to stop my AA contribution of R1,300 for me and my wife. I have adequate cover on my short term insurance. My wife also has car under warranty which includes roadside assistance. That money is going into EE EFT. Thanks Simon, upon checking my car insurance, I realized my premium of R550 on my Toyota bakkie could only pay out R75,000 if stolen - it’s an old 2006 model. Even increasing my co-payment to R10,000 only reduced my premium by R100. I decided to take only fire, theft and third-party insurance, saving R250 per month. He made an investment in a cow through Livestock Wealth. I always wanted to be farmer, but wasn’t born into farming, so took a fat chance. The CEO was explaining their model at Allan Gray’s investment summit. Your explanation is correct, but it also seems there is a monthly maintenance fee of R315. Times 24 (18-24 months to mature to 500kg) adds another R7,560, totalling around R16,000. IF you get selling price of  R18,500 you get around R2500 over 2 years gives you 15%. You can actually visit your cow and get picture- im opting out on that one, keeping it strictly business. I will send you a picture of my cow, not naming it though. Dale inspired our topic this week. Could The Fat Wallet explain what happens, exactly, when you buy a share or a portion thereof? Where does that money actually go? If I buy R1,000 of STX40 through EasyEquities, after fees and costs, what happens to that R1,000? Do all 40 companies physically get paid a portion relative to their weighting? Would EasyEquities literally transfer R240 to Naspers, for example? If they do – how and where does Naspers account for that “income”? Is there an item “income from sale of shares” on a financial statement somewhere? I don’t actually read financial statements (which is why I buy ETFs in the 1st place, because I don’t care to), so maybe it is there, and this is a really obvious question? And what happens the opposite way around, i.e. if I sell R1,000 of STX40? Home buying feedback Deen says I should ask for a drone shot of the unit I’d like to buy to get an idea of freeway access and the surrounding areas. Debt Lady is in a financial pickle and wonders if she should sell her house. I owe in total of R134,000 credit cards, overdraft and loans. I take home R26,700 per month and I am drowning. I'm thinking of starting afresh by selling my house and take the profits and clear my debts. Would you ever advise a person to do that? After I paid everything I am left with R1,200 which should carry me through the month. It doesn’t and I still have to pay rates and buy food. It dawns on me when you talk about property that I didn’t properly plan buying this house. It’s inside an estate where I’m paying R2,600 for two levies. I was excited about the increase I got in a new company. I bought a new car and got a new house and now it’s taking its toll on me. I keep on applying for loans to pay my debt. Where do I start as I know I need freedom from this debt? Hamster says buying a home can be a good financial decision, not just a lifestyle decision. He re-shared the Rolling Alpha buy vs rent calculator.   It can be a great financial decision to buy rather than rent, as long as you apply (and stick to) a few rules, like staying in it for at least 8 years to counter the negative financial effect of having to have paid all the transfer-, financing- and lawyer fees, pay it off ahead of schedule. Some time in the future, you'll have paid off your bond and will be living very cheaply. By that time rent will have increased (at least with inflation) to enormous amounts. Having a long-term view on property-ownership is a lot like having a long-term view on your investments. Lastly, the freedom one has when owning a property is amazing. The day before we moved into our house, I had the garage doors automated, installed an automated sprinkler system in the garden and had a plumber come out to install a "retrofit" solar panel on our roof to assist the geyser with heating the water (our electricity bill for a family of 3 is only R500 per month). I also installed thermal insulation in the ceiling myself and we're next going to convert the stove hob from electricity to gas. You can't do these alterations (most of them we did to bring down our long-term cost of living and energy-footprint) when you're renting. The same goes for painting the rooms the colours you like, putting up (or taking down) shelving where you want, etc. I love the point about doing alterations to reduce costs in the future, as opposed to cosmetic alterations. He explains the eight-year breakeven point as follows: When you purchase a house, the general rule is that you want to be sure you’ll be in the same home for at least eight years.  Otherwise, you’re going to take a hit financially.  Why? The first hit is your closing costs. Every time you go through closing — buying and selling — money hits the table. This can easily add up to thousands. Limiting how often you have to pay that kind of money is always a good idea. So extrapolating the cost of closing’s impact on your return on investment, you’ll need around eight years to make up for the money you had to spend now, so that you break even with someone who rented instead. As rent goes up over time, a tenant will eventually pay more than a home owner, the break-even point typically lies about eight years into the future (assuming buying and renting the exact same property). You take a second hit when you look at your bond statement to see exactly where your monthly payments are going. The way bonds are structured, you pay much more interest in the first few years you own a house. Usually, it isn’t until you’re about seven or so years into paying down your bond that you’ve made enough progress on the principal to make it a better deal than paying rent each month. Note: When you take out a bond, you are paying an interest rate on what you owe. So, in the first year, when the principal is highest, the interest you need to pay is also the highest.  However, since the monthly payment is the same throughout the term of the loan (at least with a fixed rate bond), more of the payment will be used to cover the interest payments, meaning less is going towards the principal. As your principal goes down, your interest payments will go down, leaving more of your money to go towards the principal, so it snowballs nicely.  This is one way of getting ahead of the eight-year R.O.T. If you can wait at least eight years before selling again, you’re in a better position to be ahead of the game, especially if you bought less house than you can afford and making extra payments into the bond. To explain it a little differently, if you keep buying a house, live in it and sell it again every eight years, you’re no better off than if you just rented. Any equity you would’ve built up in the property plus money saved in the long run on not paying for rent escalations, is cancelled out by the costs incurred when buying and selling.  Even worse, if you buy and sell in fewer than eight-year intervals, you would definitely have been better off renting!

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. It seems having enough money to retire is only half the battle. There are so many decisions to be made post-retirement. This is true for old school retirement and financial independence, as Alistair Hennessey’s question illustrates this week. He and his wife have sold everything to live their somewhat odd dream of following winter around. (We strongly discourage this abnormal behaviour.) They’re both in their 30s and lucky enough to have jobs they can do anywhere in the world. Having accumulated enough assets over the years to make this possible and still earning enough money to continue investing, how would one even begin to untangle all the possibilities? Luckily we have access to our financially independent friend Patrick Mckay, who has been thinking about his options for a while. In this episode he helps think through the Hennesseys’ options and talks about the wonders of tax-free investments. My wife and I have sold our apartment and all our shit and are moving to Lisbon. We’ll be living in AirBNB across Portugal, Europe and back in Cape Town, probably following the winter around. After selling everything, they have: Cash: R2,9m RAs: R700,000 I think we’ll still contribute the minimum monthly amount to keep them active (about R400 each). TFSAs: R66 000 between NFEMOM, PTXTEN, CSEW40, STX40 Currently with ABSA but soon to be moved to Easy Equities. Going forward we will just buy STX40 and/or possibly the Satrix MSCI Emerging Markets ETF STXEMG. ETFs: $22 000 between Vanguard FTSE Developed Markets (VEA), Vanguard S&P 500 (VOO) and Vanguard Total Market Index (VTI). I only found out after buying these ETFs that they are domiciled in the US, which means the US tries to steal quite a bit if I die. Although this might only be when it’s worth more the $60 000. I’ll be getting new wills done as soon as we get to Portugal. Debt: 0 The plan We’ll put aside cash for six months' expenses in EUR. Since selling the house we have dropped our monthly expenses by about 50%. I still want to transfer R66 000 into our TFSA each year. If we have a ton of extra cash we might top up our RAs, but there is no tax saving with us being in Portugal, so I’m not sure it makes much sense. He has between EUR 1,000 and 2,000 to contribute to ETFs every month. For the ETFs, the plan would be to take the bulk offshore and buy the Vanguard FTSE All-World ETF.  To be honest, I don’t actually know where we will be living in 10 or 20 years so I was thinking of investing mainly in EUR. The Vanguard FTSE All-World ETFs is domiciled in Ireland, which means that everything can happily pass to my wife without too much fuss when I die. Portugal also has some great tax savings around offshore dividends.   But this ETF has an expense ratio of 0.25% (The Vanguard ones have 0.04% and 0.07%) Assuming my maths is right, on a 200 000 EUR portfolio the annual costs would be: 0.25% TER is 500 EUR 0.04% TER is 80 EUR So over 10 years, Vanguard all-world needs to do 12.5% annual return to keep track with the S&P 500 ETF just doing a 10% return. Over 20 years the all-world (VWRL) needs to do 14.5% annual return and the S&P 500 (VOO) just 10% to get to the same place. In summary: 6 months worth of expenses in EUR for an emergency fund Rest of the cash into either: VWRL (EUR) and VWRD (USD), Leaving what’s currently in VEA, VOO & VTI Keep adding to VOO and VEA (and not die before my wife) Every year add 33k ZAR each to our TSFAs STX40 & maybe STXEMG leaving what’s currently in NFEMOM, PTXTEN, CSEW40, STX40 Leaving RAs intact (sigh) Our friend Jo wrote in for the first time in a long time! My TFSA is in cash. And has been since it started. Let me lay out my logic for you. When TFSA came out, I decided markets 'felt' expensive. I know, super subjective, but TFSA has quite a long horizon. At R30,000 a year it just didn't feel amazing me to me. I think you'll do okay with a TFSA, but it won't make you insanely wealthy. As it turns out I've made about the same return in cash as I would have buying DBXWD or a some local top 40. Which wasn't guaranteed. Markets could have done amazingly and I would have had to eat my words. Theoretically it could have also gone the other way. I'm keeping my TFSA in cash for the time being. I'll add  my emergency fund to that and wait for the next big sale/market correction. That might not happen for a while, or it could happen next week, but at some point it will happen. For example, the PTXTEN 25% down? I took my daughters TFSA and I bought a great big chunk of that particular fire sale. Thank you. You could argue I'm trying to time the market, but this is all still ancillary to my other normal investing - you know, dutifully plugging away into my ETFs every month. I see my TFSA as a kinda hedge bet and am happy to play a little loose with it. Not for everyone. But you know, just thought I'd posit an alternative. Paul has a question for Patrick. Would you please ask Patrick what he buys in his TFSA account? I know he's a one etf guy, but I believe he buys a local equity only etf in his TFSA to avoid foreign tax.

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. I’m finally doing it. I’m buying a house. I’ve had a cold winter and I’m finally accepting I didn’t turn out to be a jetsetter who lives in luxury hotels around the world. Clearly, this isn’t a financial decision, but it doesn’t mean I can’t be smart about what I’m doing. Here’s what I have so far: I’m looking in the price range of what I’m currently paying in rent in an (almost certainly futile) attempt to contain my cost of living. This is yet another reminder of the benefits of renting. In buying, I’m banishing myself to the outskirts of the areas I love. Everything in my range is tiny, most of it very old. I knew it all along, but it’s good to be reminded. It’s very hard to compare units. Even in the same price range, they differ by age, by size, by area. I’ve decided to use cost per square metre to help me figure out if something is cheap or expensive. This makes it much easier to determine value. I’m only using half the bond amount I actually qualify for so I don’t find myself strapped for cash when there’s a special levy or interest rate hike. I’m terrified. While I’m perfectly capable of multi-year commitments, I don’t like to be reminded of it upfront. I guess I’ll just have to get over it. This is the Mister Money Moustache article I mentioned. Win of the week: Sean, for editing our swearing and for making us a spreadsheet. He, like many other people, disagrees with Simon’s view on tax-free investments for kids. TFSA numbers_Spreadsheet I understand kids might use the money to buy a car or holiday and can never get that allocation back. The other side of that coin is that a TFSA started at birth creates generational wealth. You can set up your kids to never have to worry about retirement regardless of their job. Or ideally pay it forward to their kids (ie only save R500k per kid) for them to retire young (best case 38!!). Isn’t it better to try your absolute best to educate them on the value of TFSAs and retirement? You have a whole 18 years to get it done before they can take control of their TFSA (dead means longer than 65). I know TFSAs are not and should not be viewed as vehicles for things like education etc. But as a “pay it forward” vehicle its pretty magic (assuming you can educate your kids). Francois is wondering about the impact of dividends on tax in offshore total return ETFs. I've been comparing the two MSCI feeder ETFs from Satrix and Sygnia. The Satrix one reinvests the dividends, and the Sygnia one pays them out. They are both about a year old. Instead of paying out the dividends, the Satrix ETF will simply raise the ETF price by the dividend amount. I can only see this if I overlay the STXWDM and SYGWD charts, squint, and use plenty of imagination. A year is a very short timeframe to see a difference, so I've searched for SENS announcements for details on if and when this has happened. Will there be any info on this? The Sygnia one has paid out dividends twice since inception. According to the June SENS, you were exempt from local dividend tax both inside and outside a TFSA. This is because the foreign tax amount, which you always pay even in a TFSA, was larger than the local amount. It seems unlikely that Satrix will have a different price inside a TFSA, even if they had to account for local tax after raising the price a hundred times. Can the situation change if our dividend tax went up to say 25% and start exceeding the foreign amount? Ignoring the difference in TER, it would then be better to hold the Sygnia ETF in a TFSA, wouldn't it? Gerhard has a great tax tip. Many people don't submit their monthly RA contribution amount to their HR / finance department at their place of work. When I ask why, they say that they enjoy the bonus they get from SARS when they submit their tax return. The benefits I see for supplying this info to your employer:  - You get the tax break upfront  - You don't save your money at SARS over an average period of 8.5 months not earning any interest.  - You can increase your monthly RA contribution without affecting your pocket, for example: You can only afford R1000 pm for an RA, if you submit this amount to your employer and you are taxed at 25% then you would get an increase in your net pay of R250. Now you can actually pay R1250 instead of R1000 into your RA or R250 into an ETF.  - If you have a dispute with SARS or they delay the refund, as sometimes happens, you already received your tax rebate throughout the year. I see no reason why an employer can refuse this if you have the proof of your contribution. Robert found a sustainable farming investment website, which is kind of like the cows website we discussed last week. They sort out the insurance and the administration on your behalf and claim to offer an internal rate of return 12% and 16%, depending on the investment you choose. They also mention on their website that there is a tax benefit and that you can write off a portion of your asset in the first tax year. Sounds a bit like you need to be a tax guru if you ask me. It will be great to get your thought on this. It feels like a new hipster and responsible way to invest, but is it wise? It might be a unique way to diversify? The one option is berries, the other is solar energy, the other is beehives. Vincent is curious about counterparty risk at African Bank. I compared Capitec, RSA retail bonds and African Bank. I am fully aware of what African Bank went through, but having a look at their investment options I think it's viable given that the SARB has a grip on them. They have no management or administration costs and no fees on withdrawal. Everything can be done online or via phone. Their tax-free interest is quite high and they have two other attractive products: [Access Accumulator - 12 months [8.2%] & Fixed deposits - 12 months [8.45%]. I seek to keep the Access Accumulator and Fixed deposits short term; but I'm not sure of investing a third of my maximum Tax-free contribution to African Bank, because where will they be in 20 years time when I want to withdraw my TFSA portion? I don’t recommend that you use your tax-free savings account for cash investments. Edwin has a great question about the last big purchase we can make before we retire. At some point before retirement we probably have to buy our last big-ticket items e.g retirement home, retirement car. If I want to spend my retirement exploring the bush in a 4x4, I must purchase my last 4x4 with my savings before I retire. If it’s a good car it will be affordable to maintain and reliable so I would be looking for that car to stay on the road for the next 10 to 15 years as a minimum. Hopefully it lasts forever. The problem is that if I buy a cheapie it may not last all that long and break down...or I could discover that I really don’t like it and would have preferred to buy a more expensive car when I had the money. By then it is too late to change my mind. I would already be a pensioner. Are we better off stretching ourselves when younger to buy something slightly better, but that will serve us better in the long run? I want to drive a Range Rover in retirement, should I sacrifice the savings while still earning an income? Should we be making provision for our last “big ticket items” before retirement. Or is this a trap? Mbasa wants to know why we’re limited to R33,000 tax-free contributions per year. Why can’t we max out the full R500,000 allowance at the outset.

Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   Marriage is a long-term commitment to build a life with someone else (among other things). A wedding is an expensive party. This week Dr. Woofington Von Barkshire wants to know if we think it’s a good idea to spend money on an expensive wedding when you have debt and not very much money. We don’t. I have to buy a ring of the engagement type due to the expectations of my 6yr girlfriend (the time we have been together, not her age). I don't think it’s the right time to get engaged. But she is a year older than me and feels that is a life imperative to get engaged. I estimated the cost of a ring to be like R25,000. I need an emergency fund. I need to start saving for retirement. (RA and tax-free savings) I need to save for a wedding which I need to finance myself. Her parents are poor and my mother needs to save for retirement. She also has study debt (R110 000) and car debt (R120000). My options are: 1. Defer the engagement until I am in a financial position to afford a wedding. Save on the engagement ring insurance and earn interest on the cash (savings of R30 000). And endure the fights about not being married/engaged. 2. Sell all my shares and try to do a budget wedding. He has R45k in shares. 3. Get debt to finance the wedding. I hate this option. But it is an option. If I chose to defer engagement, should I sell all my shares and rather invest them in ETFs? Should I, instead of saving for wedding etc, assist my girlfriend in paying off her debt? Which will then quicker enable her to help me save for the wedding? Should one still get married, even though it is a bad financial decision? Win of the week: Roland made a commitment to paying off his debt. I am starting to pay off my debt and aim to make use of 2% of my increase to pay off more debt. I am planning to pay off one account and roll over that amount into the next account and so on. This is what I did. It’s a great strategy because of the immediate feedback. Based on my calculations I should have all my debt excluding a car loan paid off by Jan 2019. Would it be best to pay off the car loan and close off all debt or should I keep some accounts to keep my credit score up? https://justonelap.com/podcast-should-i-save-or-pay-my-debt/ https://justonelap.com/podcast-upping-credit-score/ Justin sent a message about cutting his losses. At the end of the message he says, “It was great being able to type swear words. Sorry to Sean for the extra work!” A couple of years ago I started investing in shares. I was in my late twenties and having accumulated some money to invest I thought I would be brilliant at choosing my own stocks. I got input from the team at the trading desk, but mostly my own decisions. Two years later I’m not even dreaming about growth in the investment, and rather sitting at around 25% down. A large portion of this is due to Steinhoff (thanks Markus, you doos), but most of my shares are firmly placed on shit street. I have a knack of buying when shares are at their peak. I have done waaaaay more research and know that ETFs are best for me. If fancy private bank traders can’t beat the market, it’s a lag that I thought I could. But now I’m stuck with the predicament of actually realizing the loss. Does it make sense to take it on the chin, sell it all up and buy ETFs now, or should I ride the storm a bit? I would of course not like to sell at the bottom either! Some of the shares include: Mediclinic, aspen, Steinhoff PSG and Steinhoff African retail (GREAT combo!), reinet and Ascendis. I’ll probably hold on to the Steinhoff just to keep me humble. But also - who are the madmen who would buy this share from me? Any advice would be greatly appreciated. I know I am young and can at this stage afford the knock. But holy fuck id like to minimize it. Chris has a question about dividends tax on offshore investments within his TFSA. I managed to pay off my debts recently and now have an investment portfolio which still small but starting to grow. My current strategy centres on maxing out all saving incentives which SARS gives and thereby minimising the tax payable on my salary and investment returns. I'm currently able to put 27.5% of my salary into my company pension scheme and max out my tax free savings allowance every year. Any further savings is put into a global equity etf investment. I would like to increase the portion of my portfolio in global equity, however from a tax perspective, I believe it's most efficient to buy a top40 or local property tracker in your TFSA since you get the double bonus of no capital gain, and no dividends tax, whereas a global etf will still incur dividends tax abroad (I.e. in whatever country the underlying companies are registered in). Is this thinking correct, or shouldn't I be worried about foreign dividends tax in a tax free account? Note: my underlying assumption is that the top40 will return roughly the same as a global equity tracker in the very long term (20+ years). Jaco wants to know what we think about cows as an investment strategy. You can invest into a pregnant cow, a calf or a portion of a cow (I think this is called steak). You earn income from the sale of the calf and help cover its feeding, medical and insurance costs. You can pick on which farm do you want to raise your cow and it looks like you can even go and visit! I'm curious if anyone who listens to the podcasts is dabbling in this? It certainly makes much more sense than "investing" in bitcoin… This is from the Take Charge of Your Money blog: Invest in a calf (or in a portion of a calf if you cannot afford the full cost) Help it grow by paying an all inclusive fee for feed, insurance & veterinary expenses Share in the rewards. On maturity Livestock Wealth buys back the grown cow and you will receive an annual payout based on the collective sales on the farm. The current projected ROI (return on investment) is 12.4% and is fully explained in the FAQ page. You need to pay fees twice a year and receive a payout once a year. https://takechargeofyourmoney.blog/2018/05/14/holy-cow-what-an-investment/ Christoff made an excellent point about Margaret’s question last week. She was worried about counterparty risk and the potential pitfalls and benefits of diversifying by supplier. As you and Simon stated, the probability of a big, well-known RA company to go bust is very small, plus your holdings there will just be moved to someone else to continue administering your investments. The one thing not mentioned was the sliding scale for fees by a lot of these RA providers. If you have all your investments at one specific company, you can end up with much lower fees (for example first million is at 1% annual cost, the next million is at 0.85%, etc) Rakgomo wants to know how to invest in ETFs. I want to invest in ETFs but I don't know where to get them, or even trade them. may I get some guidance in getting access to ETFs and where I can trade them?

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. The phrase “all their money” gives me the creeps. Throughout my life I’ve heard that line followed by something completely ridiculous. Some examples: “He made all his money from property.” “They made all their money from GNLD.” “He made all his money from farming.” The phrase also goes the other way, except this time it’s true. “They lost all their money when their business failed.” “He lost all his money in property.” “They lost everything in an investment.” The key message I got from Simon’s recent conversation with Charles Savage is that users remain uninvested because they are afraid of losing all their money. The bigger problem is that people misunderstand what the stock market is and how you make money from it. In this episode, we attempt to explain how you make and lose money in the stock market. We follow that with why it’s very unlikely that you’ll make, or lose, ALL your money by investing. Win of the week is Shane, for sending my favourite email of the week. Just wanted to say - this morning's podcast was terrific! Busy researching into a shared Credit Card for myself and the missus. Whilst we have been VERY good at mindful spending and savings, we just found out we're (unexpectedly) expecting an addition to the family 😊 Time to step it up a notch... BIG TIME. Thanks for all you do! Margaret wants to diversify for counter-party risk. She has investments with Sygnia and Allan Gray. Is it better to have more money in fewer funds (to increase the power of compound interest) or have the money split over more funds/management companies to decrease the risk? Sally had a similar question this week. Is there a rule of thumb for how many funds you should be invested in to manage this risk reward? How do you resist trying out several funds given the abundance of options? In America they talk about investing all their money with Vanguard or in a S&P 500 fund. Here in South Africa with scandals like KPMG and Africa Bank I'm not sure I'm comfortable with having all my money managed by one company and/or one service provider. How big is the risk of fraud/mismanagement given the regulation of the industry? I.e is it fine if I stop the debit orders to the managed funds and put them back with Sygnia?  Or should I go with another index tracking company such as Satrix? Derek is about to retire and unsure how to choose a living annuity. He says he won’t take what we say as financial advice because he doesn’t trust people who don’t like to braai. I need to decide in which Living Annuity product to invest.   I naturally would favour an index-based LA for low fees and comparative net returns.    I have convinced myself that a Medium Equity Living Annuity (CPI+5%) would best suit my personal risk profile; and allow a sustainable 3% draw-down while keeping pace with inflation and costs. I notice that there are substantial differences in the net returns of the Living Annuity portfolios that are currently on offer.   Direct comparison is complicated by the fact that the performance numbers are sometimes based on theoretical (back-tested) data as opposed to actual results. Mbasa wants to know if it’s cheaper to buy ETFs at your ETF provider like CoreShares or Satrix. When you buy shares directly via Computershare you only pay broker fees when you buy or sell, unlike having an account with a broker where you pay monthly fees e.g. Standard Bank online share trading. I think my question is, is it better to own ETFs directly from the provider such as Satrix or Coreshares instead of buying via platforms such as Easy Equities? TER https://justonelap.com/etf-understanding-ter/ Danie has some feedback on Capital Legacy that Sephatisile wrote about. Just a correction on the Capital Legacy information. We use them a lot, but, they do NOT pay your Estate Duty upfront. They offer an Indemnity Plan that "effectively indemnifies the costs of the Executor & Trustee services as well as Conveyancing Attorney fees that are necessary to wind up the deceased Estate." This is a very unique and cost effective solution to estate planning, especially when kids are involved, or complex wills need to be drafted. Patrick is earning dollars. He wants to know if he should keep them or bring them home. I am earning US Dollars. I’ve already invested some of the dollars into an Allan Gray unit trust account and was wondering if I should keep in dollars or send money back to South Africa and invest in a unit trust there. Anthony almost dethroned Shane for the win of the week While listening to the radio one morning I came across an advert about a company called VeriFi. It's an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies. It does this by sourcing information from all the major life insurance companies – including Old Mutual, Sanlam, Liberty and others. The information is presented in a comprehensive report. https://www.verifi.co.za I did all the formalities and wanted to see if there was a better RA with low fees that they could offer. They offered me a Liberty Retirement Annuity Builder for R1000 p.m Thanks to you guys I SCRUTINISED this policy to see if I was getting ripped beyond repair. They even threw in a compound interest table (with an assumed growth rate p.a of 10%) to see where I would end up in 35 years’ time. How fucking kind of them. This compound table didn’t take into account admin fees and performance fees and advice fees and service fees and ongoing guarantee fucking fees and management fees and ongoing commission recovery fees. ALL I SAW WAS FEES FEES AND MORE FEES So, the quote from a fellow listener came to mind: “It blew my mind that if I get 10% growth and inflation is 6%, there is only 4% left for growth (compounding) and if I pay 3% of 4% in fees, I will only get back what I put in (adjusted for inflation).” The fees totalled close to 6% Not to mention the ongoing fees, performance fees AND the service fees which are excluded. I had to read this policy with a  bottle of whisky to numb the pain. I’ll stick to my current RA with Discovery, for the time being as my life policy is linked and all – not happy about all the boosters and links etc… But it made me feel happy that I’m not going to get ripped by these ridiculous fees presented to me.

Listen / download here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   Crushed under the weight of debt and desperate to get out, a younger, dumber version of me would often resolutely put money away - either toward debt repayments or honest-to-goodness cash. As often, I would have to cover some unexpected financial event (some more legitimate than others) and my resolution would dissolve. Eventually I’d accept I’m bad at saving and give up. It was easier than living with failure month after month. For most people, repaying debt and saving at the same time is impossible. Just like we want to be rich right away, we want to sort out our money right away. Resolution is the work of a single insight, so a systematic solution is frustrating. Sadly, implementation happens payday by payday. Sean asked, “My wife and I are going into our 30s and have no savings other than our provident funds and RAs.  We earn a net income of R28,000 and have R10,000 debt in total. We can’t afford to save more than R1,000 a month. Whenever we save, something seems to go wrong and we use that savings to bail us out. We never go out or get take aways. The last time we bought new clothes was three years ago so we look like hobos. Our cars are fucked and we can’t replace them because there is no extra money in the budget. My wife and I don’t drink, so there is no wastage there. I’m not sure what we are doing wrong.” In this episode, we discuss what Sean might do differently. We have two winners this week. Both win because of the homework they did. Sally did a lot of legwork to understand an interest payment amount. She deserves a win for that. I changed my debit order date (on my home loan) recently. I wasn't aware of this, but apparently if you do that they charge you interest twice. She did a lot of investigation, calculations, eventually got in touch with her home loan provider and discovered the following Because you change the debit order date,  they work out the interest you owe from the original date until the date you change it. Then they calculate the interest again on the day after your new debit order date.   Together they’ll make a month’s interest.  So they do charge you twice, but not double. She deserves to win, because:   She knew immediately that two interest deductions went off her account. She did her own calculations. She wasn’t afraid to ask for clarification from her financial institution. She really loves horses. Nadia wrote us in the financial crisis episode to ask if she has the right exposure in her ETF portfolio. I sent her a link to the article on the six questions to answer before you buy an ETF. She did that, sent me her answers and in the process read up a lot more about the ETFs she holds. I’m very proud. In the episode on preparing for a financial crisis, we spoke about Sanlam dangling a carrot for Wim to keep his RA with them. Brett wrote to explain how the echo bonus works. I started an RA with Sanlam at the age of 22 which was based on their Echo bonus feature. This means that all contributions that I made to the RA during its life would be tallied up and given to me at retirement on top of all my investment returns and original contributions. This bonus sounded great, but of course the fund had fees of 3.5% per year, and I am sure you know how the rest would go. I did some calculations on this and wrote about it in the following article (although I did not name the fund): http://www.etfenthusiast.co.za/2016/08/fees-matter.html Sally also has experience with the Echo bonus. She currently has that RA, as well as a 10X one because she didn’t have enough invested in the Sanlam RA to qualify for a transfer. If I assumed the same rate of growth and contribution from my side, to just compare fees between the two, you pay less fees at 10x (as expected) and the fees at Sanlam are more over the entire term. However,  because of that Echo bonus,  the end amount I got from the Sanlam RA was similar to the 10x one with the reduced fee.   That was my situation specifically because the Echo bonus works on how long you are invested with them and all that (the longer you are with them, the higher your percentage). You miss out on the compounding over time, but at the end of the day, it was much of a muchness for me.  In the end I decided to just leave the two as they were, so I have two RAs now. Sephathsile found a company that lets you pay estate duty upfront. Last week I came across Capital Legacy. They offer free wills and promise to finalise your estate matters in 6-8 months with the option to pay your fees in advance as monthly contributions so that your family won't worry about it. They do a pay out to the family within 48 hours so that life can carry on whilst they sort out your estate matters. https://www.capitallegacy.co.za/ https://www.zaqfin.com/ Gerhard is not loving property right now I’ve managed to make some bad property investment decisions in my life – of the buy to let variety. Then I thought let me try this listed property thing, as it supposedly beats buy to let over the long term, and I know you had some Magnus guy doing an insightful comparison on it. So I am uncertain if his calculations still hold. My challenge is simply to run this comparison again and see if it still holds. As you can see below is the graph of the PropTrax TEN and I am no technical analyst but it is not looking pretty. I would love if you could comment on what in the world is going on with it. Is it okay to still hold it, I really do not want to climb out of it now… as I am far under water. Phemelo is about to become a property owner. They want to know:       I am in the process of getting a bond, I was wondering which is the best option, obtain a 30 year bond and pay it off as quick as possible or get a 20 year bond and pay just the required instalment (something has got to give)       I am about to become a homeowner and I do not have a life cover, I would like to find out how does one go about getting a life cover for the bond. Do I need to go through the hustle of meeting 5 different brokers and comparing which one is better?       I would like to get an ETF that pays dividends, however I would like on whereby the dividend payout is invested in a tax free savings account, is this possible and with which financial provider? Cyrus had to help a family member deal with debt. The process is frustrating, to say the least. This is the second time you mentioned it (if I recall), in terms of supporting family. Today's mention was about paying off their debt with a low interest arrangement. Previous it was about supporting them if they are in the dwang. So personal experience - we tried that. The supportive role. My sibling was at rock bottom - maxed out credit card, clothing account, less than R500 in cheque. So I went to town on his budget and came out with a STOP, START, CONTINUE plan. Part of it was to financially support their essentials. I did not want to pay off their debt since I wanted them (sibling and spouse) to learn how to handle cash. Things went south pretty quickly as I continually pushed frugality and it was not being met with my expectations. They were not keen on only eating peanut butter. I had a 10-point plan, and they were already challenging point 1. The short of it is that another family member has bailed them out (with a low interest agreement), however I've stopped my involvement due to the anxiety and friction it created. Family. Ugh Stefan has some insights into the EasyEquities offshore accounts and the TFSA for kids thing. My son is 2.5 years old. Shortly after he was born I opened his own EasyEquities accounts.  As you already know doing so gives you access to three accounts, TFSA, regular EasyEquities and also the USD account. Every month I add to his savings, but I split it between TFSA and regular EasyEquities, so either half-half or one month I do TFSA and the other Regular.   If need be, funds from the regular account can be drawn for things like an education, car, etc in about 18 years. We won’t have to tap into his TFSA and we can let that run until he retires rich one day. I know there will be a tax hit on the regular account so perhaps I have not chosen the best way, but so far this has been easily managed and efficient. * Then re the USD account with EasyEquities. A few weeks ago I logged a ticket with EasyEquities and managed to get some clarity.  The EasyEquities USD account is real money sitting in a bank account in New York so it i’s proper offshore  cash. EasyEquities does have an easy way to get the cash offshore. You put cash in your regular account and then you can send the desired amount to your US account. |The spreads are wide, though. Hendrik's awesome spreadsheet is at the bottom of this post. What is the best way to manage payments and investments between spouses? Me and my wife each have our own accounts where our monthly debit orders go off. We also have a joint credit card which we both pay into and use for our day to day expenses (and greenbacks of course, which covers our monthly electricity). Because we pay a set amount into this card each month it serves as a budgeting tool for our day to day expenses as well.   We use 22seven to track all our expenses and determine our monthly surplus, which we then split between her TFSA (mine is maxed out for the year), a retirement annuity and paying extra off on our home loan. I figure that I am guaranteed a saving of 10% interest on the home loan and it serves as a good emergency fund as well. When it is paid off I will save that portion in ETFs/shares as well. Fred wants to know if there’s a scenario where hyperinflation and exchange controls could lead to South African-based funds that invest offshore could be prevented from trading or shut down. Free financial calculators

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Dhiraj asks us to defend our index-tracking strategy in this episode. It’s hard to do when the theory works but the practice hasn’t delivered the goods in four years. At this point I can only cling to the success others have had with this strategy and hope. Even index-tracking product providers are increasingly offering products that will give investors an opportunity to outperform the market. The index weighted by market capitalisation has turned into the ugly stepchild that nobody wants to talk about anymore. Nobody ever knows WTF is going on in the stock market. Lots of people pretend they do, but since they all keep showing up for work instead of retiring in the Bahamas, we can assume they don’t. Maybe the market will do what it’s always done. Maybe we’ll look back at this period in our investment history, discover the yodelling goat formation and know this is when it all ended. The index-tracking strategy makes sense to me for all the reasons Simon and I discuss in this podcast. However, when that stops being true, I will jump ship. I am not a salesperson for the ETF industry. I’m an investor, and I want to see my money grow above inflation after fees by any means at my disposal. That said, I also know pivoting an investment strategy every time I don’t feel I’m making money is a surefire way to incur costs. When I got into investments, I knew anything less than five years is not an investment time horizon. Since I’m only at four years (and, to be fair, I’ve pivoted my strategy a few times already), I’ll hold out and see what shakes out. Dhiraj shared a video. You make a case for investing in a broad market index fund over the long term for cost effective wealth creation? This Youtube video makes a case that one must study the intricate details of the share markets and invest in selected shares for best long-term risk/reward trade-offs. It provides evidence that there have previously been extended periods where the S&P500 produced zero returns. How would you counter his views on index fund investing? Christiaan wants to know if it’s a good idea to have his entire portfolio, including his pension fund, in index-tracking funds. I am a teacher. Through work we are forced to have a pension fund with the ‘Green Monster’. They have recently brought out a Balanced Index Fund with fees of just 0.30% p.a. It’s invested in the FTSE/JSE Capped SWIX Index Fund, which I have never heard of, as well as the expected bonds, cash and property. Is it a good idea to have all my retirement assets in these, including my company pension fund? Lady Kabelo isn’t sure what is passive and what is active in unit trusts. I have an Allan Gray unit trust, and I'm looking to shift towards ETFs. When we talk about actively v passively managed funds, I think of ETFs as passive and unit trusts as active. In episode 75 Simon talked about being invested in passively-managed unit trusts. I'm no longer certain that my understanding of the distinction is correct. Could you explain the difference between an ETF and a unit trust, and how a unit trust can be passively managed? Lloyd has a three-month old daughter and would like to know where to save for her education. TFSAs don’t seem a clever instrument for education investment because it erodes the potential before the real savings kick-in from long term holdings. What is a better vehicle for me to save for my 3 month old daughter’s education. I am more worried about high school and tertiary so perhaps the investment time could be 10 years or more. I am thinking the right ETF portfolio. How should I set this up to be best positioned from a tax perspective? Wins of the week: Dan Gobble wrote a word of encouragement for Mpho and Rinaldo. We turned the corner at just about three-quarters of R1m in useless debt - not car or home loans. I am talking revolving loans, credit card debt and overdrafts from living expenses and starting a business, which promptly failed. Rinaldo is only dipping into it with his 140k :) We swallowed our pride and went to family for help, now all the debt is consolidated with my in-laws at a ridiculously low interest rate. And we are on track to have it sorted in two years. Also Mbasa, who is FINALLY starting their TFSA journey in July! What ETFs would you recommend? I have a provident fund (unit trust) and an RA (10x) at the moment. I’d like to invest in aggressive ones. Was considering the Satrix Nasdaq 100, Satrix MSCI emerging markets and the ABSA New funds Momentum – a combo of the 3. What are your thoughts? I recommend reading Six Questions to Answer Before Buying an ETF: https://justonelap.com/etf-six-questions-to-answer-before-buying-an-etf/ Christoff Gouws has a book recommendation. There’s one book that I’m busy going through a second time, because it’s one of the best books I’ve read on the topic of wealth building: The Simple Path to Wealth - J. L. Collins  Like you (Kris), I’m not one for active investing and trying to beat the market. I like my Index Tracking ETFs and the amount of effort it takes to invest this way - nearly zero! Jim Collins makes a great case for keeping your investment strategy very simple. He proposes a one-index-fund strategy during your wealth accumulation phase of your life and a two-index-fund strategy during your wealth preservation phase.  I like that – as simple as you possibly can make it. The book also shares a lot of fundamentals about how wealth gets built and destroyed (compounding working for or against you, opportunity cost, etc), explained in very easy to follow layman’s terms. Edwin is able to answer Ross’ question about what would happen if we turned into Zimbabwe from personal experience. My Dad worked over 30 years in Zimbabwe and did very well in his career. Company and personal retirement contributions were paid directly into Old Mutual in those days. With his retirement savings and various assets he was able to retire at age 45 with 3 children still to complete University...and he did! My parents had succeeded in giving us a wonderful upbringing, while planning frugally for the future. Then hyperinflation arrived... His life savings which, in a normal economy, would have been sufficient to sustain him forever diminished in value as the Zimbabwe dollar devalued. When the economy moved to adopt the US dollar as legal tender in 2009, my Dad was paid the princely sum of USD250 by Old Mutual. Equivalent today to R3400. Still 3 kids to put through University and still needing to sustain oneself till death. This was a crisis and he had to come out of retirement and rebuild his financial well-being at age 50. It was heartbreaking. My advice to Fat Wallet Show listeners with regards to financial apocalypse is as follows: Make sure you diversify some of your liquid assets outside of South Africa. When a loaf of bread costs 1 quadrillion Rand, it is handy to be able to bring USD$10/month back into the country so you know you can eat If the economy starts to deteriorate very rapidly e.g. Rand goes from R13/$ to R130/$ in 12 months, get into cash very quickly Convert that cash into hard currency very quickly Find ways to limit your liquid cash outlay e.g. consider growing your own vegetables, reading news for free rather than buying a paper, using cards to transact etc Get out of paper "products" as soon as you can and get into save haven currencies as soon as you can The Zimbo's experienced the apocalypse first hand. When it comes along it doesn’t matter how good you look on paper. All that matters is how much of a stable currency you have access to on a day to day basis. 

When we get into debt, we think it’s a temporary state of affairs. We’ll get rid of it once we earn more money. However, nothing is more delicious to a financial institution than an indebted individual getting a raise. As our income increases, so increases our access to credit. Think of someone you know who appears to be very wealthy. Now think about the debt required to maintain that appearance. An expensive home loan, car debt, credit cards and store cards all work together to make it seem like money is no object. As we discuss this week, the price we pay to appear wealthy is often the very thing that destroys true wealth. This week Rinaldo inspired us to tackle debt in high-income households. I am a high income earner with money problems… I contribute 18% of my salary to my employer provident fund and R500 a month to an education endowment plan for my boy who is five years old. That is the sum total of my investments. Oh, and I bought a buy-to-let apartment two years ago and what a disaster. Battling to sell the money-chowing, headache-causing thing now. I need to invest more but I’ve got the following bad debt:        Credit card of R40,000 at 14.5% interest        Revolving credit of R40,000 at 17% interest        Overdraft of R60,000 at 15% interest I’ve got a deficit in my budget due to the credit repayments and I'm considering a debt consolidation loan, but don’t want to stuff up my credit record which is rather good because up until now I've serviced my debt well. Should I consider a consolidation loan and where and what will be the impact on my credit score? No emergency fund, which caused the debt. How did you do it?

Look, if it’s the end of the world we’re all in for a bad time. Your only hope is to be at the site of the asteroid hit at the moment of impact. Be patient zero - dying will be more fun than trying to survive the apocalypse. A financial crisis is not the apocalypse. It happens in financial markets once a decade. It sucks, but you’re not watching your family getting melted by lava. Two things have always been true of financial crises: We are dreadful at predicting them. We recover from them. This week, both Flipi and Ross were worried about financial or political collapse. We talk about the things within our control when it comes to our investments and those that aren’t. As any World War II survivor can tell you, when things go dreadfully politically, your wealth isn’t worth much. That doesn’t mean you should live large and wait for the end. Flipi is concerned about a global crisis. He lives in Japan, though. Are you guys reading/hearing or similarly being exposed to more frequent comments about another crash, correction or 'bad period'? Would there be any preparations (perhaps even just emotionally) that people may make to ensure they don't do stupid things during such times, and perhaps come out better for it (or not worse off than everyone else) post such periods? Weirdly, Ross has a similar question. I have an RA with 10x investments. What would happen to my retirement should South African experience an economic collapse similar to Zimbabwe? Is there any sort of protection against this? I realize it may be an extreme scenario, but I would be nice to know what would happen. Win of the week: Mpho almost had me in tears. This is one of my favourite emails of all time. I have had a listening marathon of your podcast from episode 1 until the recent 101 episode and decided to finally write to you as your podcast is one of the reasons we are on this path to financial independence. I’m 33 married with 2 kids and for so long being on autopilot mode when it came to making decisions - especially money-related. I’ve been told do well in school so I can get a job and the get married and then have x number of kids, which I did without even thinking about it. For some reason when I turned 33 I had a freak out moment and started taking a good look at our finances. Making a combined income of around 90 000 a month life didn’t feel any different for us compared to when we had a combined income of R18 000 10 years ago. We had 4 credit cards between us with personal loans, car loans and a bond - not forgetting a R50 000 loan from my sister. I forgot about the overdraft. All these decisions were made without even thinking about it. I don’t know how we got to this point. I started listening to your podcast and reading up on personal finance. From last year May we have paid off all the credit card debt, one overdraft and we are also ensuring that we are building up our emergency fund. We are not investing yet as focus is on building up that fund so we don’t find ourselves back in debt. The plan is to pay off all the loans, one of the cars and my sister before the end of the year. I’m sometimes filled with regret when thinking of all the stupid money decisions we have made and how we have allowed the lifestyle creep to creep up on us without even realizing it. We now analyze our spending and have really started communicating about money, which is something we didn’t do. We’ve cut our expenses and continue to identify areas where there is potential to cut (DSTV premium had to go). It has become a challenge to find creative ways to have fun and create memories without expensive outings and this has actually made us reach out to families and friends and spending more time with them. I look forward to when our debt will be completely paid off and we start investing. I’m also looking forward to spending my money on things that I value and not being on autopilot when it comes to my life. Thank you for the information that you are sharing out there and will e-mail after that last bill is paid. Josh is looking at a buy-to-let investment club A friend invited me to join him and 2 other friends in an investment club. He wants to set up a company for this purpose. They want to get into buying properties. Each member will contribute an agreed-upon amount monthly, increasing annually. I know pooling money is a way to increase purchasing power, in this case for properties, which will be rented out. There would also be the need to take out a bond on the property in the name of the company so I have no idea how that would work Does this sound like a stupid idea? I know you guys are not into the whole idea of buying property, but is doing it in a club/company a better way by virtue of pooling money? I highly recommend you watch this: https://justonelap.com/listed-property-vs-buy-let/ Wim is looking to move his RA, but Sanlam is dangling a carrot. I am paying 2.3% in fees. I’ve seen only 6% growth over 10 years and inflation was slightly lower. I have to move, because my money is not moving. Here’s a tip when you’re looking at performance over a period - compare it to the performance of the Absa MAPPS growth ETF for the same period. The MAPPS ETF has Cash (4.48%) Equity (72.53%) Inflation-Linked Government Bonds (10.61%) Nominal Government Bonds (12.38%) This doesn’t include the 30% foreign exposure allowance in a regulation 28-compliant fund, but it should give you a sense of what a combination of assets have done over a period. They said there’s a echo bonus being paid out in new Sanlam product. I requested a detailed growth and cash bonus for remaining 20 years if I stay invested. Am I still getting screwed? They promise 10% growth but have not been able to do that for 12 years. Is there a way to compare my investment in eg. sygnia RA (skeleton fund) over 20 years with this installment vs the Sanlam pie in the sky prediction? John recently pointed out when some of these institutions promise a certain percentage growth, they mean for the period, not compounded. Kelly is getting some first-hand experience in loss aversion. I'm 28 with no kids, and pay R222.39 for a life policy with Discovery, valued at R751 236. I have been paying towards this for almost 3 years now. I'm not sure whether or not cancel this policy, only because that would mean losing the contributions already made. Should I continue or not? Mike has a thought about tax on RAs. One of the biggest issues presented with an RA is the massive tax bill due once you convert your nest egg into cash and an annuity. If you want to access a third of your R10 million in cash, you're going to pay a whopper of an amount in tax. However, you don't need to! You can take the R500K in cash, tax free, and put the rest into an annuity -  it's not compulsory to convert it into cash if you don't need it. This neatly sidesteps the tax hit and gives you significantly more money to work for you in your living annuity. You'll pay tax on the income generated, but that seems fair, considering it's been growing tax-free for decades. If you've got tons of debt that needs to be paid off, then yeah, getting the cash out might be your only option, but if you've been smart about your impending retirement, then that hopefully won't be an issue. Herman is in the process of developing a calculator that will help you once and for all find the tipping point. If he succeeds, he’ll be the Win of the Week for a whole month. Linda is about to kick of their investment journey and wants to know which ETF we recommend. We talk about that here. Adrian has a question about timing. I have recently been fortunate enough to exit a business and have some cash to invest - I haven't invested as much as I should have over the years in traditional savings but always saw my business as an asset I have been investing in. Having sold this asset I have cash to invest but am worried about the timing of putting this all into equity markets at one point in time (markets priced quite high after a good run). In this scenario would you do so gradually? If so, what do you recommend doing with cash as you gradually enter markets? Ross wants to know if he’s on the right track with his ETFs. I have the FNB Tax Free Share account. I invest in two ETFs: ASHT40 & ASHMID. How does the Tax Free Shares account from FNB fair? Are the ASHT40 & ASHMID decent ETFs? Nadia is not sure if she’s on the right track in her tax-free account. I opened a TFSA with Easy Equities this year after doing some research and listening to your show. I've very new to the finance world so everything is a little overwhelming and confusing. I want to tell you what I am putting my money in with the TFSA and I would absolutely appreciate it so much if you could give me feedback on if you think i'm on the right track or not. These are the "holdings" I've chosen for my TFSA: CoreShares Top 40 Equally Weighted ETF Satrix 40 ETF (STX40) SYGNIA ITRIX MSCI WORLD CoreShares PropTrax Ten ETF CoreShares Global DivTrax Like I mentioned, I am brand new to this game so please excuse me if I sound like a complete dumbass. (No such thing as a stupid question in this show!) I try to keep track of what's happening in the markets but it's happening so fast, I struggle to keep up. If I had to continue my TFSA with the above mentioned, would you say I'm doing alright or do I need to refresh my choices? Should I be splitting my TFSA money equally between the above mentioned holdings or should I be putting most of my money in the CSEW40? Mandla has a warning about using your credit card account as a current account. Be careful of the credit card interest free periods. A person from FNB told me that I should not be putting all my monthly debits on my credit card. I was moving things like my monthly rent and subscriptions and recurring payments to my credit card so that I have one statement to look at each month. He says I shouldn't do this because I will get charged interest. Basically, the following transactions still bear interest: * Cash withdrawals * Purchase of Foreign Currency * EFTs out of credit card account * All transactions linked to Petro Credit card * All budget facility transactions I am actually sitting down to look up the terms and conditions to confirm for myself, I thought I'd just share. I’m looking into credit card accounts myself. While there are interest-free periods, you do pay transaction fees on almost everything. A lot of people are talking to me about the rewards they earn, but nobody is saying anything about fees. Links: Six questions to answer before buying an ETF: https://justonelap.com/etf-six-questions-to-answer-before-buying-an-etf/ Should I consolidate my ETF portfolio: https://justonelap.com/etf-should-i-consolidate-my-etf-portfolio/

Access to a great share at a discount is something to take very seriously. Khuliso’s question about Phutuma Nathi got me thinking about BBBEE shares for the first time. I’ve never really thought about it, because I don’t qualify. However, the majority of you do qualify. How do you make a decision about whether a BBBEE share is a better investment than the ETF you would have bought anyway? I found this conversation especially fascinating. I’m keen to hear how you incorporated BBBEE shares into your portfolio, or, if you decided against it, why that is. Win of the week: Michael, who officially moved his TFSA from Old Mutual. I can officially say that the transfer of TFSA money works. Haven't heard anything official from Old Mutual, but the other side of the fence seems convinced the money has arrived. Khuliso wants to invest in the Multichoice BBBEE shares, Phutuma Nathi. I intend on purchasing some shares when I rebalance my portfolio in the third quarter. My motivation for buy is good dividend yield. Would you recommend or be against such a plan? How are they different from ordinary shares? What benefits do they offer that ordinary shares don’t offer? How should you think about them in your overall share portfolio? Frederick has a few hundred thousand left over after selling his house, paying his debt and stashing money for his emergency fund. He’s not sure what to do. He wants to put it in a flexi-fix deposit account with Standard Bank, and get a fixed interest rate of 8,8% per annum back. Money is guaranteed and growth is also guaranteed. It’s always important to remember that these decisions don’t have a one-size-fits-all answer. The best course of action depends on: Your investment horizon. What you want the money to do. If you know how long you have and you need to know exactly how much you’ll have at the end of the period, then a fixed deposit is a way to go. If you would just like to grow it as much as possible for as long as possible, maybe an ETF is a better option. If you don’t have anything saved for retirement, maybe you put it into an RA. Nitesh and his wife earn a good income, but they have three kids in private schools. He wants to know what the best way is to create wealth in his situation. John is 70. He has a fixed return investment that’s about to pay out. African Bank is offering fixed term accounts with 10.5% and 12.95% interest. He wants to know if he should be concerned about counterparty risk. Jaco asked for some clarity on the spending ratio. To get your spending ratio, you divide the money you put towards paying off debt or savings by your after-tax income for the month. I know it is technical, but isn't this a savings rate rather that a spending rate? If I put R15 towards savings on every R100 I am earning, I am not spending 15% but rather saving 15%? The spending ratio will be my total monthly/yearly spent against my income. - You're right on this one! From Manage Your Money Like a F*cking Grownup "Take your expenses for last month. That's all the money you spent (not money you saved or used for repaying debt). Divide that by the amount you earned that month. Multiply it by 100. This number is your spending ratio. This number is the proportion of your income you're giving away to other people and businesses. It represents the percentage of your time that you spend working for clothing companies or for your landlord, or for your bank, and not for yourself." Soobrie is moving their TFSA to Easy Equities. I have three years' of allocation in the tax free savings account with the Nedgroup Core Diversified fund. I'm planning on moving it into EasyEquities. Which portfolio should I choose as I can leave the money invested for another five years? They also have 13 ETFs with etfSA and want to know if they should consolidate. ETF: Should I consolidate my ETF portfolio? Ben has four ETFs in his tax-free account and wants to know if he should add one for dividends. Dividends are taxed at 20%, while you'll never pay more than 18% CGT even in the highest income bracket. For that reason dividends are awesome in a tax-free space. The real issue is, what product do you buy?

Subscribe to our RSS feed here. Subscribe or rate us in iTunes.   Interest is a strange thing, because you could at any point be earning it and paying it. In fact, if you have a credit card you could be earning and paying interest in the same bank account. Tharina has taken steps to get her financial house in order, but she has a dilemma. She has a sum of money earning interest, and she owes a sum of money on which she is paying interest. Should she be using the one to pay off the other? The answer can either be very easy, or very complicated. We discuss her options in this week’s episode. Win of the week: Pieter, who has his estate planning situation on lockdown. My wife is currently a stay at home mom. We have two kids and twins coming. There is a plan for her to go back to work at some point, but currently this is the configuration that works well for all of us. I am contributing monthly building up a lekker EM fund. I am planning moving the entire thing into her name. I know you mentioned "What about divorce", but honestly she is not earning currently and if something happens to me she needs to be able to hold down the fort. So our plan is as follows: Move EM fund to her name. Currently this is just a 30 day notice deposit at FNB. This also means she does not have to liquidate some of her assets. It does not have to be a year’s worth of EM fund, because I have proper life insurance. They pay a R50,000 immediate benefit within 48 hours and the rest in about 2 weeks to a month. He also has a death letter that explains everything. P.S. Me and my kids do not mind the swearing. I'd rather they swear and know shit. Tharina is pretty much on top of her finances except for a car loan. I took out a car loan. Apart from my emergency savings, I have saved a decent amount to pay off my car. It is not the total amount due. The amount is being saved in a money market account. Would it be better to pay off my car by putting the lump sum and extra each month into the Loan Account OR would it be better to save the total amount in my money market and then settle the car loan all at once? Johannes just got a credit card. He’s very worried about it. I am a 21-year old student and recently upgraded my FNB account to a Gold Account which includes a credit card. My old FNB account was an Easy account which was R5.20 p/m, but I ended up paying anything between R100 - R210 p/m for additional "services". I decided to stop that shit and upgrade an other account which is the Gold one. I decided to take a credit card eventually. What is the best way to use my credit card? I know a lot of people use their credit card for day to day living and pay it off at the end of the month. I know very little about all the rules/fees that apply to a credit card. How do I use it to my benefit and hopefully save money rather than paying FNB interest each year? I hope to build a good credit score. I know some people earn a shitload of ebucks that they use for flights etc. Please inform me best on this as well. Some people suggest to pay your salary each month into your credit card and use that...I am lost and don't want to blacklisted. Jane has something called a “last survivor” account. She wrote back after our death episode. My husband and I have an offshore joint and last survivor banking account.  In the event of one of us dying the other one is the automatic owner of the banking account.  The bank just removes the deceased spouse from the account. We have a HSBC account. Unfortunately my local manager was retrenched and now we only have one of the expat banking services. Isaac is 22 and has his financial situation completely under control. With regard to my TSFA, I have exclusively been buying property ETFs and own the Coronation property fund. Since REIT dividends do not qualify for the usual dividend exemption, the best utilisation of the tax saving would be for REIT dividends which are taxed at a person's marginal rate from the first cent. This is opposed to regular dividends, CGT and interest (first R23800 tax free). What are your thoughts on this? Am I overthinking this? If you sell and buy ETFs often in your TFSA, will SARS deem your intention to be revenue in nature only for ETF's in said TFSA or for all TFSA's in general? (thinking that this might be a sneaky way to day trade tax free. Not that I would day trade, but I like the thought) SARS doesn’t care what you do in your TFSA accounts. Since there’s no tax in those accounts it doesn’t matter if you trade for income or are a long-term investor. I own a small amount in a huge number of ETFs. Is this problem? If it is a problem, should I rebalance and incur some CGT? Remember your CGT is tied to your marginal rate, so if you want to go this route, do it now before you start earning real money. Or just pump money into preferred ETFs and leave the rest as is? (I see an IPO and can't help myself) With regards to Simon's comments on the three year rule and resetting base costs of investments (section 9C): The act provides this section to ensure that investors actually invest as opposed to speculate. Since it is explicit in the act, surely SARS won't penalise the taxpayer for making use of it? Eventually they'll catch on and put in an anti-avoidance provision? Wim has two RAs and wonders if he should be moving one. I have a Momentum RA from my employer, which is pretty much compulsory, but I have no issue with that because my employer matches my contributions. Then I have a Sygnia RA in my personal capacity from before. Would it make more sense to move the Sygnia one to Momentum or not? Also, I feel like I am paying too much in fees. Which RA has the lowest fees? I obviously don't want to withdraw the funds due to tax. Moving them from RA a to b is tax free. Gerhard checked out Brightrock for life insurance and he’s very pleased. A while back I asked about life insurance and you suggested I look at Brightrock. I have and for a product that I am comfortable provides me roughly the same as I had before I am paying R1,200 where my liberty costs were 1,650 before. This is a massive saving. Jacques saw a life insurance ad that promises free money. It’s a life insurance product that invests either your entire premium (if you’re under 30) or a percentage of your premium in a money market index fund. (Think TRACI). After 60 premiums you get 10% cash back. Check out the company here. Thanks to Londwa for sending a great video about swearing.

One of the highlights of the 100th Fat Wallet celebration was the opportunity to interview Patrick McKay about financial independence. Patrick, who runs The Investor Challenge Blog, achieved financial independence two years ago. At 39, he boasts the title of Regional Drone Coordinator and works because he enjoys it. In this interview, Patrick tells us how he did it. He talks about his investments, how he managed to afford having a child and what he plans to do now that he can do whatever he wants. Hopefully this is the first of many conversations with Patrick. Listen, and be inspired.

Author Sam Beckbessinger’s excellent book Manage Your Money Like a F*cking Grownup is the unofficial written summary of The Fat Wallet Show. While we didn’t know about Sam nor she about us until after the book was published, we are thrilled at the synchronicity. She explains every principle you’ll ever need to understand to make excellent financial choices simply and understandably, sometimes even with pictures. In fact, if you never read another thing about your money, you’ll be set for life. We couldn’t imagine a better co-host for our 100th celebration. We spoke about the one concept in her book that we’ve never dealt with on this podcast (because I didn’t know about it) - the spending ratio. As Sam explains in this episode, it’s an excellent way to measure the health of your finances, because it’s not dependent on external circumstances like the market or even your salary. You are in complete control. To work out your spending ratio, divide how much money you put towards paying off debt or savings of any kind (including retirement and emergency fund) by your after-tax income for the month. Times that by 100 and you have the percentage of your income that you spend. Your challenge, should you choose to accept it, is to reduce that number as much as you can. The lower your spending ratio, the higher percentage of your income actually serves you. Sam’s book also deals with the most common behavioural traps we fall into when it comes to our money. I caught myself making the most obvious one as I was reading Sam’s book - mental accounting. I caught myself before I made the mistake and saved R600! Not bad! In our conversation, she explains what mental accounting is, why we do it and how we can try to get around it. Lastly, we talk about the final frontier in my budgeting quest. I’ve become very mindful about my money and deliberate in my savings over the past five years, but I’ve always struggled with discretionary spending. I allocate funds to certain spending categories, like groceries and petrol, but never seem to stick to that. Sam’s book finally solved that irritating problem. She explains why it can hurt being too granular in your budget.

We’re 100 episodes old*, so we might as well talk about death. Edwin is turning out to be our most philosophical user - you’ll remember him from before. This week, we help him figure out what will happen to his investments when he dies. We know for sure every investor, trader, RA holder and homeowner will die. Why has it taken us 100 episodes to talk about the impact of death on wealth? Mostly because it’s scary and we don’t like to think about it. Estate planning is a huge part of financial management, especially for those who have already managed to accumulate some assets. It’s moving up our list of priorities in a big way. Thanks, Edwin. *We did also smash an entire bottle of champagne while recording this episode to celebrate 100 weeks of The Fat Wallet Show. This podcast has been a transformative experience - personally, professionally and for our business. You guys surprise us with your frankness, insights and thoughtful feedback every week. You’re a constant reminder that world is full of intelligent, sincere people who care about those around them, despite what we might think after 30 minutes on Twitter. Thank you 100 times over. You should come party with us on Wednesday to celebrate! Win of the week: Leonora thinks we could do better in the swearing department. Coming from the Cape, I find your swearing vocabulary very limited.  A four year old down here might know more choice words than the two of you combined. 😄 Edwin has three kids and has to think about grown-up things like death. As a 37 year old adult with 3 kids. What actually happens, step by step, to my money when I die? I have several investments in fixed property, ETFs, unit trusts, overseas shares and a company pension fund. I have debt in a primary home and investment home. All in all on the day of my death if I include my life policies my net worth with be positive. I also have a will that leaves everything to my wife and kids. My wife will be richer than she was when I was alive. Don’t tell her :) Will the bank freeze all my money until my estate is finalised? Will they take cash out of my life policies and pension to pay estate taxes? Since my emergency fund is in my bank savings account does this mean it will be frozen too and my family can not access it? How long does it take for an estate to be finalised? Will the proceeds from my life policies be taxed too? Is there a clever way to plan for this so that my family can still live during the process of finalising an estate? Is a life hack or best model for planning for this. Seems a waste to spend all of my life trying to maximize my wealth only for it to cause problems for my family when I am gone. Njabulo is starting to see his investments work for him. I logged into my ETFSA account for the first time since moving my contributions to Easy Equities only to find out the cash account grew by just over 66% from free money (dividends and interest). The "profit" from dividends and interest in enough to buy me another Satrix40 ETF. Small as it is, it reminded me of Lesegesha's email. Size matters very little in the world of compounding interest. Cobus is leaving the country and not sure how to save for retirement in the meantime. I’m 25 and have the opportunity to go work overseas. I don’t currently have plans to come back to SA. But I would like to start saving for my olden days and make compound interest works for me. How does one go about this? Because if one plans to emigrate, does one need to save in the destination currency? Or buy ETF's that carries global risk instead of just SA denominated risk? Such as an SNP500 etf? Conrad wants to contribute his full R500,000 tax-free allocation at once. Sadly, he can’t. Karel has taken charge of his finances in a big way and was hoping we could help him with a share-picking checklist. Since I started listening to you I’ve changed my RA from Investec to 10X. I have opened an EasyEquities account for money left over at the end of the month that I save after cutting back on my spending. I also managed to get rid of my bad debt and I should be able to finish paying of my house by the end of this year (done and dusted in 4 years). I maxed out my TFSA yearly as well. So far it’s been going great, I have bought majority ETFs and I had some shares that I transferred into my EE account. NOW I am venturing into uncharted waters on picking my next share. What I love about this is the order of operations. First things first - you take care of your future by taking care of your debt and sorting out how you’ll survive when you’re old. THEN you venture into the more fun stuff. I am a sucker for a checklist. Would it be possible for you to set up a checklist of the top 10 things to compare between companies to help me decide between say Metrofile and PSG? All the monies I put into this account and every single share I buy, I plan to keep for the long run so good old coffee can investing. Check out Porter’s Five Forces. Wilhelm has questions about RA rebates. Is the rebate to be based on your gross income? What is the best way to calculate your tax rebate? How does the primary rebate work? @synapseza has such a cool money hack this week. I have an Income Protection / Disability Protection / Life Cover/Let's-add-some-more-fucking-complicated-benefit-enhancements-and-accelerators-to-charge-even-higher-premiums product with Discovery. The Income Protection is by far the most expensive benefit of the product. Looking through the policy document I noticed that there is a choice between waiting periods (not that it was mentioned by my broker when I signed up). I was on the shortest waiting period (7 days). But I have an emergency fund, so I really have no need to be covered for such short periods. Extending the waiting period to 30 days resulted in a 30% premium reduction (and they didn't quote for 90 days although this is an option in their product). Definitely something to check out and align with your emergency fund. Dean wrote us about body corporate bridging solutions. We discussed this in this episode when Bronwyn’s financial advisor told her of a product with a 17% guaranteed return. Dean explains the product below: BCBSs provide access to what would normally considered an institutional-only asset class – lending. Lending as an asset class is meant to co-exist and complement a range of other asset classes that exist in a client portfolio. It’s also important to qualify that these funds are a loan to a Body Corporate, not an investment. Our clients may view their funds as invested, but technically it’s loan. BCBSs products have the following characteristics: Risk The Sectional Titles Act has protected every creditor (our clients), to the extent that there has never been loss to any creditor since the legislation was first tested in 2001, where legal precedent was set in the Amine Case. Legal opinions confirming creditor security include: EY Stuart, Knowles Hussain, Webber Wenztel. Contracts are drafted by Edward Nathan Sonnenberg and Werksmans, amongst others. We have a parking facility with Stanlib. Aside from the Sectional Title Security, BCBS will soon be introducing a Hollard capital guarantee on the Capital Growth Plan. Our cash custodian is Sanne, a FTSE 250 company. BCBS never touches client capital, but merely facilitates the lending process, due diligences Body Corporates and report on the capital. BCBS is also just the funding arm of the larger Sectional Titles Solutions (STS): (12J VCC / Solar / Outdoor Advertising / Legal / Administrative). Security afforded our clients, makes the product very low risk. A further discussion should include the lending demand of Body Corporates. Costs There absolutely are costs, but none are borne by our clients. The borrower covers all the costs, not the lender. These include a lending rate, admin fees and a raising fee. (Similar to a bond application with a bank.) We put our clients in the position of a bank, thus there is a 0% cost implication, and a 100% capital allocation to BCBS clients. Returns The very nature of a lending asset class suggests that returns are linked to the Prime lending rate. This is indeed the case. All BCBS’s products are linked to Prime. The products range between Prime + 3%, 5% & 7.5%. (Contractually specified.) These returns are truly meaningful, taking into account the capital security, no cost implication and the fact that Prime very rarely changes. Clients do not have a TER, capital is protected, there is almost no market volatility experienced. So far, all I’ve shown are positives. As an ex-financial planner, that would make me sceptical, but BCBS clients do have negatives to contend with as well: The pairing of capital with a borrower does take time as there is relatively long strict due diligence process. As this is a loan, a client can be repaid all or part of their funds before they want the funds back. Thus they would then need to re-join the deployment queue. The client may also be repaid amounts that are too small to redeploy. Should life happen and the client needs to exit prior to the completion of a loan contract (on average three to five years), the client would experience an exit fee. All of these items are covered in our Memorandum of Understanding and ultimately the Sale of Claims Agreement (client contract). We also encourage all clients to do their own due diligence on the products and we always gladly share any information they may require to gain a better understanding. BCBS has always been highly transparent in all areas of their products.

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. Factor-based investing is nothing new. The idea that certain shares will give higher returns over time is the premise behind the entire asset management industry. Absa’s newish range of factor-based ETFs are as interesting for their weighting as their methodology. In this episode, we talk about whether factor-based investing has a place is passive investing. I hate to do this to Sean, but the ABSA TFSA account has a minimum brokerage of R15, so this spreadsheet is in error, and you are still better off going with EE either way (lump sum or monthly) by a whole R34.50 per annum. That’s a free glass of wine right there! Free wine gets you a win of the week.  Antoine discovered something in his dad’s RA that I didn’t know about. Anyone else notice this? He wanted to know the reason for multiple endowments and investments, taking interest free loans from one and investing it in another.  I confirmed with the product manager again that there are no benefits doing things this way. I believe these guys keep on lending and reinvesting the same money, because for every new investment, they generate a commission. I explained to my dad that a R50 000 commission might sound like small change if you compare it to the final outcome of each of these investments. But consider this : R50 000 upfront commission Momentum borrows this against your investment at 10% interest per year for 10 years = -R79 290.00 Plus you lose a potential growth of 10% per year = R85 352,08 So the difference is R164 644,08, which means every time they generated a R50 000 commission  for a new 10 year investment, with the same money, my dad is R164 644,08 poorer. There was no real value added, they probably just get their secretary to send my dad some forms to sign. It would have been better for my dad if they just took the same cash out of his pocket every time. Thinus If you had R10 000 per month to invest, what would be the ideal split between putting money away for retirement vs. implementing/maintaining an aggressive investment strategy? For example, let's say this person is in their early thirties and has a healthy appetite for risk. They want to invest in the following: Buying an RA has obvious tax benefits, but might be limited if one is seeking more risk. Buying ETFs via a TFSA, which is obviously tax free and less risky. And, buying single stocks (equities) either locally and/or internationally. The responsible adult would lean more towards the RA and TFSA, but the risk-reward-seeking side of them wants to put everything in single stocks (equities). How do you balance the risk in this scenario? Phemelo (who was a book winner) made a difficult choice about a car. I’ve been battling to make a decision. We bought an SUV 2 years ago. Because service plan expires, we needed to make decision. 1.Trade in it and get smaller car 2.Surrender it to the bank 3.Extend service plan for an extra R500 4.KEEP THE CAR, SERVICE IT YOURSELF AND DRIVE IT until the WHEELS COME OFF. We decided to go with friends’ advice to keep the car and drive it till the wheels come off. I feel I need to celebrate making this decision.  Hopefully it will pay dividends in years to come. Tshepo has a question about over-the-counter shares. I was introduced to the word but not the research. Do you need lots of money or can an average Joe also get into it? I am looking at a company called Equity Express. Jonathan said women with kids are excluded from the podcast because of the swearing. We asked you what you thought. Madelyne, Ronel and Chris said they don’t like the swearing. Tim says he doesn’t like it, but if we must he doesn’t want bleeps.

Growing up, investments weren’t often a topic of conversation. Even so, I knew that people got rich from property. I don’t ever remember someone telling me this outright. I knew for sure we weren’t the people getting rich. Still, it’s just one of those “universal truths” I absorbed as a kid. Looking back, I realise it’s because I grew up during a property boom and a lot of people really did get rich from property. Share investments weren’t accessible or easy to understand. Financial products were sold by unscrupulous insurers who gorged themselves on the hard-earned cash of their clients. The vast majority of the population were excluded from the financial system. Property was a great way to accumulate assets and build wealth under these circumstances. That is no longer true. The market has changed. Legislation has changed. Easier, cheaper, less risky ways of building assets are now available to everyone with a proof of residence and identification. Property is suddenly one of many ways to get rich. In this episode, Simon and I discuss the role non-share investments can play in your portfolio. We think through two listener questions - one around S12J companies, the other, property. Garth wants to know what we think about venture capital investments. Since I started listening I have opened an account with Easy Equities. I’ve set up a budget, started with a financial plan, and invested in ETFs & normal shares. My question is around Venture Capital Companies. Is it wise to buy Private equity, and get the tax relief? Or is it only for high income individuals? There is a lock in period of 5 years I see as well. This is similar to the MTN BEE shares bought a couple of years back. I am trying to diversify my portfolio and looking at all avenues to spread the risk with the bulk being in Shares/ETF's of course. Ros has a property investment success story. I bought my first home - a small 3-bed townhouse in which I still live - in 1999 for R180,000 - got a loan from my dad and paid him off (including interest which he did charge me!) in two years. Then I bought a rental property in the same complex for R370,000 (including all costs of purchase) in 2004 - got a bond for R280,000 which I paid off within 3 years. I then bought a second rental property (mistake!) for R707,000 (incl. all costs) in late 2013 for which I liquidated some Satrix Top 40 and accessed the remaining capital in the existing bond, which I decided to pay off at the end of 2017. I've left the bond open and use it as my emergency fund or to help with short-term cashflow issues if a client pays me late (I'm a freelancer). The rental income that I get from the two properties means I hardly have to work at all to cover my monthly expenses. But with the property market currently where it is, I do agree with you that it makes no sense to buy an investment property today. The first rental property has seen capital growth of around 127% over 14 years (approx 9% pa), and then there's all of the rental income. The second property has seen capital growth of around 13% over 4 years. The two properties are of similar size in the same complex, so the difference is purely down to timing - the first was bought when property values were still going through a high-growth phase, the second when property growth had plateaued out. We talk about this excellent JSE Power Hour presentation by Magnus de Wet in this episode.  Jonathan made the best case I ever heard for not swearing on the podcast. So good, in fact, that I’m actually considering it. Personally I don't mind that you swear. I understand the need for creative and relaxed expression on the podcasts, which is breath of fresh air compared to radio shows. The only problem is that it excludes mothers who have children in their cars. Yes, there are some dads that take their kids to school but invariably it’s the mom. The result is that mothers don't end up as being financially literate in the household. As a husband, I can’t get my wife to listen to your podcast because she won't listen to the swearing. As a household, we have shared decision-making. It’s very difficult to convince my wife to listen because driving in the car is probably the only time she has to listen to the podcast. I would very much like to improve the financial literacy of moms, especially stay-at-home moms (my wife by the way is a professional and still works) but alas, she is excluded from your otherwise excellent podcast. I could even suggest that you take a poll in which you ask your listeners whose wives won't listen to the podcast because of the swearing and thus you could gauge from your listeners themselves. If we are to create gender equality in financial literacy, let’s get more women involved. I take the point on kids in the car. I disagree with the view that women are more offended by the swearing than men. In fact, every email we’ve ever received about swearing has been from a man. That said, I’d love to hear from you on this. This show is about inclusion, which, ironically, is why we swear in the first place. We want to feel comfortable ourselves, and we want our users to feel comfortable. Richardt let us know about a very cool tool for Sygnia investors. Sygnia has this excel sheet which allows you to select all the funds you like on the first tab for a Reg 28 compliant investment, and then once you click Generate, on the second tab it will show you the complete breakdown of fees and total asset class allocation! It has been updated following the budget speech. It’s very cool. It includes the actual rand amounts too, so you’re not just working with a percentage. If you contact customer service they send it to you.   Nicole is following up on the tax issue on global funds in tax-free savings. You made a comment on having global funds in your tax free savings account. The issue is that you pay dividend tax on dividends issued in the countries where the shares are held. The tax gets deducted from your dividends before they’re paid out to you or reinvested. If you receive dividends in a TFSA, you don’t pay local DWT, but you can’t avoid the international tax. I have the Ashburton global 1200 and the sygnia 4th industrial revolution in mine and I'm trying to figure out if these would result in the problem you identified. When I received local top 40 dividends last week, my offshore dividends were a line item. I hold these outside of my TFSA and I noticed that I paid local DWT on those. That’s also a line item in my statement. What we’re trying to work out is if there’s an offshore tax that was already deducted and not included as a line item in my statement. Getting an answer to this question is proving to be really hard.   Jacques has a question about his retirement tax break. Is the  27.5% on the total pay you receive, i.e monthly salary + overtime + bonus + ...... or is it my basic cash salary before all those extras only? My company contributes 15% of my BASIC salary (+ my 7.5%). If SARS gives us a tax break on 27.5% on total salary, that means my current contribution is much less than the "22.5%" shown on my payslip. If I could spare enough to save the full 27.5% of my total earnings, what do I do with the extra money? Retirement annuity or Tax Free Savings account? Is there something else? HR seems to be unsure about increasing my contribution deducted directly from my pay. Denzil wrote us in episode 94 about his Liberty RA. We made a fire under him. He also has a question about moving TFSAs. I decided it’s time to kick these guys to the curb. I’ve started the process to transfer my RA from Liberty into my 10X RA. The FA was not too pleased and tried all the tricks in the book. He even then asked me who I’m moving to. I informed him about 10X. He had no idea who they were!! I even told him about this a year ago, so much for keeping tabs on the disruptors!! I’ve also started the process to withdraw my the other investment from them. I’ll be maxing out my Easy Eq TFSA for the year. 50% to my Emergency fund (taking it to my comfortable 6 month level). The rest will go into my Trading Easy Eq account. Again, crazy FA not happy, and has all excuses. So all is good and here's to my money actually now growing(well lets hope so!!!). When you transfer a TFSA from one account to another TFSA Provider, do the contributions count in the year I added them, or does a transfer count for this years R33k cap? Gerhard knows he missed the boat to win the book, but he wanted to contribute his mind-blowing financial fact anyway. The single biggest tip I have on finances: never ever buy anything that someone is trying to sell you. If you didn’t initiate contact the answer is always no, no matter how awesome the deal. Saves you from being overcome by superior salesmanship and buying something you didn’t want all the way to being scammed.

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. We spend so much time talking about bad financial products. Is there such a thing as a good financial product? If so, where would you find them? Listener Bronwyn got badly burned with financial products in the past. She’s been paying 15% fees on an Old Mutual education policy and took out a Discovery retirement annuity that hasn’t returned anything above her contributions for the past six years. Now her financial advisor wants her to invest in Body Corporate Bridging Solutions, which apparently guarantee a return of 17.5%. In this episode, we provide a checklist for buying financial products. When comparing similar financial products, think of the following: Fees Let this be your point of departure. As winner of books and life, Ronel, explained last week, “If I get 10% growth, and inflation is 6%, there is only 4% left for growth and compounding. If I pay 3% or 4% in fees, I will only get back what I put in, adjusted for inflation.” Guaranteed returns far above retail bond rates As Simon points out, the government is the only party that can realistically guarantee returns, because the government owns the printing press. You can check government retail bond rates website here. Counter-party risk Investments are for the long-haul. As winner of books and real life, Lesigisha, pointed out, the principles of compounding relies on time, not money. If there’s not much information available about the company taking your money, be very careful. Counter-party risk should be considered alongside fees, though, in the case of older, bigger corporations who probably won’t go bust but happily pocket your investment returns. Active or passive Simon and I spend a bit of time discussing this point. The SPIVA report indicates that actively-managed funds underperform the market year after year. However, if an actively-managed fund makes you feel more comfortable, don’t forego it just because we say so. It’s your money, after all. Win of the week: Sean worked out if you’ll be better off at Absa or EasyEquities. He also worked out how many years it would take him to make back the penalty. ABSA’s new inactivity cost is essentially R40.25 per every two months, but only charged five times as there would be a trade in the beginning of the year, This adds up to R201.25 per year for the next 14 years (R2 817.50 excluding compounding or about R6 780.98 at 15% growth adjusted back with 6% inflation). After that the fee is R241.50 per year until you remove the money, which assuming my daughter is financially savvy will be a long time as she is only 18 months old today. Anyway before getting myself worked up about ABSA essentially stealing a month’s income from my daughter, I decided to objectively look at the numbers (boring Excel attached to check calcs) and do a comparison between EasyEquities and ABSA For my family it’s cheaper to use the EE platform by quite a bit, We will pay off the moving of the two ETFs in just under two years. For someone using a monthly deposit it may be better to pay into ABSA until the TFSA allowance is maxed out and then only move to EasyEquities. Hope this helps some peeps. Click on the link below to download the spreadsheet. ABSA vs EE Shout-out to Lean, who recently started listening and seems to be going through the episodes front to back. They wrote about tax on whisky, from many moons ago. Claire wrote to say my newsletter editorial really hit her in the feels.  Your "editorial" this morning really struck a chord with me... Of course that's how they make their money. And the same goes for any of the other things we buy, oh so complicated: wine, perfume, cars, homes blah blah ~ have a great week! Chas wants to know if we have transcripts. I have listened to most of #96, then I was interrupted by a phone call so I lost the thread. I am 78 and a bit deaf so I battle to keep up with your rapid delivery. Do you provide a transcript that I can study in my own time or is there a way I can pause to digest what you just said and then go on again? I always want to learn more about investing. Thanks for a lively intelligent show. Transcripts are for one day when we grow up. It is our highest priority in terms of this show. Thinus has a question about structuring his pay cheque. When allocating your salary to different "pockets", should you use gross or nett salary? Alexander sent this great email about selling his house. When selling a primary residence does one pay CGT for the amount above R40,000 regardless of what you have spent on the house? We sold our house for R50,000 less than we bought it for about four years ago. We paid more than R500,000 towards our loan (which was mostly interest of course) We spent about R100,000 on renovations before we moved in. After the sale we end up with R70,000 in our pocket. Of the R500,000 (paid into the bond) R120,000 went to the principal amount. We sold for R50,000 less than the principal amount. In my book, it’s a loss of R530,000 (500k + 100k -70k). Or may I only deduct the renovations? Which is still more than the 70k, but in principle can one only deduct physical improvements? Living there cost us a fuck-ton of money. Obviously we are getting very little out of this deal, but even if we made R600,000, I would be able to prove that it cost us much more to live there so there is no "gain". What can I deduct from the money we get from selling a primary residence? How does this compare to a buy-to-let property? If you can deduct a bunch more for a buy to let, would it be worth it to buy and let to yourself? We’ve had a few more emails from people who are upset about Absa’s fee increases. John says this is not the first time. I bought a small amount of the Absa NewGold ETF years ago and had never done anything else with them. They sent me a letter (in the POST) about 18 months ago telling me about a new minimum admin fee, payable quarterly. On my pretty small account it amounted to an admin fee of something retarded like 10% a year! After querying it and getting a shrug of the shoulders, I thought FUCK THEM!! I did some research found EasyEquities, sold my ETF, was below my CGT threshold and reinvested two days later with my newly minted Easy Equities account at a newer, much higher base cost. With EasyEquities being such a user friendly, reasonably-priced platform, I've subsequently invested multiple times what I originally had with ABSA. Their, EasyEquities’ gain. We foolishly forgot to pick a winner for Sam Beckbessinger’s book Manage your money like a fucking grownup. Njabulo, who writes for us, snuck in his submission. Whatever your investment or savings plan is, it is important to consider inflation and fees. If the investment can't outperform inflation after fees, that investment is making you poorer. Jen was the Win of the Week in episode 90 for figuring out that people who don’t earn a steady income can still structure their savings by doing it by invoice paid instead of by month. As a self-employed person without a fixed income, I can't structure a pay cheque because I don't get one. But I can apply the same methodology to each amount that I receive. Since my last email to you about this, it has been going well (although April has been a kak month so it has not been easy). On the odd occasion when I have been tempted to forget about my system in favour of instant gratification, I just listen to beginning of episode #90 again where you discuss my email. Straight away I am committed all over again, like I would be letting you down if I didn't stick to my guns. I know I should be motivated by how happy future me will be, but sometimes it is hard to think for two people at once. The second brain wrinkling fact, and this isn't mine but a repeat of what you said, is the idea that our total income over a lifetime is a finite amount. Every time you spend money on something,  there is something else you can't spend money on. Has that bit of information affected my spending habits! You are changing my life and I have turned into a bit of a fanatic about all this. I am constantly annoying the crap out of everyone I know because I am trying to convert them all to The Fat Wallet Show, for their own good. This, as well as iTunes reviews and mentioning us when you deal with any financial services provider really helps us. Thanks!

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. This is another themed-by-serendipity episode. Last week Edwin mailed with a dilemma: how do you choose between being a good citizen or family member and having money? Whatever you spend on your family, kids or pets or donate to charity is money not going towards your savings goals. Does that mean you should forego those things altogether? Money and morality are closely linked, but so is money and health, as Christoff pointed out. Having a lot of money but never having any fun is completely pointless. A lot of money at the expense of having children is not going to make you happy (if you want children). Sitting on a mountain of money and never helping anyone else is going to bankrupt you morally. Spending your life trying to get rich but neglecting your health is going to lead to sickness in retirement. What’s the point of that? We discuss strategies to navigate these questions and completely fail to choose a winner for Sam Beckbessinger’s Manage Your Money Like a F*cking Grownup giveaway. Something to look forward to next week! Win of the week: Jacques Kasselman. He found us by accident on iTunes and immediately panicked. After reading his mail I realised that he actually didn’t need to panic at all. Where to start to get on track? I think the best thing would be to get rid of my debt of over R1500 a month, excluding interest on my vehicle loan. I started paying off my debt by having a liberty investment I had for 6 years (R500/pm - 1.67% growth above what I put in) pay out and pay off my most expensive debt first. That's R700 that can go to the next card/account and then the next and so on. Is this the right strategy or should I rather look for somewhere else to invest that money, eg. TFSA, ETF and slowly pay off the debt over time? The way I understand from what I have learned from you guys so far is get rid of debt, then create an emergency fund while simultaneously slowly starting to save/invest and increasing the savings/investing part as the emergency fund gets closer to 3 months salary. TFSAs SARS gives us R23,800 tax free interest already. Is it still beneficial to contribute to an TFSA at possibly lower returns if we are still far from reaching that limit? Saving the R500,000 cap for when one day we pass the R23,000 limit? Reaching the R500,000 limit would take about 15 years if you contribute the max of R33,000. As I am 34, I still have 31 years left if I am unable to retire early. PENSION My employer requires 22.5% pension contribution monthly, deducted from my salary (me=7.5% company=15%). At the moment its split between Allan Gray and the company fund. I plan on increasing the percentage towards retirement to max as soon as I can get the rest in order, or at least a little better. Stefan responded to Frank, who wanted to know where to keep his Lazy system cash while he waited for entries. I have four EasyEquities accounts and I get interest on all cash in my accounts. There’s a cash management fee, so it's not the best cash account, but it's not like I'm getting nothing. Fred has an interesting question about TERs. He is invested in an Allan Gray Balanced Fund through a financial planner. The TER of the fund is 1.44%. In addition to that, he pays an admin fee of 0.40, an advisor fee of 0.50% and a management company fee of 0.79%. Just for the privilege of buying the fund he’s paying 1.69%. I looked up the fund costs on the Allan Gray website, and I have some bad news. The TER is 1.45%, but excludes “other expenses” of 0.02%, VAT of 0.15%, and transaction costs of 0.07%. 3.38% total cost. The problem is, you don’t see the TER. It costs you money, but you don’t see the money. Pieter is putting his emergency fund to work. He banks with FNB, and he’s really made the most of that infrastructure. I have a cheque account that my salary gets paid in. I have a bit of extra money to cover the "shit I did not budget for". I move most of my expense money to my credit card so it is positive. This earns me a tiny bit of interest and I win back quite a lot in ebucks. I have a linked savings pocket with 1 months expenses in it. It earns interest, has no account fee and money is available immediately. I am building up 3 months living expenses in a 32 day notice account that also earns interest and has no account fee. So the plan is: for small unplanned things, you just use money in your account. If the paw paw hits the fan I can live a month with my savings pocket money. When I start touching that money I can request "next months salary" from the 32 day notice account without incurring costs. If I can build up > 3 months in my notice deposit, I will move that to bond ETF or something that gives better return. This way I have no fees and costs, acceptable interest and money available now. Gerhard needs help with life insurance. I love your war on fees. It’s helped me a lot in making my decisions around investing. Is there a similar type of thing in the life insurance side of the world? My life insurance is with Liberty, and it is fully a grudge purchase, but I do have 100s of children so kind of have to have something. Are there new style life insurance companies that you guys are aware of, like a 10X but for life insurance? I asked the 10X team and they didn’t know of anyone. However, I did get some suggestions. Have a look at brightrock.co.za. It looks like a new school type of business, but it’s majority shareholder is Sanlam. The other suggestion was FMI. They’re a division of Bidvest Life. Craig Gradidge from Gradidge-Mahura investments said: The insurers who are "traditional" and reasonably transparent are Sanlam, Old Mutual, Hollard, PPS.  The 2 that integrate are Discovery and Momentum. With Brightrock benefits structure is still something they need to work on...as always, the answer of which is best is usually determined by client requirements, their lifestyle and health conditions, etc etc Poor Josh is stuck between a rock and a hard place with his RA. I recently started working at a Big Four bank I come from a company that used 10X as a provider. I didn't know how lucky I was back then. I am 26, so I need an aggressive portfolio. The fund options we have are somehow administered/managed by Old Mutual and the options are: Allan Gray global balanced portfolio - 51% equity allocation, 1% fee on SA based assets, and performance related fees of between 0,5 and 2,5% for foreign assets. I'm staying fucking far away from this one. Assholes. Coronation global houseview portfolio - 49% equity allocation, looks like a fund of funds so fees on fees will apply here, but doesn't look that bad. Still shitty though. Investec balanced fund - 41% equity allocation, 23% bonds allocation. Fees are reasonable at 0.54% for local assets and 0.75% for international assets. I ended up choosing this one due to the lower fees, but it's so conservative, so shitty. Nedgroup core diversified fund - 50% equity allocation, 7% bonds. Fees are good at 0,58%. But again, lower equity exposure. Actually looking at this now, this option looks the best out of a shit bunch. The rest are so shit they aren’t worth mentioning. Think old mutual, Tanquanta cash pooled fund (yes, seriously). So, my question is - do I bite the bullet and just throw as much as I can at the Investec/Nedgroup funds, or maybe lower contributions to the least I can and then open a portfolio with a better RA provider like a Sygnia/10x etc in my personal capacity? I'm leaning towards the latter. But this would probably mean some complications come tax return time? I don't suppose I can go to a massive corporate’s benefits department and tell them that my options are terrible, give me better ones? Jorge wants to invest in a living and guaranteed annuity, but he wants to know how to make that decision. What are the practical implications and values considerations should be taken into account when opting for both a guaranteed and living annuity? We have an excellent article on justonelap.com/retire about the difference between these products. Entries to win Manage your money like a fucking grownup by Sam Beckbessinger. We asked you for the one fact that changed the way you thought about your finances. Christoff’s point is about health. When you realise that you need to save up for a potentially very long retirement (30+ years these days!), we do all this planning to ensure that we’re “taken care of” financially, but what about our physical health? If we’re going to live for another 30+ years after retirement, we’d be enjoying those years a lot more if we’re fit and healthy, right up to nearly the end. I’m 43 and take good care of myself, but I look around at my peers (school friends, cousins, colleagues, etc of the same age-group) and a LOT of them already suffer from heart problems, hypertension, cholesterol, various forms of cancer, diabetes, and what have you!  It’s very depressing to think of having the benefit of living in the 21st century, with enough technology to keep us alive for so many more years, when most of those years are going to suck! Just as compounding works for/against your finances, it does the same with our health.  Poor daily habits will eventually catch up with you, so we need to keep our attention on this very important factor if we’re going to enjoy our hard-earned and cleverly-invested wealth. Phemelo found The Fat Wallet Show in January and has made massive strides in his financial life. I’m not all over the show. I have a financial plan and taking on the challenge of keeping the lifestyle cost the same to avoid lifestyle creep. My huge eye-opener was there are no shortcuts to this thing - baby steps. I’ve closed my overdraft, I’m starting to slowly chow the credit card debt, and I started paying my student debt. The next step is starting to slowly build the emergency fund. Ronel had an a-ha moment about fees If I can lower my fees on my Retirement Annuity, I can have sooo much more money. It blew my mind that if I get 10% growth, and inflation is 6%, there is only 4% left for growth (compounding) and if I pay 3% of 4% in fees, I will only get back what I put in (adjusted for inflation).  That is not my idea of a comfortable retirement .... So I moved my Retirement Annuities from Sanlam and Old Mutual to 10X. I am now on a fee witch hunt to cut ALL fees to the bare minimum :) John Morrison (our retired unicorn) submitted a vote for Khuliso, I think. When people speak about money I have realized that I must first determine their anchor point and their biases. Then I can adapt this information to my anchor point and confront my biases. Someone investing for future retirement is at a different point to another living off investments in retirement. I am truly inspired by Khuliso and their kota. Such an understanding of compound interest, time and lowering the cost of living. Really amazing! You can't help it if your parents were poor and you start poor, but with compound interest in a single generation everything can change. Well done Khuliso! With ABSA's WTF new minimum brokerage fees in ETF accounts (which is by the way more than a kota) we need to get behind EasyEquities and give them huge support. Is EE the only company that understands not to rip off the poor? Links to be included in show notes: Adam sent a link about the three biggest lies about passive investments. They are: People can’t make their own decisions about which products to buy Very few investors have the time, knowledge or skill to invest their own money. The fees aren’t as low as they claim Passive products available to retail investors in South Africa are still relatively expensive and not that much lower than actively managed funds. You don’t get market return It is easy to compare the JSE/FTSE All Share Index returns with active manager returns and conclude that active managers are not worth their fees. The comparison is flawed. It does not consider risk and it also does not take into account that most of the growth from that index has come from one share – Naspers. I’m not going to tell you what to think about this. If you understand how these products work, you can make up your own mind.

If you secretly hate us but haven’t been able to find a different source of financial information, I have some great news! I found a Freakonomics Radio episode that summed up exactly the principles we champion on this show. In this episode, Simon and I take the financial literacy survey. It’s only three questions, but understanding their answers will enable you to make great financial decisions. If this sounds vaguely familiar, you might be thinking of this podcast we did last year. Here are the questions: Suppose you have R100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? More than R102 Exactly R102 Less than R102 Imagine that the interest rate on your savings account was 5% per year and inflation was 6% per year. After one year, how much would you be able to buy with the money in this account? More than today. Exactly the same as today. Less than today. Do you think the following statement is true or false: buying a single company stock usually provides a safer return than a collective investment scheme like an ETF or unit trust. Win of the week: Rob has been coming to our events for ages. He has some ETF investments, but he’s been wanting to trade since the day I met him. This week, he sent this email: Yes I have done my first trade and  bought my first bunch of shares (7 shares in total - some bits and bobs) (as oppose to ETFs) I am not sure how I am supposed to feel! Its bit like sex for the first time - did not know what to expect! Frederick My world has been turned upside down! I started listening to your podcast a week or so ago, and fok... my google is broken!! From googling sport all day I now spend endless nights and have sleepless nights on where to put my money and avoid tax as much as possible! I use to think money is money and my RA is perfect and that life is sorted! I was wrong! I have an RA (diversified wealth builder) with Sanlam. Any thoughts here please? My FEES (to my knowledge) is 0.65%. It says “management fee at benchmark %”. I put some money in monthly with a 10% annual increase. By retirement I should be paid out R11,5m. Let’s say you live another lifetime after your working life, how much will you need? It’s possible to retire at 60 and live to 100. https://justonelap.com/podcast-much-money-need/ Frank is trading Simon's Lazy system and wants to know if he can park his money somewhere while he waits for entries. He’s not earning interest on the money that he’s allocated for this trade. Shamona wants to know if timeshare is worth it. What are the pros and cons? What should I look out for when buying? Entries to win Manage Your Money Like a Fucking Grownup. We want you to share the financial fact that blew your mind. We’ll be running this competition for one more week. I asked author Sam Beckbessinger hers and she said on R10k per month, you’ll earn R19m in your  working life. Mine is that a low cost of living is basically the answer to all your problems. Lesigisha wrote back after we sent him a shout-out last week. Thank you so much for the great affirmation I received from the submission of my email, it really really went a long way in validating what I’m doing. It’s hard to start on this journey, but after doing it for a while one does sometimes get despondent and wonder if this is worth it. Your affirmation has helped reinvigorate me and I go back to it every time someone says they’re waiting until they have a bigger shoe size before they can start making “real money decisions”. Khuliso’s mind-blowing fact is that you don’t need huge amounts of money to invest. As a result of his mail I spent a lot of time thinking about kotas this morning. The most mind-blowing fact was finding out that if I can afford to buy a kota (R23.00) or street wise 2 I can afford to invest in the JSE and create wealth. Even though it's little money, over the long term it makes a difference. In my case the problem was lack of information rather than a lack of money to invest. I am now very conscious about my spending habits. Whenever I buy takeaways in the back of my mind I keep on thinking of ETFs that I could be buying. When I look back, I see missed opportunities where I could have invested and build wealth.

It’s becoming increasingly clear that access to money isn’t always the best thing. In last week’s episode, Pieter explained how access to a free house and investments didn’t make him great at money. Fat Wallet bestie and newly appointed spy, Wilhelm, sent us news from the front line this week. Wilhelm started sorting out his money and sharing his journey with us when he was still a student. It’s been such a pleasure witnessing his pre-income journey. If you can figure out your money situation before you actually have any, how much you earn becomes irrelevant. You’ll be a financial success. Sadly, the opposite is also true. I certainly learned that the hard way getting into mountains of debt in my 20s. The difference between me and Wilhelm’s new colleagues is that I earned a junior journalist’s salary (basically just enough to make my engineering friends feel sorry for me). The amount of damage I could do to my financial life was artificially limited by the amount of money I earned. Thank goodness. This week we talk about the dangers lurking behind the piles of money of high-income earners. If you’re a low-income earner, this is good news for you too. These are the traps to watch out for before the dineros start rolling in. We are giving away a prize for the first time ever. Sam Beckbessinger is the author of Manage Your Money Like a Fucking Grownup. She donated a copy of her book to one lucky Fat Wallet listener. Find out how to win it in this week’s show. You can find out more about the book here.  Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. Wilhelm writes: The government takes really good care of its young doctors. We get a good salary, but the lack of financial education means that a lot of that money simply gets wasted. I know of three doctors living in my building who purchased expensive brand new cars (Mercedes Benz A class AMG, Audi RS3) before receiving their first salary (and without receiving any help from their parents). They bought cars on credit using only a contract from the department as collateral, where it has often happened that people do not get paid the first month due to the poor admin/payroll/HR abilities of the DoH. One is paying an interest of 13% over seven years. In PE we get the opportunity to live in the doctors’ quarters. It’s an old apartment building in an old and rather dodgy part of town, but it is centrally located with adequate security, a brilliant sea view. We get to live here for R1100 per month. My flatmate and I pay R2200 for a three-bedroom apartment. Many of the new doctors don’t want to live in the flats. They are old, the outside looks a little dilapidated and the first two floors had a history of cockroach problems (which has been sorted out). They justify their choice with, “I’m only here for two years, I’d rather live close to the beach.” They pay between R6,000 and R8,000 per month for two- or three-bedroom apartments. This often excludes water and prepaid electricity or 24-hour security. That is 300-400% more than we are paying. The last thing I noticed is the absolute ignorance towards savings and investments. Of the 52 interns who started at Livingstone hospital, I’ve chatted to more than 40 of them and only two of us have TFSAs. One of them even said his financial advisor told him that TFSAs are “only for poor people”. People blindly follow the advice from advisors from companies like Sanlam (which gets sold to us under the Abacon brand), Old Mutual and Liberty with very few people even knowing that 10X, Sygnia and EasyEquities exist. People have private financial advisors that have them investing in Funds with TER > 3% with many hidden costs. When they asked them about TFSAs, they said “oh yes we can talk about those when you want to get serious about saving!” From a financial point of view I’m on target to have my TFSA topped up for 2018 within four months. My emergency fund is also growing nicely, already up to three months of living expenses. I’ve also done a bit of research and found that you can save quite a few rand every month on insurance if you increase your excess payments when you claim. You should only do this if your emergency fund is able to cover the amount of excess that you are taking on (maybe even two or three times over so that one single claim does not consume your entire emergency fund). Mary-Ann wants to know if her emergency fund can do better. I am currently keeping my emergency cash funds of about R100k in my OST account which currently earns me 5.638% - better than a Savings account. I’ve been trying to figure out if it is worth putting that cash into something like the Newfunds GOVI ETF or Newfunds or Satrix ILBI ETFs. It seems to me like I could earn closer to 8% there although would need to deduct the TER from that return. I realise that the capital could fluctuate slightly, but is there significant capital risk to make it not worthwhile? It could get liquidated if required in a few days. I would probably continue to keep a portion as cash for immediate emergencies that could not wait a few days. What are your thoughts on pros and cons of this strategy? Where might I do better? I hate having money laying around not earning its keep! Milan has an answer for Georgie regarding her bond insurance. I think he’s going to save many of you a lot of money. Georgie mentioned having trouble trying to reduce her credit insurance premium. There's an easy way around this issue. The new credit life regulations state the credit provider must allow the bond holder to substitute the insurance cover as long as it provides the same level of benefits. In other words Georgie can look to other credit life insurance providers for insurance on her bond and get a quotation based on the outstanding balance of the loan. Antoine (who shared their thoughts on RA penalties being like debt) has another pearl of wisdom. They say, regarding when to spend and when to save I heard a good explanation for this on “Money Management Skills”, from the Great Courses series: Think of your past, current and future self. If you borrow money, your current self is taking from your future self. When it comes to a home or study loan, you can argue that future self will also benefit from the house or degree, so it is not that bad. When you save money, you are sending some money to future self. In this instance, it doesn’t make sense that your 30-or 40 year-old current self can’t do anything fun while you’re still young and active and your future 90-year-old self lies in bed with millions in the bank. I recently bought a new bike. I am able to buy a very fancy bike cash, but at a certain price the marginal gains are not worth the money you spend at my level of cycling. Instead of spending thousands extra on a bike that’s a bit lighter, I decided to get a good enough bike and shoot some of that cash to my future 70-year-old self, so that he can use that cash to go on a nice overseas trip. Last week Keith Mclachlan took issue with ETFs on Twitter. We gave him an opportunity to share his views on our website. Paul reckons he hit the nail on the head: Because we all wish to improve our knowledge and understanding of investments we should welcome Keith’s view. I just don’t see any misunderstanding; He uses ETFs when/if he doesn’t know/understand a market and doesn’t have the time to study/follow it. That’s what we all do. That’s the reason ETFs exist.   Glad to see my investment strategy mirrors his. Denzel just discovered fees. He’s not happy. He has questions. I’m sorry to get back onto RAs again but the fees these f*ckers have been charging me is absurd. Now I know why my FA drives the car he does!! I have two RAs: One is with 10X (very happy, even though returns to date are average, market not great) The other is with Liberty through a FA. They invest in Allan Gray and Coronation. The fees are just crazy. See below image of the EAC I have just come across. I’m so angry I didn’t look at this before. I’ve been with them for two years after moving from Discovery (another mess). Would it be best if i cancel the Liberty/ AG/ Coronation F*ck up and put it all into 10X? I know it seems obvious, but I have to ask! I have a Liberty Evolve investment with them too Again, crazy fees (like 8% it seems!) I’m thinking of cancelling this and placing this straight into Easy Equities, spread over a year or two of course. I have an emergency fund of just under three months that i'm building up to be six months where i'd be comfortable Would it be best to use the evolve investment to get this to six months worth and then put the rest into my Easy Equities TFSA/ Equities? The only debt I have is my wife's car, Still owe about R200k on this - Pay off first? Pieter wants to know how to find a cheap car. In one of your earlier shows Simon mentioned how he figured out the year price (or something) to help him to buy an underpriced second hand car. I can't remember which episode and I am having trouble figuring it out. Could you please be so kind as to give the formula again? Subtract the current milage from 150,000 (or whatever you suspect the Death Mileage is for a car). Divide your expected annual milage into the remaining milage for number years until you suspect the car might have no real economic value. Divide that number of years into the price. That gives you a ballpark of cost per year. Now you can compare cars! Flipi is living in Japan at the moment. They wrote us about RAs a while back, but this week sent pictures of the cherry trees in bloom. Since this show comes out on a public holiday, I’m including them in the show notes. Seeing the Japanese cherry blossoms are a bucket list item for me. Thanks for sending them, Flipi! [gallery ids="7483,7484,7485,7486"]

So many Fat Wallet listeners are diligently setting money aside for their kids. We often field questions about investments and suitable investment vehicles for children. Being able to send your child into adult life with enough money is a noble aspiration. We don’t often encounter people who benefited from this type of financial leg-up, making it difficult to guess at the impact it has. This week, listener Pieter let us in on his experience as the beneficiary of this sort of parenting. He also tells us why he doesn’t think it helped as much as it could have. He writes: The biggest financial issue for my dad has always been paying off their house. He used to say that he would have done much more with us as younger kids if he didn’t have that debt. He took it upon himself to make sure my sister and myself get a good, debt-free start to adult life. We are very fortunate that he helped us buy our first house cash, and had some money left to invest. For this I am truly grateful. BUT!   My financial education was as follows: At age 10 my dad gave me a little book and a pen and told me I need to write down my allowance and spending. It took all of 20 seconds and I think I wrote one line in that book. I never saw him do it and he never asked me about it again. More than decade was wasted simply because I was not financially literate. Worst of all, it lead to the mismanagement of the assets with which we were entrusted. If I knew at 18 what I knew at 33, I would have been much closer to retirement. To save oodles of money for your kids is a nice gesture, but teaching them about that money makes the biggest impact. Both my kids have TFSA ETF accounts at Absa and that is all fine and well. But I am making an effort even at their young age to educate them about money. Once they’re older they will be included in budget talks and planning, know about salaries and about their investments. I want them to work with money and make mistakes while I am still there to catch them. You also mentioned in the podcast that talking to your kids about finance means you should fix yours. I also feel that you should include them in your failures. Learning comes from failure so go at it :D We live on a farm and pay the kids allowance for chores using poker chips. It’s a mission to have a bunch of 1 rands everywhere. We soon realized that we we’re running out of poker chips and had to make a plan. I built a small "bank" for them where they can deposit their poker chips. I added some budget functionality and my plan is to add some interest dynamics when they are older. I put it online for some friends to use and figured you can point other parents to if you want. (I gain nothing from people using it. I just like to share).  Moola Bank Shane wins second prize, for putting his money where fees aren’t. Thanks for the great on TFSA Transfers! I've decided to be a guinea pig, and initiate my transfer out of those super high fee people (Old Mutual), and into the safety of my EasyEquities account. It's been fairly painless so far, all I did was call each provider, told them what I want to do, and they mailed through the forms. Now the 10 day waiting game begins. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. Richard Watson reckons the time for silver investing has come and gone. The listener who wanted to put all his cash into silver might want to move half into vanilla! Dirk is looking for a place to invest for his little girls. Seems as if Sygnia has quite a reputable TFSA with lowest costs I have seen in the market thus far. I am thinking about opening a TFSA for each of my little girls in the near future. We’d like to commiserate with our friend Petrus for paying a rental management firm 10% commission every month for no good reason. Been paying these fuckers 10% commission for more than a year for nothing!! Anyway, just another point for NEVER buying!! I have a good tenant (well, I hope as I'm sitting in Germany), so I will be dealing directly with him until I get to sell the piece of shit property. He also has an excellent point regarding emergency funds. Just a quick sanity check. Why should I not use my credit card as an emergency fund? It seems wasteful to have say three months worth of living expenses sitting in cash not earning anything. Surely with the 58 days (I think) interest free you get with your credit card this gives you enough time to draw money from your investment (of course not your TFSA) before you have to pay interest. I guess there is a good reason you keep this in cash, but I am not sure what this is.   Fees If you use your credit card because you lost your job, how will you pay it back?   Perwez wants to help his wife find an index-tracking RA My wife recently resigned from her job and now has her retirement funds available to invest. I’ve told her the best option would be to open an RA with what she has rather than converting it to a provident or preservation fund. I’m a firm believer in passive funds and I have been doing some research in what is available within RA wrappers. Other than the usual suspects (below), do you know of any other passive RA products/wrappers? Thus far, Im leaning towards a 50/40 split between the Prescient balanced fund and the Nedgroup Core Accelerated funds, both of which are available on Momentum Wealth's RA LISP (the only platform I know of that has both funds available) and adding the remaining 10% to an index tracker focusing on property. Prescient balanced fund Nedgroup Core funds Satrix balanced fund Sygnia Skeleton funds 10X Easy Equities RA funds ETFSA funds ABSA core RA passive fund (although latest factsheet is from Sep 2016) Hannes has literally sold the farm - or part of it, at least. I‘ve sold part of the farm and must now invest the money wisely. Everybody tells you to see a certified financial adviser - I am still to meet such a creature. The inputs I have had creates more confusion than clarity and I get the distinct feeling that a corporate overseer is involved and that fees are not realistic. Can you give me some pointers?    Is there anybody that is knowledgeable about trusts since the property is in a trust? In the podcast we recommend that Hannes get in touch with Craig Gradidge. You can contact him here.  Miles compared a bunch of balanced funds and found that the NewFunds MAPPS Growth ETF outperformed the others by a huge amount. Although it’s overweight Naspers, at a TER of 0.20% - great. Even a medium risk TFSA blend would probably battle to beat this growth! I seriously think, for a TFSA portfolio of ETFs, MAPPS could have  about 20% allocation. To remind you, this ETF has: Cash (4.56%) Equity (75.65%) Inflation-Linked Government Bonds (9.11%) Nominal Government Bonds (10.68%) Marlene has a financial responsibility vs lifestyle balance issue. I am saving a lot for retirement and not so much for the things I want to do, which is travel. I feel like my brain is in save mode. All of a sudden I am anxious to save for everything. From a deposit for my next car, to a deposit  for country house (when I retire) or nice-to-have item. How can I balance the two as I grow older, seeing as I am 31? I want to retire comfortably but also travel. I feel like I cannot just focus solely on my retirement portfolio and medical expenses, but want to travel and enjoy life whilst in my 30s. I opened the ETF accounts to utilize when I retire. Hopefully they will grow as I reinvest dividends, and the market doesn't collapse like 2008. Should I resume my investment strategy as is, or should I look at other ways of growing my portfolio? Please also advise if I am saving too much for retirement/ future medical expenses as opposed to doing things I want (travel).

A few weeks ago I attended a 10X event in Johannesburg. Being a low-cost retirement annuity (RA)  provider, obviously much of the discussion centred around fees. Steven Nathan, who runs 10X, did an analysis of a statement sent by an old-school retirement product provider. He used the real example to illustrate how impossible it can be to figure out what we’re actually paying for our investments. Listener Jenny Pigeon (a nom de plume, if you will) had the same experience this month. She’s been investing with Allan Gray for 16 years but never thought to check her fees until she discovered The Fat Wallet Show. She sent her statements on to me, hoping I could help her figure them out. Since I’m of the new school (0% platform fee, 0.25% brokerage, 0.1% TER), I couldn’t. Simon had brushed up against these sort of products and still has an Allan Gray product. He couldn’t do it either. It took two weeks before Jenny, Simon and I got to some sort of answer, which wasn’t too bad, actually. In this episode we talk about the process, why successful investing means you’ll inevitably pay more than you contribute and how little we like the percentage of assets business model. We also decided to include my preparation notes to try to make the topics more searchable. It’s not as great a solution as a transcription. However, it’s a free solution. And some (us, mostly) would say that’s the best solution. Kris Christoff Gouws sent a link about the P/E Ratio of the S&P 500. http://www.multpl.com/shiller-pe/ It is a great way to guage the “value” within the whole S&P500 (for example when planning on buying some more ETFs tracking this index).  As you know, when evaluating single stocks, any P/E ratio above 20 is considered “overvalued” or “expensive”. To this, an interesting thought is the current “overvalued price” of the whole S&P500, since the Shiller P/E Ratio currently stands at 32.38!  More market-correction (as was seen in the last few weeks) is needed I guess! Win of the week: Me, for figuring out this thing about total return ETFs. A total return ETF reinvests dividends instead of paying them out to you. The idea is that you save on the brokerage, because there’s no charge. This only works if you want to use your dividends to buy the same ETF. However, you do get taxed on the dividends before they’re reinvested. What I learned: Once you get taxed, they don’t actually buy more ETF units. They simply add the value of the dividends to the NAV of the ETF. When you sell the ETF at a profit, your CGT is calculated based on the sell price minus the buy price. But your sell price now includes dividends you already paid tax on. We need a spreadsheet ninja to work out when your CGT becomes more than your brokerage. We also need to work out if this applies to bond ETFs. I also wanted to send a shout-out to Warren. He says: Today is both a happy and a sad day. Happy/ relieved that I have FINALLY finished listening to ALL the fat wallet show podcasts, including all bonus episodes, Christmas and the like and a sad day as now I have to wait for the new ones to come out (I don't even know when these are released as I would download them as I go, on free office WiFi of course). I would just like to say thank you both for putting this together. I am a 26yr old Investment Analyst (so not as cool as your engineer or doctor friends haha) and currently also studying towards my CFA charter. Its refreshing listening to this podcast as its takes all the complicated things I deal with on a daily basis and states them in a nicer simpler way. The links to the IG and other webinars are also great. We inspired Jenny Pigeon to confront her investment fees for the first time. I am in my early 60’s and would like to retire fairly soon. I am self-employed and instead of taking out a retirement annuity I have "paid my self first”  and paid regularly into Allan Gray. Since my new addiction of listening to you and Simon on The Fat Wallet Show, I have decided, for the first time ever, to read my Allan Gray Quarterly Statement. There are about 20+ different funds on my platform. I have asked Allan Gray to send me the total fees for the quarter in rands, as I find the maths a bit complicated with so many different funds with different fees. My fear is that my annual contribution (R240,000) could in fact be less than my annual management fees. I would love to make significant changes to reduce costs and therefore improve my investment performance. She does have another problem. She’s become friends with her advisor, so I want to try to help her understand and simplify her fees without burning bridges. She sent a statement. And then some more statements with the rand amount for the period. Then there was a Twitter storm. In the end, I managed to work out: She pays more in fees than their monthly contribution of R20,000. Based on the latest info, fee is 0.78%. Paying more than your contribution in fees isn’t impossible. If you contributed R1500 to an ETF and ended up with R1m, at a TER of 0.15% your contribution would match your fees. In one account she’s invested in nearly 30 different funds, including one that "reduced the minimum fee from 0.70% to 0.60%, the maximum fee from 2.10% to 2.00% and the fee at benchmark from 0.85% to 0.75%." Only 8 have an investment management fee under 1%. 11 have investment management fees over 1.5%. Average investment management fee cost over funds, 1.5%. Excludes platform admin of 0.23%. This fee excludes Annual Administration Fees, Annual Financial adviser fees and Initial financial adviser fees. She also has a second account, which includes five more Allan Gray funds - some of them feeder funds, some UTs. The investment management fee for all of those comes to 1.98%. “Some annual administration fees are deducted within the unit trust and are included in the investment management fee.” Some feedback that I got from Twitter. Let’s start with, when was the investment made or moved to the AG LISP? Looks like you are trying to stir up some attention here. 😉   She set up the fund in the early 2000s.   Doesn't sound right...Allan Gray caps the annual fee at 1%. An initial fee can only be charged once.   All the statements she sent included an initial advisor fee as well as an annual advisor fee   Passive? Which index is the UT tracking?   Turns out, she has some passive like the Satrix ALSI and the MSCI World, but in the smaller account all of her funds are actively managed.   Two people said the advisor is the one to blame: More of an advisor problem than AG. You can get Nedgroup Core Diversified and Core accelerated trackers for a exactly 1 percent (inclusive) on AGs platform. This is a function of the advisor screwing the client. Important not to bad mouth the platform, active management or underlying funds. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. Georgie wants to save on bond insurance. 18 months ago I took out a home loan for R1 million. I managed to pay off R400 000 in the first year. Now I am paying the remaining R600 000 in monthly instalments, with no adjustments to the interest. To qualify for the home loan, I was required to take out full bond insurance. I’m paying a monthly amount of just under R500 to insure the R1m bond, only 60% of which I would actually use if the situation arose that I was unable to pay. I have asked the bank for my "principal amount" of R1m to be re-evaluated, with no joy, just a convoluted answer about having to take out another home loan, which I would then need another Offer To Purchase for, which seems ridiculous. How can I work this situation so that I'm not overpaying for home loan interest and insurance? Madelyne says we’re wrong about the Satrix 0.1% TER. Currently on etfsa, it is listed at 0.31%. That makes the Ashburton top 40 with a TER of 0.16% more attractive. Wealth needs help making choices about their tax-free account. I have previously invested in the tax-free Allan Gray balanced fund, and although it is a good fund the fees are far too high (TER of higher than 1%). I am glad I can move from this year, but I am not sure what to take and what to do with the new allowance. I like the ETF options as discussed in you one ETF to rule them all show but are looking at REITs as well. Reason being that the dividends from REITs are taxed as normal income outside of a TFSA. This makes the TFSA a bit of a hack for a good future passive income in retirement. I am just not sure what good options there are, I  know ABSA’s property equity fund is very good but again fees are a stumble. Edwin wants to diversify his property portfolio. I have three investment properties and would like to diversify my wealth. Two of these are paid up and the last one will be in about two years’ time. Is there a way I can use my paid up properties to get a lump sum of cash that I can use to put into ETFs without selling the properties? The rentals already go towards paying off the 3rd property. I’m trying to diversify by stealth. Lawrence says we’ve been giving him sleepless nights following our single ETF strategy show. He has some shorter-term objectives in his TFSA, but thinks that he can afford to be slightly more risk tolerant. He’s thinking about: a combination of 2 ETFs - one high risk with the majority of my holding per year and one low risk for when I reach a level I feel I should sell out and trade into the more stable ETF. An example could be something with high exposure into Emerging Market or a Resource ETF and a Top 40 ETF as a combo. Normal ETF Account Then on my normal ETF profile, just to keep it plain and simple with something to keep putting money into over time and not looking for any special returns. Mbasa wants to know if RAs and provident funds can really be counted towards your net worth. On disposal of ETFs and Unit Trusts, do you pay CGT? Colin’s friend is being threatened with fees. I sent a copy of this week's newsletter to a mate who seems to be stuck with a 'policy' He replied to me that he cannot cancel the policy until he is 55 and that the broker has threatened to charge all admin fees until the end of the policy. Or words to that effect. Is this type of stuff legal, and who is the best person to give some advice? Shaunton wants an RA without an advisor. Simon mentioned that he has an RA that don't have any financial adviser involved? What is a good platform that one can use to invest in your RA without using financial advisers? What is good DIY RA options to investigate, which products to use? Nehal took his TFSA situation into his own hands like a boss. It took just one secure message while on the share trading platform and they moved my portfolio from the internet banking site with a R10 monthly fee to the share trading platform at zero monthly or annual fee and just the trading fee. However since we can now transfer or TFSAs can you please make a mini podcast just with what Simon said about ABSA being the cheapest and that we can now transfer.

Last week I was lucky enough to join my ETF inspiration Nerina Visser on ETF Investor on Business Day TV. We attempt to answer the ETF questions of a beginner investor who invested in an Easy Equities basket. This week’s Fat Wallet is the audio of that programme. You can watch the videos below. Kris 123 Listen / download here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

We can finally move our tax-free accounts - in theory. In this week’s episode, we consider the curious case of Rama, who is getting properly shafted in their tax-free account. We use their misfortune to help you work out whether you should be moving your tax-free account. We also issue some warnings about being on the front line. We have very unflattering things to say about Old Mutual. By sheer fluke, three listeners wrote us about three different ludicrously expensive Old Mutual products. Aside from the actual fees you pay on these products, you are also robbed of your peace of mind. Even people who made all the right choices to provide for retirement have come out behind because they were sold products that didn’t have the investor’s best interests at heart. If you suspect you are holding a product that isn’t 100% geared to benefiting you, do something about it today. How do you know? Check your fees. There are very few financial products these days that cost more than 1% per year. Just to be clear, that’s a percentage of your total investment. We also offer some ideas to a listener who feels out of control of his retirement savings. We explain how understanding your regional exposure, sectoral exposure, fees and asset allocation can help you plot a way forward for your investment lifetime. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

Your first investment will scare you half to death. Don’t let anyone tell you different. We’ve all felt that terror (some of us more than once). We all came out the other end secure in the knowledge that we are now among the select few who Invest in the Market. Hannes, a Just One Lap user, has been following Simon since before Just One Lap existed. He’s paid for a share trading account every month for the better part of a decade, and yet never managed to pull the trigger on that first investment. In this episode we discuss the things we’re afraid of when we start investing and how to overcome those fears. Like Lesigisha pointed out last week, effective compounding depends more on time than money. This excellent Stealthy Wealth article illustrates that point very effectively. Links Frank was perplexed by this quote from a Moneyweb article, “Taxpayers may even include any capital gains that they are liable for in a particular year of assessment as part of the 27.5% tax deduction." In this episode we explain how that works. Chris is concerned about spreads in ETF products. As we explain in this episode, spread is the difference between the price people are willing to pay for a share and the price at which people are willing to sell. ETF prices are determined by market makers, not buyers and sellers like ordinary shares. Why then are the spreads so large? His email is below. I was intrigued by the discussions around the Lars Kroijer videos and your post "ETF: The whole world in your portfolio".  This got me thinking about implementation of such a strategy and I started looking at TERs and spreads of local top 40 ETFs and the global ETFs as I will most likely opt for the cheapest products. TERs are easily available and published by the product providers and some third party sites such as etfSA.co.za.  But nobody ever talks about the spreads.  I wrote a script to poll bid/ask prices every 5 minutes throughout the trading day and computed some statistics on them: The count column is the number of samples taken, median is the median of unfiltered data, avg is the arithmetic mean after filtering for outliers and stddev is the standard deviation from the mean. Because ETFs trade fairly infrequently compared to normal stocks, I think it is safe to assume the market makers participate in the majority of orders. Thus, the figures above should be a fairly accurate view of the spreads the market makers maintain. Now I understand the spread is a once off "cost" that I pay, but look at those numbers. 1.6% on the Ashburton global and 1% on the Satrix world! Kristia   Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

For many South Africans, saving simply isn’t an option. Either they don’t earn enough to be able to save, or they have too many familial obligations to do so. In this episode we offer some tips on things you can start doing on a very low income to put yourself in a better financial position in the future. We also talk about some common traps high income earners fall into. If you’re already too scared to listen, here’s what we talk about: Why insurance might be a better idea than an emergency fund. Why a low income is the best place to start preparing for a bright financial future. Why debt is not your friend. How cost per use or cost per unit can help you make better financial decisions. Why you shouldn’t avoid paying tax. Our win of the week is Lesegisha, who is foregoing sushi in favour of education. As you’ll hear, his letter blows my mind in this episode. For that reason, I’m republishing it in full here. I am a pious listener of The Fat Wallet Show and the proud contributor to Lewis dragging down our Fat Wallet Index. When I heard the topic of this week’s show I knew you guys were still sticking to what it says on the label and giving advice to the little guy on the street. Thank you for that and it’ll pay dividends in future if not cheap wine. I am a 26-year-old full-time postgraduate student (I’m lucky I know but here me out) living on R6000 a month. This may sound like a lot for a student but bear in mind I have previously held a full time paying auditing job with plenty of travel perks and whatever bells and whistles that come with the occupation. So I have tasted the fruits of freedom and R6,000 in that context is worse than my life before I knew what sushi tastes like. I've been studying the topic of investing, business and leadership since I was 15, reading Rich Dad Poor Dad and can say the easiest and biggest investments that one can make on a small paycheque is in their financial literacy. The concept of pay yourself first cannot be overemphasised. In my budget the first R300 goes towards everything finance and investing related. I split it R120 for my active share portfolio, R120 for my tax-free savings portfolio and R80 into a rolling emergency fund which I draw down to R80 after three months to invest the excess in my active portfolio and my tax-free savings. I’ve been with EasyEquities from the very beginning. “Lost money” that I find in my jeans, birthday presents etc I take in cash or direct my friends and relatives to make deposits to these accounts. I make sure that at least once a year the R300 buys me a decent book that can help me stay on course. My Best Buy and read so far was Fooled by Randomness by Nicolas Taleb and Security Analysis by Ben Graham (which costs the equivalent of six months' investing capital). The reason I do this is to entrench the habits of having my money work for me while it’s in triple digits so that when I eventually break my glass ceiling the pressure isn’t there to learn habits that I had the opportunity to learn before lifestyle creep. My biggest belief is that the size of my return will be materially disproportionate to my input not because I’m gambling, but because I take the time to learn as much as I can about the basics of money that you guys mention. I always look to put my money hard at work where it’ll earn me the biggest most predictable returns. The law of compounding interest says, start early not start big. The rest of the R5700 I survive on with the piece of mind of knowing that I have used the best part well and that there will always be someone who is surviving on waaaay less and not complaining. But my key takeaway is that on a small paycheque education is your biggest investment and then pay your future self first. The rest is survival as we know it. Kristia

For a moment there I got excited. I blame Peter Hood, who dangled the capital gains avoidance carrot dangerously close. Peter’s theory is elegant: Use your capital gains allowance each year to offload your cheap ETF units at a profit and then buy them back at a higher price. Your cost per unit goes up over time, allowing you to pay less capital gains tax when you eventually cash in for real. Unfortunately, traders ruin it for everyone. Regular (read, annual or more) transactions in your trading account lands your squarely in the investing-for-income category. Income, as in “income tax.” Yeah. You may be able to hack it by having three different ETFs that you sell and rebuy on a rolling three-year period. That sounds like a lot of admin, but the tax saving might just make it worth it. I’m not often grateful that I have a growing portfolio (I was going to say “small”, but I like the more hopeful term), but this time it works in my favour. Unless my portfolio doubles twice over, I’m not even close to the profit exemption. I have time to figure this out.* Links Thanks to Christoff and Mukhtaar for sharing this link to the financial independence calculator. This tool will help you work out the most tax efficient way to invest your money. They sent this following the discussion we had about tax on a retirement annuity. Play around and share your insights with us. Francois Louw shared this ShareNet article on Top 40 offshore earnings. It’s an awesome tool. ShareNet will publish an updated version this Thursday - this data is about a year old. Keep an eye out for that. When we had the discussion on renting vs owning last year, many of you shared this Rolling Alpha calculator. Johan Uys discovered it last week and shared it with us. I’d forgotten how much fun it is. Lastly, next week we’re doing an episode for people who earn very little. If you consider yourself a low income earner, send your concerns to ask@justonelap.com. Kris *Unless my ship comes in. I expect it any day now.

Following last week’s investment crisis episode, indices seem to be on everyone’s mind. We decided to dedicate this episode to all things index. Navi wanted to know which ETFs we’ll be investing in this year. The Ashburton 1200 looks very appealing for us both. Nobody saw this coming - least of all us. Frank Denys made a case for ETNs that practically had us throwing our money at him. It’s a product I intend to learn more about. In the meantime, I strongly suggest you direct your ETN questions to our friend Nerina Visser from etfSA.co.za. Tim is so into ETFs he’s been reading SENS announcements. He realised that he doesn’t know how the delisting and listing of additional securities work with ETF providers. He was worried that it might be an ominous sign, but we reassure him. What is the best thing to do with your tax-free account when you are already retired? Jim is 76 and not sure if he should be keeping his allocation in cash or ETFs. We help him think through his decision. Fernando thought he found a workaround for our single ETF strategy by investing in a passively-managed unit trust. We have some bad news for him that might land us in trouble. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

Did Dale Towert ruin our lives, our business and possibly the ETF industry? Turns out Dale is a powerful guy. He sent a link to the “Investing Demystified” video series by Lars Kroijer and immediately changed the way I think about ETFs. In the videos, Kroijer makes an argument for a single world-wide ETF combined with bonds as a complete investment strategy. Over the years my ETFs expectations changed. Instead of hoping for market return, as it says on the sticker, I’ve been trying to use my ETFs to outperform the market. In douche parlance, it’s called “seeking Alpha”. In the real world, it’s called “a fool’s errand”. We didn’t think it was possible to simplify our investment strategy more than our existing ETF portfolios, but in this episode we do. By the end of the conversation, I land on holding the Satrix MSCI World (Developed Markets) and the old school Satrix Top40. We also discuss a Finweek article sent by Christoff Gouws. The article advises structuring your retirement savings in a more tax efficient way. It inspired me to work out how much tax I would pay on the one third of my annuity I’m allowed to cash out in retirement. The answer horrified me. At my current savings rate, I’ll pay 34.6% tax on the lump sum. This excludes the income tax I’ll pay from the money I earn from my annuity. I used the rates on this page. At first glance, I’ll be paying more tax I’m currently saving on the lump sum. On the other hand, the 27.5% tax break I’m currently getting is pushing me into a lower tax bracket. That means I pay less capital gains tax - largely irrelevant because I have no intention of cashing in my investments. The tax I’ll pay on the annuity income is what is going to resolve this issue for me. Currently, the first R117 300 per year received after age 65 and R131 150 after age 75 is tax-free. Presumably I’ll withdraw the tax-free amount every year and supplement my income from other investments. My tax-free savings account will come in handy here, as well as my R40 000 capital gains allowance. It’s also worth considering the opportunity cost of not making the most of the tax rebate. Can the money I save in the lower tax bracket earn more money than I’ll be paying in tax once I retire? My head hurts. If the article inspires you to go through this process and you have more success than I’ve had, please share your calculations with me. Lastly, Simon talks about an index methodology mailing list in this episode. Subscribe to that list here. Remember to send your questions to ask@justonelap.com. Kristia   Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

The below letter from one of our listeners stopped us in our tracks. So often we have no control over the course our lives would take. The challenge is to ensure our finances are in a position to sustain crises. In this episode, we talk about how to spot our own financial weaknesses and how to recover from a financial disaster. I have always been a HUGE fan of property. About eight years ago I was doing, I thought, pretty well. I had a high-paying freelance gig (very much the norm in my line of work). I bought four investment properties and was comfortably funding the shortfall between the rent and the bonds, levies, maintenance and other expenses. That was my road to financial freedom, or so I thought. Then, just like that, the high life ended. I was called into the head honcho's office one afternoon and told they were changing direction and not to worry about coming in the next day. After 10 years, I was given 24 hours’ notice. Back then I had never heard of income protection and I ended up losing everything. The investment properties, our cars, the house my wife, kids and I lived in. Everything. It was so dire that we had to move back into my parent's house. You have no idea how humiliating that time in my life was. I felt like the biggest loser and failure on the planet. We slowly started picking up the pieces. We found a small flat to rent, we managed to buy a small, old second-hand car cash. It's been a very long road and we are nowhere near where I want to be financially, but I am pretty proud of what we have been able to achieve over the last year. For the first time ever, I am going into a new year with a small, but growing, emergency fund. I also now have income protection in place. Another first, I have paid one of my kids’ school fees upfront for the year, thanks to you guys mentioning it on the podcast. That decision will save me 8% on his fees this year. It's been a slog but I finally feel like I am starting to get my head above water. I also managed to invest a fair amount over the last year for what I planned to be a deposit on a home for my family. We have been desperate to own our own home again and it has been burning my ass 'paying off someone else's bond’ as is often said. It's the one thing about this whole process that has been eating away at me. I started listening to your podcast late in 2016, so just missed the property one. Thanks to that specific podcast, I've changed the way I look at it and now I'm ok with not owning. I also realise I'm probably better off as there is no way we could afford to own a similar house in the area we're in if we were to buy. We would have to downscale significantly and move quite a distance from the schools our kids are in. Thanks so much for sharing your experience with the Fat Wallet community. I think we can all learn a lot from your situation. Massive kudos for picking up the pieces smarter and better! Kris   Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

We received an excellent email from Jason Herron, who has found a way to make Discovery Vitality work hard for him. I have a little love affair for Discovery miles and thought now that you are using Vitality, it could be useful to you and the listeners. There is a bit of admin in getting the best Miles collection rate. You will need the following:        Discovery Credit Card         Discovery Vitality         Achieve gold status in vitality and eventually Diamond after 3 years of gold. I know having a credit card goes against the teaching of your podcast, but have a minimal limit and pay it back in full every month. When spending on the card you earn 1 mile for every R15 spent.  The key is to get to gold and spend at partner stores. You get 5x miles ie. 5 miles for every R15 spent. Then eventually Diamond  status you get 10x miles so for every R15 you spend you get 10 miles. The partner stores are very common stores that we all spend at anyway.         Dis-chem/Clicks         PicknPay/PicknPay liquor (wine for Simon)         Shell/BP         Computicket, Takealot, Ticketpro        Nando’s         Exclusive Books         iStore/Incredible Connection         Hirsch’s/Coricraft         BabiesRus, ToysRus, Hamleys, Reggies         Golfers Club/Pro Shop         Vida e Cafe (I know you love coffee*) The best thing about Discovery miles is they can easily be spent at most of these partners. For me, the key is to use them exclusively on travel. When you book on Kulula with Discovery and are on Diamond status, you get 35% off the flight plus an additional 10% if you pay with your Discovery card. You can also use miles to offset the  balance of the flight. There have been many a time when I’ve had to pay a few cents on the credit card (free flight) as you can use miles in multiples of 10 only. 10 discovery miles is worth R1.00 with Kulula. If you’d like to go international, Discovery miles can easily be converted to British Airways Avios or SAA Voyager miles on the Discovery site. Avios 1 to 1. Voyager 1.2 discovery miles per voyager mile. Also nice for upgrades. Kris *I really, really do.

There’s nothing Wolf of Wall Street about long-term wealth creation, especially for us index investors. You diligently put away what you can and wait for the market to do its thing. If you’re not fond of watching paint dry, you probably won’t get your kicks from this investment strategy. It’s not surprising, therefore, than we often receive questions about alternative asset classes. If you’ve been bored out of your mind with your investment strategy, you are ready for some action. Like everyone else, I’d love to tell the story of the one investment decision that made me rich. It’s investment lore at its best. In this podcast, Simon and I discuss the alternative asset classes we get asked about and why we never have a satisfying answer for thrill-seekers or artists. Kris

Happy New Year! We hope to make this your (and our) most successful financial year ever. Sticking to the theme, we talk about our financial resolutions for 2018. Last year I made the same financial mistake twice. In trying to avoid cost, I incurred unnecessary cost and aggravating effort. This year, I hope to develop mental models so I can stop making the same irritating mistake. Simon shares his financial goals for 2018, as well as why he doesn’t believe in goal setting. Since 2017 proved me an excellent goal setter, we disagree on this point. Kris

While every question we receive on this podcast pertains to a completely unique financial situation, some themes recur. More often than not, the questions we receive pertain to property investments, tax efficiency and foreign investing. In this mini podcast, Simon and I discuss the answers we give most often to these questions. If you’re a regular listener, a lot of this might sound familiar to you. Perhaps hearing us talk about them again inspires you to revisit these areas to ensure you’ve got the right mix for your financial situation. We are so happy that you’re taking a break from your merriment to share a few minutes of your holiday with us. We hope it’s a pleasant day, however you choose to celebrate it. If you have a pressing question, sleep on it for a few more weeks. We’re back to our inboxes on 15 January 2018. Kris

It’s safe to say that I think about money slightly more than the average person. Once bitten, twice shy and all that. Weirdly, though, my financial hyper-vigilance sometimes results in exactly what I try to avoid. 2017 felt the need to teach me that lesson more than once. In the second of our mini podcasts, Simon and I talk about the financial mistakes we made this year. Mine cost a little, Simon’s a lot. Even so, I’d like to do better next year. We are now officially on holiday, which means I won’t get to your questions until January. I hope you enjoy your festive season as fully as I intend to enjoy mine. Kris

Fat Wallet listener Hugo Schuitemaker and his trusty Excel spreadsheet made a startling discovery. An amount invested at the beginning of the year would have to earn a 19.5% return to catch up to a 10% discount on his child’s school fees. “Sometimes schools offer a discount for paying the full annual amount upfront. In my case its 10% if I pay the full annual amount of school fees by 1 January. So this naturally called for an Excel spreadsheet. Upfront payment vs Monthly payment. I worked out that the 10% discount is a huge savings for me. If I chose not to make use of the discount and paid the monthly amount, whilst keeping the balance of my capital invested, I would need to make a return of 19.5% over the year, just to equal (break even) with the discount I would receive from the school! It’s a no-brainer for me. I would even argue that if you can loan money at an interest rate of less than 19.5% (out of you bond for example), with a 10% discount on school fees it would be in your best interest (excuse the pun) to do so…” In the first of six holiday mini podcasts, Simon and I discuss the merits of taking a lump-sum discount instead of investing it. We also drink some bubbles and eat popcorn. Yay, holidays! School fees discount calculator Kris

In investments we fall victim to all the consumer habits we’ve developed over a lifetime. We are fooled by bells and whistles, make impulse purchases, get home with things we don’t need only to realise we forgot the thing we went to the store for in the first place. By the end of an investment year, it can be hard to remember why we own what we own. This is especially true if you haven’t formalised your investment plan yet. With easy-to-use investment technology, it’s fun to experiment. These experiments hopefully help us develop a coherent investment philosophy over time. Those of us outside of the retail sector have a bit more time for reflecting this time of year. It’s a great opportunity to take a critical look at our portfolios. In this episode, we help a listener make choices about individual shares cluttering her portfolio. We also consider strategies to deal with duplication resulting from ETF holdings. This was our second-last recording day for the year. We are looking forward to recording six mini-episodes over a bottle (or two) of bubbles next week. Kris

This week, two listeners help Simon score free wine and free petrol using loyalty programmes. Here’s a new Fat Wallet rule: if it gets us free wine, you are automatically the win of the week. No questions asked. We discuss medical aid and how much to save towards the education of two toddlers. We received a question about the Warren Buffett indicator. I figure out halfway through the discussion that it’s basically the P/E ratio of a country and nearly die of pride. I just love those moments where my brain makes a connection that I didn’t know it was capable of making. By the way, Craig Gradidge blew my mind this week when he explained a very complicated principle in a way that made it clear as day. This, to me, is the mark of true intelligence. Jonathan de Freitas found an awesome workaround for price alerts on the If This Then That (IFTTT) service. Check that out here.  Lastly, we read through all of your tips and suggestions in our survey and we spend the episode talking about the things you guys want. We’ve had many requests for show transcripts, for example, to make the site more searchable and help people who are hard of hearing. We dedicate this episode to the ideas we loved, the suggestions we don’t agree with and our listeners’ wicked sense of humour. Thank you all, one last time, for taking the time to help us serve you better. Remember to join us IRL on 7 December for our final Power Hour of the year. It is always our favourite event. We can’t wait to hang out with you. Kris

How it happened that November turned into the retirement annuity month, I’m not sure. Following our previous two episodes, we were bombarded by questions and concerns around RAs. It seems our episode on choosing an RA spurred many of you into action. We hear from an 86-year-old listener how far the 15% savings rate actually gets you. Hint: not very. We help two listeners figure out if they’re paying too much for their annuities. One listener is struggling to find the right answers to his retirement question from his provider, Discovery. We also discuss Stealthy’s reasons for not loving RAs. I can send virtual dirty looks to expensive providers for days, but the last three episodes reiterated the importance of keeping a very close eye on my investments. I contribute more to my retirement annuity than any other investment. We’ve seen providers won’t be brought to book for selling expensive, wealth-depleting products. We’ve seen legislation change. My future financial security rests solely with me, as yours does with you. Kris P.S. Our survey results are in. Check them out here.

I’ve had a great time chatting retirement at two separate events last week. Both times I came away feeling uneasy about the go-to 15% savings rate for retirement. I suspect we’ve been anchored at that number because that used to be the tax break. I also suspect that number is only correct under very specific conditions. If you started saving 15% of your salary since your first pay cheque and you plan to retire at 65, 15% might be enough. Then again, it might not be. How would you know? Here’s what you need to work out how much you’ll need to retire. Your current cost of living per month times 12 for your annual cost of living. Remember not to use your income for this amount. You won’t be saving towards retirement in retirement. Multiply by 25 to get to how much you’ll need to retire today. Adjust for inflation to get to the lump sum you need by the time you retire. Here’s an online calculator to help you.  Assume, for the sake of this calculation that you will earn 10% per year on your investments. Include the savings you already have. Use this calculator to get to your monthly savings goal. At my current savings rate, I’ll be able to retire in 17 years. At a 15% savings rate, I’d only be able to retire in 25 years. That’s taking into account the 27.5% I’ve been putting towards my RA already and my current tax-free savings. I could still retire before 65, but I’m a long way away from my early retirement goal. Even at my current savings rate I miss my retirement goal by 10 years. There was a time I was set on retiring at 40. Guess that ship has sailed. I have two options to reach my retirement goals. Save more, or cut down on my cost of living. Saving more means earning more, which is largely out of my control. What I can control is my cost of living. Time for some planning! The point of this episode is that the perfect retirement savings number will be different for everybody. Run the numbers for your goals and make sure you’re on track. Do this once a year to make sure you are where you need to be. Kris

In a previous episode of The Fat Wallet Show we discussed how to compile your own ETF portfolio. In theory, once you know which factors to consider and understand all the information, you can make informed choices about your investments. However, putting together an ETF investment is child’s play compared to choosing a retirement annuity. Unless you’re an outlier, your retirement annuity is the most important financial decision you’ll make. It’s not only the largest sum of money you’ll ever invest, but it’s also the investment decision with the least room for error. I don’t mean to overstate this, but it’s the decision that’s going to determine how the second half of your life pans out. If you’re lucky enough to die somewhere between 80 and 90. Live to 130 and you’re on your own. This week, we try to unpack some of the factors you should consider when choosing an RA. We talk about moving existing pensions and annuities and completely fail to distinguish between them. You’ll be unsurprised to learn that fees play a major role in our decision-making process. We asked 10X to help us think through some of the factors to consider when it comes to RAs. They identified five parameters by way of very helpful questions. They are: Is it a traditional, policy-based RA offered by a life insurance company or is it an investment-based RA offered by an asset management company? Are you forced to use an advisor or another intermediary? How much are you paying in fees? Are you taking on the appropriate amount of risk? Is your service provider honest about the impact of these factors? I also decided on a whim to make listener Jaco Marais rich. If you are planning on signing up for Stash next year, use Jaco’s promo code. He gets R10 every time someone new signs up. Code: JAC8747 We also share the story of a man who found R400 000 he didn’t know he had. Kris

If an investment grows more than a savings account interest rate, is that a good investment? If it performs on par with the Top 40 index, but below inflation, is that good or bad? It’s surprising that we got 70 episodes into this podcast without ever discussing when a share is performing well. On the face of it, it seems almost too obvious to warrant a conversation. How much do I want a share price to rise? Infinity! In this episode we discuss some of the metrics you can use to determine how your investments are performing. Identifying an under-performing share is pivotal to making choices about which shares to sell and which to give time to recover. Kind of important, no? Fernando Nieuwfelt dangled an intriguing hypothesis and we couldn’t resist, “I switched out a local market cap index for the STXEMG. The performance is very similar, it's less volatile and more diversified.” We talk about the merits of selling ETFs with purely local exposure in favour of the new Satrix Emerging Markets ETF. Speaking of things we couldn’t resist, Mike O’Donoghue issued a challenge. Let’s find the Fat Wallet listener whose tax-free account is performing best. Simon and I did a quick comparison and I was happy to take the lead with just shy of R113 000 on Thursday, 26 October. I’m feeling strong. Shots fired. In case you missed it, we released a bet-you-didn’t-see-this-coming bonus episode last Friday. We help a listener make a difficult financial choice using our five financial building blocks. Listen here. Thanks for listening to The Fat Wallet Show. Kris

Getting to be great at money is like losing weight. Those who are successful at it don’t reach their goals because they perfectly stick to a plan. They are successful because they make more good decisions than bad ones over a long period. We’ve long theorised that there are five financial concepts that underpin good financial decisions. We posit truly understanding these concepts will remove a lot of the uncertainty that often fuels financial decision-making. Taking the right variables into account, you will hopefully end up making more good choices than bad ones. We discuss each of these concepts in this episode, but to recap, they are: Assets Interest Inflation Compounding Index-tracking products In this bonus episode, we help one of our listeners solve a property dilemma by applying these parameters to his specific situation. Follow our line of thinking and see if you agree. Kristia

We are 70 episodes strong! What a ride! As you may have noticed by now, The Fat Wallet Show tries to help you figure out how to think about your money. The theory is if you understand a few surprisingly simple concepts, you have the tools you need to make great financial decisions. Once you have a handle on these concepts, you need a solid financial base. Getting that in place takes about a month, if you focus. We discussed the things you need to understand to make a good financial decision here. To recap, they are: Assets Interest Inflation Compounding Index-tracking products We discussed your financial base in a two-part series on how to structure your pay cheque. Listen to that here and here. To recap, those are: An emergency fund A retirement annuity or pension fund Dread and disability cover Medical aid A tax-free savings account In this episode we bring everything together by telling you how to put together a tax-free ETF portfolio. We discuss diversification by asset class, region, sectors and investment strategies. This is the process we use to put together our ETF portfolios. You can subscribe to those here. We were inspired to revisit this by this slide from an S&P Dow Jones Indices. Check it. This is the @SPGlobal version of our ETF portfolios. Green bonds not available yet locally, but go bananas on the rest. pic.twitter.com/f0onkNKMAk — Kristia van Heerden (@kristiavh) October 17, 2017   We have our first ever giveaway this week. I’ll be speaking at the Liberty Retire Well Masterclass on 9 November. To win one of three tickets worth R250, let us know which financial concept or term you think is well understood by everyone but you. Thanks for listening to The Fat Wallet Show! Kris

Simon had some family matters to attend to this week, so I did my first ever solo Fat Wallet. Turns out talking about money alone in your living room isn’t quite as entertaining as doing it with a friend. I’m sure you’ll miss him as much as I did. Two episodes ago, Daniel Jacinto wanted to find a good alternative investment for income. He currently owns a buy-to-let property that helps him pay for his parents’ medical aid. He looked into a Finbond product that offers 11% interest on a deposit fixed for six years. It’s a solid option, but it does mean the principal investment will lose buying power over time, and the 11% payout won’t keep up with inflation. This week, Riaan Honeyborne and Johan Harman both wonder if Daniel wouldn’t be better off just investing in an ETF for income. The problem with equities as a supplementary income source is that you have zero control over the market. In my investment lifetime (short though it is), I’ve never gotten 11% return on an investment. When you are relying on that income every month, not knowing whether you are going to hit that target is going to cause you stress. Maxwell wants to know whether listed property instruments can out-punch buy-to-let as a second source of income. I think not. If it’s the monthly income you’re after, you can probably get there much quicker with a buy-to-let. You can also buy an investment property on credit and use one as surety to buy another, gearing your portfolio. However, you end up with a huge amount of concentration risk, and if you pay off a bond on a buy-to-let, you end up paying more for the asset than it’s actually worth. If I’m going to be throwing a lot of money at an asset, I prefer liquid, diversified and maintenance and paperwork-free. Links and sources Roneil sent a link to a Mybroadband article about great value smartphones. If you’re after a device that gets the job done, there are some great alternatives here. I’ll certainly be thinking more along these lines once my current phone dies. I also mention Ingé Lamprecht’s hilarious article about going for a cheaper cell phone contract and the subsequent chaos. It’s “penny wise, pound foolish” in action. I also mention that fantastic Power Hour Magnus de Wet did for us on listed property vs buy-to-let. Listener Love Index You know things are bad when you start thinking about losing as a sliding scale... Kristia   Listen / download here. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

The Sygnia World and Satrix World exchange-traded funds (ETF) both track the MSCI World Index. ETFs are priced on their net asset value. That means the share price is calculated by adding up the prices of the shares within the ETF to arrive at a fair value. Unlike ordinary shares, ETF unit prices are not subject to the forces of supply and demand to the extent that ordinary shares are. When there is demand for ETF units, the market maker produces more units at fair value. When there is too much supply, the market maker buys back units. How is it then that the share price movements of the SYGWD and STXWDM aren’t equal, asks listener Gerhard Jacobs this week. Simon and I discuss the impact of dividend reinvestment on price, as well as the unreliable nature of the closing auction price. Aiden Whitaker not only inspired young listener Ernst Jordaan to start making his dreams a reality, his question also got Kenneth Collett and De Wet de Villiers thinking about tax efficiency for a side hustle. Kenneth suggested registering a small business corporation to reduce his effective tax rate from 27.4% to 24.8%. De Wet finds a way to reduce that amount even further, to 21.08%. We discuss this voodoo in this episode. Links and sources If you are a South African living abroad, you might want to pay attention to the proposed changes to the 185 day tax resident rule. Thank you to Kim for bringing our attention to this Moneyweb article.  Listener Love Index It’s a tough time to be in the love business. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

So much of what we discuss on The Fat Wallet has to do with investing for some future date. We never really get around to what to invest in if you need money right away. Unfortunately the first thing you need, for those of you who suddenly perked up, is capital. Listener (and great guy) Daniel Jacinto is paying for his parents’ medical aid with income from a buy-to-let property. Since discovering The Fat Wallet, Daniel has realised there’s more than one way to skin a cat, and if that way doesn’t have to involve levies and maintenance it’s probably more fun. This week we discuss Daniel’s options, as well as the cool new products we love and we get to peek inside a very decent investment portfolio. Since we haven’t recorded a Fat Wallet in two weeks and haven’t really had a chance to hang out since Simon’s return from holiday, this one seems to get to the one hour mark without us. Links and sources At the beginning of the episode I get a bit lyrical about Stash.  We also talk about a new robo advisor from OUTsurance. Find OUTvest here. We didn’t think it was possible, but our Listener Love Index seems to be doing worse than before. Kris Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live.

If you’re a Fat Wallet regular, you know I love thinking about bonds. Despite my fascination with the asset class, I don’t hold any outside of my retirement annuity. If all goes well, I won’t be cashing in my investments for the next 20 years. Bonds are a more conservative asset class. They reduce volatility, but they have an upside limit built in, and I’m a sky’s-the-limit kind of gal.   This week, listener Dale Towert reaches the same conclusion about bonds, “Everyone says a well-diversified portfolio should consist of stocks, bonds, property and cash. At what stage do you think it’s a good idea to start introducing bond ETFs to your portfolio? I’ve been restructuring my portfolio, and thought it might be a good idea to have at least 10% exposure to bonds. This got me thinking: the purpose of bonds is level out the ups and downs of the rest of the market. At 10%, if things go really badly in the rest of the market, 90% of my portfolio will still go down with the market. At the same time, if things go well, 90% of my portfolio will also go well. In other words, at 10% the effect of the bonds will be fairly minimal. To have a greater levelling effect, you’d need much more than 10% in bonds – probably closer to 40-50%. But the returns (incl. interest) on bond ETFs is pretty poor over time, so unless you are already, or about to retire, this doesn’t make sense either. At what stage do you think it’s a good idea to start introducing bond ETFs to your portfolio, and at what percentage (if at all)?” In this podcast, Simon and I discuss the bond dilemma. We also talk about having more than one retirement annuity, Sygnia funds, what will happen to Steinhoff shares and whether biotech is the future of money. Links and resources We pre-recorded this episode on 13 September, so we have no idea where the Listener Love Index is, but if past behaviour is a predictor of future behaviour, I’m not hopeful. Kris

Investing can be overwhelming because there are so many moving parts. You need to understand what a broker is and then make a decision about which one to use. You need to familiarise yourself with investment products like index-tracking funds and then make a decision about whether to go that route or invest in individual companies. If you go for individual companies, you can easily spend the rest of your life pouring over company results and reading SENS announcements. All of this happens before you even buy your first investment. Once invested, things get even more hairy. Fees are always a big concern, followed very closely by capital gains and dividend withholding tax. More often than not there seems to be no good reason for market movements (although there’s no shortage of experts who will dream up reasons). Political events can have a huge impact on a portfolio. Economic conditions reflect in your portfolio long after real economy has gone in a completely different direction. Add, on top of all of this, currency moves and inflation and it’s little wonder that the decision to start investing can take years. In this episode, Simon and I discuss the impact of inflation on capital gains liability. I realise there’s something that will impact my investments that I’ve literally never thought about. The worst part is there’s nothing to be done about it. André du Toit’s spreadsheet that takes into account inflation can be downloaded here. Thanks very much, André. CGT Local vs Offshore revisited Links and resources Our Fat Wallet Listener Love Index has been flirting with, but not quite committed to, being 3% in the hole. This displeases me. We don’t advise opening a tax-free investment for a child’s education. The video below has everything you need to know about tax-free accounts. Kris

Risk factors are a big consideration when I make investment decisions. Generally, I consider sectors, regions, currency and asset allocation when deciding between ETFs. I’m by no means claiming these are the only risk factors, but these are the ones I understand. Considering I only invest once a year, it’s kind of nuts how much time I spend thinking about this. Last week I wrote an ETF blog about how weightings can affect the performance of ETFs that track more or less the same companies. In the local market, the Satrix 40, the CoreShares Equal Weighted 40 and the CoreShares Top 50 all track the performance of the same group of companies, with a bonus 10 in the case of the Top 50. (I’m just saying that to be thorough. Hopefully you arrived at that conclusion by yourself.) While these ETFs track the same companies in the same market, they don’t perform in the same way because of how they’re weighted. What would happen if I had to invest in all three of them? My exposure to different risk factors wouldn’t change. I’d still be investing in the same sectors, regions, currency and asset classes. The only variable is how these indices are put together. In this podcast, Simon and I discuss what this would mean for my portfolio. As always, cost is a huge consideration. Aside from the brokerage, I would have to pay TER on all three products. Would this make a huge difference to my performance? If I hold all three, would I end up exactly average, or is there a chance that I could slightly outperform? Links and resources Our friend Stealthy Wealth made a spreadsheet! This time it’s to work out how much capital gains tax you would have to pay on an offshore investment. Play around with that here. Stealthy Wealth-CGT-Local vs Offshore If you’re interested in joining an investment club without doing any of the work, Chris de Jager shared this link to the Platinum Wealth investment club. Since this is a show about questions, remember to send yours to ask@justonelap.com. Kris P.S. Our Listener Love Index is living proof that sometimes love is not enough. Check how we're doing here.

We often speak to people who want to set up investment clubs. I like to fly solo, especially when it comes to money, so I never really paid attention to it. Of course, now that I might have to set one up, they suddenly seem a lot more interesting. We’ve been chatting to Njabulo Nsibande (who became a dad to a baby boy last month!) about his investment club for a while now. He alerted us to the possibility of a Satrix money market ETF. His club is about the start making investment decisions. This week, Simon and I discuss his investment options, as well as the structure and format of investment clubs. We talk about a few Moneyweb articles in this episode. First, Adrian Diergaardt won the week with his whiksy. The article that inspired him to see how much his whisky is worth is on Moneyweb here.  Ros Brodie wrinkled my brain because of an article she read on Moneyweb. Here’s how I understand it. If you invest in an offshore ETF through a local broker, you’ll experience two movements in your portfolio. Firstly, the performance of the underlying investment, the ETF, will affect your portfolio. Secondly, the rand/dollar exchange rate will move your portfolio up and down. Offshore ETFs like the Satrix World are denominated in dollars. Your rands have to be converted to dollars before the units are bought. If the rand weakens, a single dollar can buy you more rands. Because your portfolio is in dollars, every dollar is worth more rands, pushing the value of your portfolio up in rand terms. The opposite happens when the rand strengthens against the dollar. There is a chance that your portfolio could be profitable because the rand weakened against the dollar even if the ETF stayed flat. This has capital gains implications when you sell your ETF. If, on the other hand, you converted your rands into dollars and bought the ETF through an offshore broker, you would only be liable for capital gains on the performance of the ETF. When you sell the ETF, you’ll convert your dollars back into rands without being taxed on any profit earned there. I can see why some people would consider going the offshore route to avoid the capital gains implications, but this can easily be more expensive than going local. I suppose the challenge is to figure out if profits from currency movements will result in more tax than the fees of investing with an offshore broker. Kris

When we discuss financial principles on The Fat Wallet Show, we try to make them a rule of thumb. More often than not, debt is bad and saving is good. Most of the time, retirement and tax-free should be where your money goes first. Of course there are exceptions to these rules. There are as many unique financial situations as there are people. Sometimes a set of circumstances leads to an opportunity. Other times you do everything exactly the way you’re supposed to and it still doesn’t work out. This week’s question from Vee M got me thinking how a “bad” rule-of-thumb decision can be a great decision in certain circumstances. Another case in point is Simon borrowing against his bond to buy shares during the 2008 financial crisis. Would I tell my best friend to do that? Hell no! Did it work for Simon? It did. If you are honest about the risks and possible outcomes, you have your financial base in place and you are a fiscally responsible individual, odds are you’re in the best position to make a call about your finances. Ask for input and advice by all means, but never forget that the success or failure of your financial plan affects you and your family. Whether those you consult agree with you or not, you have to live with the decision. What I loved about Vee’s question is that she had the following information:   Exact amounts owed on all her debt   Exact amount of tax payable should she cash in her provident fund   Exact amount of interest she will pay should she decide not to settle her debt   Exact amount of cash she would free up should she pay off her debt This information enables her to:  Assess her net worth by comparing her assets (provident fund, fixed deposit savings and home) to her liabilities (debt on buy-to-let property and car)  Compare the once-off tax liability to the accrued interest over time. Being able to do this makes a complicated decision as easy as, “Which is greater?”  Decide what is important to her. Is the current debt stress better or worse than the stress of providing for her future? Vee understands how quickly she can rebuild her retirement annuity because she knows how much she’ll be able to invest every month. Data is power when it comes to financial decisions. Data overrides the fear and greed of financial decisions. Vee hit the nail on the head. Links We built a spreadsheet to help you work out how long it will take you to make up the penalty you have to pay to move your RA. Click on the link to download it. Moving your RA Chris de Jager sent a link to a forum discussion on estate duty. The discussion follows on the discussion we had with Candice Paine about investing abroad. Danie de Waal sent shared an article on how index funds can affect the market. Read that here. P.S. Our Fat Wallet Listener Love index took a beating at the time of recording. Hopefully by the time you read this things will be looking up! Kris  

Fat Wallet regulars know that index-tracking products are at the heart of our investment philosophy. Even Simon, with his individual shares and trading accounts, prefers having at least half of his portfolio invested in exchange-traded funds (ETFs). ETFs are financial products that track the performance of an index. If you struggle to understand what an index is, you’ll probably find ETFs difficult to grasp. In the last Fat Wallet episode, we decided to create our own index to illustrate how indices are put together. Zack Bezuidenhoudt from S&P Dow Jones Indices graciously agreed to help us put together an index of Fat Wallet listeners’ favourite companies. The rules of the index were entirely made up by me. I was drunk with power. We received 22 submissions between Monday and Wednesday morning. Since some listeners liked the same companies, we decided to give more weighting to companies that received more nominations. We are therefore happy to announce the world’s first index weighted by love. Probably. We capped the exposure of each company at 10% to avoid over-exposure to an individual share. We also opted for a variation on an equal-weighted index. The result is an index as diverse and colourful as the Fat Wallet audience. You can have a look at the complete working document here. And finally, below for your viewing pleasure, is the Fat Wallet Love Index, organised by weighting. Kris

It’s our 60th show! At the time of recording we were also only a few downloads shy of the 70 000 download mark. What a time to be alive! We are so grateful for your support. This week we received a bunch of related questions about my favourite topic - ETFs. We discuss: TER: How it’s calculated and what it means for your investment. I also wrote an article about it here. Spread: The cost that’s not a cost. The difference between ETFs and ETNs. How to put together an ETF portfolio. How to choose between two similar ETF products. How to understand risk. How to trade (or not trade) the volatility index. We also decided on a whim to put together a Fat Wallet index. It’s a fun way to see how indices are created and to see if we’re collectively smart enough to beat the market. You can submit your favourite listed company for inclusion in the index by sending a mail to ask@justonelap.com. Maybe we can get some industry peeps to take us through the nuts and bolts in a future episode. Kris   

Last week, we spoke about the basic concepts you need to understand to make good financial choices. We recap those this week, because understanding these concepts will change the way you think about your money. To recap, they are: Interest Inflation Compounding Assets Indices and index-tracking products We also discuss the different types of expenses that will impact how you spend your money. They are: Unavoidable expenses that keep you alive Expenses that can be avoided in the short-term, but will ensure your future financial security Expenses that will make your life easier Fees to be part of the formal financial sector. These are unavoidable This week, we discuss how each of these expense categories will affect your spending in different phases of your life. We start with those who have no financial responsibilities and very few expenses. Then we talk about how to handle debt and finally we deal with family obligations. The TL;DR version of this episode is: You want your bank statement to reflect your values, so you have to start by asking yourself what you want your money to do for you. That can be traveling the world and discovering new species or building a home for your 12 kids. Everyone needs the same financial base, which includes: An emergency fund equal to at least three months’ expenses A retirement annuity A tax-free savings account Dread and disability cover If you have dependents, your financial base should include life insurance until you’ve accumulated enough assets. You should avoid debt as much as you can and pay back unavoidable debt as soon as possible. Kris

Thinking about how you are going to spend your money when you haven’t yet started earning any seems like putting the cart before the horse. However, if you’ve been earning money for a while you probably have monthly expenses that are difficult to account for. Why is that we can plan every other aspect of our lives, but our financial decisions are often without direction. In our first ever recording in front of a live audience, Simon and I discuss how to create structure around your salary. We explain, once a again, the five financial concepts that will enable you to make a good financial decision every time. To recap, they are: Interest Inflation Compounding Assets and liabilities Indices and index-tracking products We discuss the expense categories that will apply to most of our finances. First, you have unavoidable costs to keep yourself alive. Secondly, you have a bunch of costs that you can avoid in the short-term, but that will benefit you in the long-term. Next, you have costs that can improve your quality of life. These are the perks. Finally, you have costs that you can’t avoid because you are part of the formal money system. We’re talking here about banking and brokerage fees and interest. While the first and third categories tend to capture our imagination and the fourth is mostly ignored, our future financial security depends on the second category. Keeping your costs low in category one, three and four frees up money to really help you secure your future. We argue that your bank account should tell a story about your values. If you don’t know what you want your money to do for you, you’re going to end up spending it on things that don’t matter to you. When you wonder about what you want from your money, there’s no such thing as a wrong answer. If you want to travel the world with your money, you should. If you want to retire in ten years, write that. If you want to spend your money on your hobby, that’s good too. Once you have taken care of your future self through long-term savings like retirement and tax-free savings, your bank account should reflect what is most important to you. Finally, we are so grateful to Marc Ashton and the Moneyweb team for the opportunity to speak at the expo and get a chance to interact with all of you. Thanks for stopping by and making our morning a success. Congratulations to Ernst Jordaan for being our first IRL win of the week.  Kris

In the current political climate it’s not surprising that we get so many questions around moving money offshore. This week’s episode was going to be about moving pensions abroad, but offshore exposure in general ended up dominating the conversation. First, we talk about taking your pension fund with you when you emigrate. The good news is that it can be done if you’re not already taking a pension. The bad news is there’s no way to avoid paying tax. Next, we talk about tax on foreign dividends and finally we get to how much offshore exposure you need in your portfolio. We land, if you’re too impatient to listen, on having much more offshore exposure than local exposure. Think 80-20. The question for a returns junkie like me remains how to work out how much of my offshore exposure should go towards developed markets and how much to emerging economies. I like the idea that there’s a lot of room for upside in emerging economies. It would be naive to assume those economies can only go up, however. The higher returns come at the expense of stability. How do I know how much risk to take? We also explain how an ETF can be a feeder fund and talk about unitising your portfolio. The spreadsheet we mention can be found here. Information around unitisation is here. Remember that we’ll be at the Money Expo this Saturday, 29 July. Between 9:00 and 10:00, Simon and I will discuss how your paycheque should be structured. It’ll be a Fat Wallet-style conversation, with the added bonus that you can ask questions. We look forward to meeting everyone! Kris

You’ve probably noticed that we’re aflutter about the new Satrix ETFs. International index-tracking offerings on the cheap is pretty much the reason we get out of bed in the morning. Investors have a chance to get their hands on these ETFs before everyone else in the initial public offering (IPO). In this episode we figure out what the upside is to getting in before the products list. Find our episode on private placements here. When companies list, a limited amount of shares are issued and allocated during the IPO. If the share price rallies after a listing, investors who get in before everyone else have nowhere to go but up. ETF units, on the other hand, are created as people buy them and priced based on their underlying value. Aside from not paying a brokerage fee, buying ETFs on IPO is the same as buying them at any other time. We mention Stealthy’s post on cost comparisons for the new ETFs. You can find that here. Mike pointed us in the direction of an early retirement calculator. Find that here. If you’ve been hiding money offshore, you have a grace window to own up to SARS. That site is here. Kristia

I had to fight the urge to throw my laptop away and run for the hills when I read Jurie Lombard’s mail this week. This is not Jurie’s fault. I’m overly-cautious when it comes to debt - once bitten and all that. However, I’ve also wondered about using my portfolio as collateral to borrow money. Borrowing can be a powerful way to create wealth. People who swear by property often cite the ability to use existing capital as collateral to acquire more capital as an upside of the asset class. As Simon points out in this episode, small business owners also often borrow start-up capital to create more capital. Why should our share portfolio be exempt from leveraging? In this episode I try to push past my discomfort to figure out how to leverage a portfolio smartly. Simon did this excellent seminar on risk and leverage. In the video he’s talking about contracts for difference (CFDs), but the principles hold true for borrowing against your portfolio. The biggest risk we could identify is some sort of market crisis. If the value of your portfolio drops overnight, you can expect a margin call in addition to watching your portfolio getting klapped. That’s not a good day at the office. The product Jurie was asking about can be found here. Last week Simon challenged Stealthy to create a spreadsheet. Of course, Stealthy already had the spreadsheet. Download it here. At my current savings rate, I will be financially free in just over 16 years. If the market did what I wanted it to do when I started, I’d be a bit further along by now, but we accept what we can’t control and then complain about it bitterly on our podcasts. Medical students, interns and professionals, check out this blog. Thanks to Alexis for sending it along. Lastly, by the time you read this I will be on holiday. That means there will be no Fat Wallet Show on 10 July. Kris

“Is it really possible to live off my investments?” This is a question we field often. We recently did a podcast about early retirement that deals with a variation on this theme. The question concerns me, because the answer lies at the heart of all financial planning. Firstly, if living off your investments isn’t the end goal of investing, what is? How else do you differentiate between long-term investments and short-term savings? Intentionality is a theme that keeps cropping up on the Just One Lap platform. Good financial decisions aren’t possible without understanding the purpose of investing. Secondly, the answer affects your judgement around whether your retirement annuity or pension fund is any good. How do you decide how much to contribute to these funds? All too often companies set the retirement savings rate on behalf of employees. If you can’t answer this question, how will you know whether the company-mandated savings rate or the oft-cited 15% is enough to see you through retirement? When I started dreaming of an early retirement, I calculated I would need around R7m to be financially free. At a 4% draw-down rate, this would earn me a monthly income of just over R23 000. At 4%, so says the theory, my capital would keep on growing if my returns beat inflation. Imagine I never ran this calculation and decided instead to contribute 15% of my monthly salary to an RA. If I started this month and continued my 15% contributions for the next 20 years, providing I earned an annual yield of 12%, I’m still almost R700 000 shy of my early retirement goal. In this podcast, we talk about the numbers you have to run and the assumptions you have to make to know whether you have enough money invested. I highly recommend you visit the Stealthy Wealth website for a lot more information about this. While his goal is early retirement, the principles are the same. Kris

I’m slightly obsessed with having a solid financial foundation. I talk about it often. Here’s what I have as my foundation: No short-term debt.* An emergency fund. I work on somewhere between three and six months’ expenses. Dread and disability insurance, in case you lose your ability to earn an income. Medical aid. Retirement annuity. You should have this foundation regardless of your financial plan. However, you also need a road map. To get one, start by asking yourself what you want your money to do. This might seem oversimplified, but it can have a great impact on your financial choices. For example, if you want to travel as much as you can while you’re earning an income, your money has to go towards travel. If you want your money to buy you financial independence in 10 years, your money will go towards investments. These options are equally valid. As long as you have your retirement savings sorted, none is more justifiable than the other. Only once you have a plan and a foundation should you start worrying about discretionary investments. If your plan is any good, it will help you figure out what types of investments would serve you best. For example, if your plan is for your money to buy you a year off work to travel South America, you already have a savings goal and an investment horizon. This will affect how much money you would have to put away and help you find a risk-appropriate investment or savings vehicle. Knowing the answer to what you want your money to do will impact every financial and lifestyle decision. If you know traveling is your financial priority, you'll also know how buying a new car will impact your ability to travel. Your financial plan doesn’t have to be perfect. It does have to be written down. It has to be detailed enough to keep you on course, but also adaptable enough to allow for major life changes. In this episode, Simon and I talk about putting together a financial plan. We use that foundation to answer two reader questions about investments. It’s a must listen, regardless of where you are in your finances. *One could make allowances for a home loan here, although I don’t have one. **I say Australian astronaut. I meant Canadian. Kristia

Since Simon and I are both vocal fans of index trackers, we are often asked about the possibility that ETFs could break the market. The questions submitted by Jaco de Wet this week are questions we field often. The fear is that index trackers will become such a large part of the market that price discovery will be compromised and management won’t be held accountable due to a lack of shareholder engagement. If you’re not completely new to the investment world, odds are you’ve heard the phrase, “Past performance is not an indication of future performance”. If you speak to someone who has been investing for a while, you’ve probably also heard them say that some market event is unlike anything they had ever seen. While the market tends to trend higher over time, “unlikely” market events happen all the time. Think 2008, tech bubble and even the introduction of index trackers. Who saw it coming? Nobody. Why? Because the market is organic. In its purest form, the stock market is made up of those with money to spare (investors), those raising money (companies) and the people and institutions that facilitate these transactions. While the players in the market remain constant, the conditions surrounding the lending and borrowing that occurs in the market change with the times. If the market hadn’t adapted to the times, the JSE, which was founded in 1887 after the discovery of gold in the Witwatersrand, would be a market for gold. The introduction of ordinary listed companies didn’t break the market. The market adapted to the needs of its constituents. The argument Simon and I try to formulate this week centers around the fact that the market isn’t static. Both markets and legislation change to reflect the needs of the times. If index trackers in their current form became so prevalent that they become major shareholders of companies, price discovery and accountability certainly will become an issue. However, in the time it will take to get to that point in the market, the market will adapt. Legislation will adapt. Index trackers themselves will adapt. For as long as there is a market, there will be people in the market seeking profit from inefficiencies. While ETFs and other index trackers can certainly change the market the way listed companies changed the market, the market will adapt.   Kris

We have long been huge fans of Candice Paine. If you are one of many who asked us about offshore investing, you’re about to become one of her fans too. In this illuminating interview, Candice explains all the different ways to take your money offshore. I was expecting a very complicated process, but basically you can move your money into different currencies and regions from the comfort of your own bank. However, if you are determined to move money into a different country altogether, we talk about that too. By far the scariest part of this conversation has to do with estate duties. As two of our listeners pointed out, should you die when your money is offshore, you will pay estate duties in the country where you are invested. In the USA and the UK, that is 40%. Think about that for a second. Almost half of your investment gets destroyed simply because you died - as if you had a choice! This leads to all sorts of paperwork. Since I’m willing to do just about anything to avoid paperwork, I’m very comfortable with my offshore ETFs in my tax-free savings account. We’ve finally reached the end of our hectic recording schedule. Life returns to normal, freeing up more time for your questions. Send them to ask@justonelap.com. I swear, if you ask me about cryptocurrencies, I’ll scream. But you can listen to a JSE Direct podcast on Bitcoin here. Kris

I can’t think of anything better than learning about something that piques my curiosity. It’s an incredibly powerful antidote to boredom. Learning is easiest in environments where beginner’s mind is encouraged, which is why I’ve always been a fan of learning in secret. When you start expecting answers instead of questions, you create an expectation of mastery. With that, humility and curiosity are lost. An expectation of mastery leads to fear and inevitable failure. Perfect, complete knowledge is a myth. Learning is a life’s work. True understanding isn’t always a by-product of learning. When learning doesn’t stem from genuine curiosity, when asking questions isn’t encouraged, when the teacher is impatient, understanding gets lost, curiosity wanes, passion for the subject matter gets snuffed out. More than sharing information, it’s my hope that this one-year-old show will provide a framework for asking questions. I hope, by listening to this show, you will be less afraid to speak up next time something isn’t completely clear. I hope you will never be afraid to ask the same question twice. I hope we are creating a hunger for true understanding, whatever the field. For the last year, this show and its listeners have been a source of great pride and joy for the Just One Lap team. Thank you for listening to The Fat Wallet Show. Kris

Back in the bad old cabinet reshuffle days, I made some money trading my tax-free savings account. In that account, I was invested in the DBXWD and CSP500. The cabinet reshuffle led to a nauseating drop in the rand. The currency drop, in turn, resulted in an elating increase in the value of my dollar-denominated investments. It was an emotionally confusing but financially lucrative time. I’d been down this road before. Considering how little my investments have done for me, seeing some life in my offshore investments is basically the only thing giving me hope. This time, instead of just being a spectator, I cashed in on the currency move. While nothing of great significance happened in any of the markets I was invested in, I could take profit because of the currency move. How does this work? In this episode of The Fat Wallet Show, Simon and I discuss the impact of currency moves on offshore ETFs. There are two elements to keep in mind - the market you’re tracking and the currency in which your ETF is denominated. Our feedback this week is all about tax. There must be something in the water. We clear up some confusion around capital gains tax from the previous episode. The penny finally drops for me. I’m going to write it down here just to be 100% sure I have it. Each person gets a R40 000 tax-free capital gains allocation per year. 40% of any profit over R40 000 gets taxed at your marginal rate. In that way, capital gains is affected and does affect your income tax. I had this all wrong. I thought you paid 40% on any profit over R40 000. Nope, nope, nope. We are on an unusual recording schedule, but we will get to your questions and feedback eventually. Get in touch with Team Just One Lap at ask@justonelap.com. Kris P.S. The Fat Wallet turns one in the next episode!

Aside from low cost and simplicity, ETFs are appealing because diversification is built in. When you invest in the 40 biggest South African companies, you invest in different sectors and different regions. You even get a degree of asset diversification in the form of property stocks. Last week, Stealthy Wealth asked me about my diversification strategy in this interview. Because I’m an ETF investor with a very long investment horizon, diversification is not high on my list of priorities. The question did make me wonder how I will diversify once I approach retirement. When I think about diversification, I always consider three things: asset class, region and sector. My knee-jerk reaction to Stealthy’s question was that I want no more than 25% exposure in my portfolio to any of these things. By that logic, if the stock market crashes, I’ll have 75% of my portfolio comfortably sitting in property, bonds and cash. Hopefully those assets will see me through the crash and sustain me until my equity portfolio recovers. There are, of course, mathematical formulas to determine the optimal degree of diversification, but because I’m nowhere near a mathematician, I couldn’t use them. I couldn’t even read them. In this episode I speak to Simon about the right degree of diversification. I look at 10X’s approach to the issue within my retirement annuity (RA). I question Simon’s 100 minus your age rule of thumb. This week we cover the topic before we get to the feedback. Let us know how you like it. In the podcast I mention a calculator that Stealthy Wealth developed to determine whether interest or dividends would be more tax efficient. Access that here. Please continue to submit your money questions to ask@justonelap.com. We’ll do our best to help you find the answers.

About a year ago, Simon and I had lunch. I was about to go on holiday and there may have been some wine. During the course of the conversation Simon mentioned something about Sygnia and the price-earnings ratio. I didn’t really have any idea what he was talking about, so I made a note to turn it into a Fat Wallet episode. Since that lovely encounter, we’ve had so many Fat Wallet questions that just always seemed more pressing. I regret not getting to this sooner, because it turned out to be super interesting. The price-earnings ratio is a way to work out how many years it will take to make your money back when you buy a share. That, along with a company’s net asset value (NAV) and cash flow can help you work out whether a share is cheap or expensive. This is one of those episodes where you can practically hear the gears grinding. Hopefully you got the “A-ha!” moment too. Kris

My biggest frustration in learning about the financial world is the expectation that I should understand concepts that nobody ever explained to me. A part of the reason why I got into so much debt is because I didn’t fully understand how interest applied to my financial situation. The other part of the reason is stupidity. The Fat Wallet Show is my attempt to level the playing field. Not only am I declaring, out and proud, that I don’t know everything. I’m also taking back the most important weapon against ignorance - the humble question. Because this show started out as my personal attempt to find answers, we started with concepts that I didn’t understand. In the process, we never covered things that I did understand. A lot of the questions I have about the financial world these days don’t have much to do with my personal finances. The interbank lending rate, for example, is not something that has an impact on my ability to make choices about my finances. Interest, on the other hand, is a core concept that informs almost all of my financial choices. There are, in my opinion, only five concepts you need to fully understand to take control of your money. In this podcast, Simon and I discuss those concepts and how they affect your finances. If we didn’t explain some of the concepts in a way that is easy for you to understand, find someone who can. These concepts might be the catalyst that launches a journey of financial curiosity. If not, they are enough to get you to retirement in one piece. Kris  

Many have caught on to the idea that you don’t have to spend your life in servitude. Instead of lifestyle creep and keeping up with the Joneses, you can live modestly and put away the rest of your income. Once you have enough invested, you draw down just enough of your investments to maintain your already modest lifestyle and spend your free time doing what makes you happy. Early retirement: the Holy Grail of investment. Mr Money Moustache in the US and South African Stealthy Wealth have embraced the idea of early retirement. In both excellent blogs, they explain the maths and share the types of financial maneuvering and lifestyle choices that would make early retirement possible. Like most investment-related planning, though, both have had to make certain assumptions about what their investment returns would be over a period. No matter how much you save, cash won’t get you to early retirement. Enough money compounded over a decade or two, on the other hand, might just do the trick. As aspiring retiree Ashleigh McLaren recently pointed out, however, the market doesn’t really care about our life plans. Over the past three years the local market has done very little, while Statistics SA recently reported a dependable and steady uptick in inflation. If I had to plan my retirement on my experience in the market, I’ll be better off buying survival packs so I can sustain myself on crackers and ammunition when I’m inevitably poor. You might only be young once, but you'll be old for a long time and probably won't like cat food. https://t.co/71Mxdzm3w2 — Kristia van Heerden (@kristiavh) April 13, 2017 " src= "data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" alt="" width="20" height="20" data-wp-preserve= "%3Cscript%20async%20src%3D%22%2F%2Fplatform.twitter.com%2Fwidgets.js%22%20charset%3D%22utf-8%22%3E%3C%2Fscript%3E" data-mce-placeholder="1" /> Are these calculations based on past market performance are realistic in the current market environment? We attempt to untangle that question in this episode. P.S. We record the stinger at the beginning of the episode. I had every intention of talking about inflation-proof portfolios, but conversations tend to take on a life of their own if you let them. Kris  

For most of us, a retirement annuity is the biggest investment we’ll ever make. More than any other investment decision, your RA should be scrutinised and prodded at every opportunity. This week Alexis Whitehead wanted to know how to choose a provider. We often mention 10X, although Sygnia claims to be cheaper. etfSA.co.za, home of our bestie Nerina Visser, also offers index-tracking RAs. Which is the right choice? Equipping yourself with the right tools to make financial decisions, I believe, is the best way to healthy finances in the long run. I believe I should have the right financial building blocks in place if I hope to be successful financially. To recap, those are: No debt An emergency fund to cover my expenses for at least three months Medical aid Dread disease and disability insurance Retirement savings I also try to develop mental models that would make financial choices easier. Those include: Calculating cost per use: In an ideal world, I want the cost per use for everything I own to be somewhere between R1 and R10. I like to think about it in terms of renting the same object. If something costs R2800 and I use it 280 times, would I be willing to pay R10 to use it every time? What price would I be willing to pay to rent something once? Opportunity cost and future value: If I compound the price of an item, will the object of my desire be worth giving up that amount in the future? I lose the opportunity to invest that money when I spend the money on other things. Cost compound: Fees compound in the same way earnings do. If the fees apply to assets under management, I also try to remember that the assets grow constantly. 1% of R10 000 is easier to stomach than 1% of R10m. In the end, your money should make sense to you. Who you choose isn’t as important as why you choose them. Having a plan is half the battle won. kris

Due to Simon’s travels we recorded this episode a few short hours before news of the S&P ratings downgrade reached us. I was depressed about the state of affairs even then. I don’t know if I would have been able to get out of bed for a recording after the downgrade. Weirdly we had a question about the downgrade on ice for this episode, so we delve into what it means. I also found this interview with our bestie Nerina Visser very helpful. So much was said and written about it in the 24 hours after it happened, I don’t think I can contribute anything meaningful to the discourse. However, I did write this blog about it when it was all just a terrible possibility. I also made a list of downgrade-proof ETFs here. Simon's JSE Direct podcast also provides helpful information on what this all means.  I’ve been thinking about the impact of currency movements on my portfolio for a while. You may remember so far my investments haven’t really been making much money. I get very excited when there’s currency movement, because my entire tax-free investment account is made up of DBXWD and CSP500. When the rand weakens, these dollar-based investments momentarily shoot my portfolio into profit. It’s a happy time until the rand strengthens again. This time around I’ve devised a plan to capitalise on it. I ask Simon to sense check me in this episode, then I did it. So far, I have no regrets. Kris

Long-time listeners of The Fat Wallet Show might not be surprised that I find questions around credit records distressing. My dubious credit history makes me wary of debt billed as anything but an expensive and stressful parting from my money.   We look very mischievous in this picture, but we actually talk about how to build up a credit score in this #podcast. #money #fatwallet A post shared by Kristia Van Heerden (@k_r_isis) on Mar 30, 2017 at 4:15am PDT That said, some larger purchases are only within most of our reach through credit. A bad credit record could be the only thing standing between you and the house you shouldn’t buy. A question from a 24-year-old listener trying to prop up his credit record had me do some digging. I was happy to find there are ways to get a good credit record without exposing yourself to the trappings of the bad stuff. I also received one of my favourite emails of all time from Shaun McQueen this week. Thanks for writing, Shaun. You did my soul good. I'd like to give you some feedback on Just One Lap and your Fat Wallet Show. End of last year I've came to the  conclusion that I hate my job. I've been pondering on this for quite a while ..what the hell, it might also just be a midlife crisis. Anyway, so I decided to focus on the one thing that doctors know nothing about - finances. Become a trader or something...After all, finance 101 in med school is easy. If you need more money - work more hours! Worst business model ever. This is how I stumbled across your show  via the JSE podcast. After 3 months of reading books, listening podcasts etc. I'm obviously not my own trader or investor - yet. But, I've noticed a big difference in my thinking. I suddenly realize that I don't need the expensive car, or all the gadgets etc. It's easy to think  " I deserve this and that, because I work so hard". What bullsh*t.  I now know that I do not hate my job, I actually love it. It is the fact that I need to work all the hours to pay for all the stuff that I do not really need, that makes me unhappy in my work. So, today I've made a massive poster and stuck it onto my home office wall for me to see every day. I've noted down the stuff to get rid off, my step by step financial plan and my road to less working hours!( happiness). It won't happen overnight, but it is a start. Thanks for waking me up. I'll continue down this journey of financial education. And maybe in 3 - 5 years from now I'll work because I want to, and trade because I can. Regards Shaun PS Not only engineers listening to your show... Kris

A letter from Carel Nel reminded me how utterly irrational I used to be about money. My irrationality manifested in two ways: avoidance and minimising. In an attempt to feel more in control of my chaotic financial life, I organised all my bills into folders by month. Sometimes I would spend whole days easing my anxiety over my debt by this ritual of organisation. I didn’t read the statements, but doing the paperwork made me feel like I was dealing with my debt. I also became the queen of debt comedy. When forced to confront my financial situation, I’d joke about the crushing weight of it. “I’m so screwed. Har! Har!” It’s a stupid defense mechanism that I still use.   These days I’m irrational about other aspects of money. For example, the crushing feeling of anxiety when I invest my emergency fund or the inability to buy something I like, want and can afford. In this episode of The Fat Wallet Show Simon and I try to put together a rationality checklist for making financial decisions. Here’s a cheat sheet: Work out the true cost, especially if you’re not paying cash. The true cost is the sticker price plus account fees, interest rates, delivery charges and any other rates that may apply. Work out the cost per use. Every time you use something, it becomes cheaper. Work out how often you’ll realistically use the item, divide the price by your answer to get to the cost per use. If you had to pay that amount to rent the item when you needed it, would you think it’s cheap or expensive? Work out the opportunity cost. If you had to invest that cash amount at 7% growth after inflation for 30 years, how much money would you have? Is the utility of the object or the joy it will bring your worth sacrificing that amount in your future? Are you trying to buy your way into a new skill? You want to acquire a new skill. You convince yourself the first step to acquiring the skill is to buy an expensive tool used by those who already have the skill. You find yourself unskilled with an expensive tool. Get the skill. Reward yourself with the tool. If you like it, can afford it, want it, buy it. This one is for me. I think the first step to making more rational choices is acknowledging that we can be irrational. Awareness is often a powerful antidote to stupidity. Kris

I like the concept of dividends: companies that do well share the love and the profit with their investors. Because my investment portfolio is small, however, the dividends I receive are often an inconvenience. While I’d never turn down free money, a R300 dividend payment isn’t exactly changing my life. That’s why I find the concept of income-generating assets confusing. If I had to rely on dividends in my portfolio, my retirement would consist entirely of cat food. In this episode, I make it my business to learn what I can about dividends. Dividends might be cut and dry for ordinary share investors, but how do ETF issuers handle dividends? Shouldn’t companies be turning their profit into growth instead of paying it out to investors? How do I even know which companies are paying dividends and whether they’re good companies or not? Until my portfolio is larger and earning more dividends, what should I do with my tiny dividend payments? Right at the end I show off what I know about dividends and CFDs, only to be out-shone by Simon. I almost had it. This is our 40th episode, by the way. As far as milestones go, it’s not a major one, but I want to acknowledge that I did something fun 40 times. Kris

Last week Simon and I discussed how much I save. We also marvelled at Conrad Loots, who manages to save 69% of his salary. Over the weekend I thought about our conversation and how far I’ve come financially. Six years ago I had ten times more debt than income. Back then I would have taken last week’s episode as further proof that a better financial situation simply wasn’t for people like me. I would love to be able to save 69% of my salary like Conrad does, but I would have to give up things that I love. I don’t want to do that. My current lifestyle is worth more to me than the ability to save more. If I happen to receive a windfall (which is definitely not in the pipeline) I’ll invest it. Until then, what I save is what I save. Whatever your current financial situation, you can improve it if you want to. You don’t need to be saving 69% of your salary. You don’t even have to save 6%. Start where you are and make improvements where you can. Eventually it will become easier. You’ll see. This week we also received two questions (and stole one) about the S&P500. Simon and I discuss the different ways to invest in the S&P500. We discuss how it affects tax, the impact of currency conversion and whether or not you should be investing in dollars. Kris

I’ve been so excited about my tax-free investments. I was going to transfer my tax-free allocation on the 28th, then got paranoid that Capitec would transfer my money on the same day and cost me 40% in tax. I decided to wait until 1 March. The wait frustrated me, but I’m an adult. I know how to delay gratification. Naturally the first thing I did on 1 March was transfer my allocation to Easy Equities, but then I had to wait another whole day for it to clear. Of course, the first thing I did on 2 March was log into my tax-free account to finally go shopping. When I got there, however, the money wasn’t there. Many scenarios played out in my head at this point. The last thing I thought of, because in my own head I’m incapable of silly mistakes, is that I may have transferred the money into my ordinary brokerage account. Investigation confirmed I had transferred the money into my ordinary brokerage account. Instead of going shopping, I had to withdraw the money from my taxable brokerage account, transfer it back to my bank account and start over. The world of investments is full of frustrations and I am one of them. I hope your attempts were more successful. It seems the new tax year has many curious about the opportunities, possibilities and loopholes. In this episode of The Fat Wallet Show, we answer all the tax questions we got this week. Kris

I recently attended an Investec event where they introduced a structured product that piqued my interest. Simon and I have discussed structured products before, so I was expecting a hugely complicated bullshit product with massive fees. I was wrong (again). I realised in that briefing that I have a great advantage. I know what questions to ask when someone tries to sell me a financial product. I don’t get intimidated by the concept of gearing and I have a somewhat tenuous grip on the idea of hedging. I know what high fees are, because I have low fees to compare it to. I understand what the S&P 500 means in the context of a financial product. I know all of these things because of my job. My obsessive question asking is what led to this podcast in the first place. It’s a great position to be in, but I’m fairly sure I’m one of very few people who get to be in this position. This week is a great example of how Simon helps me understand these products. I ask the same questions until I’m satisfied that I understand the answer. You’ll note that we are talking derivatives again. Although we’ve discussed it before, I always come back to it. Even though I understand the basic premise, I struggle to wrap my head around these products. I get the feeling I’ll only ever truly understand them if I start trading them myself. This week we do an on-the-fly checklist of things you need to ask when someone tries to sell you a financial product. We start, as always with fees. The underlying product, counter party risk, whether the product is listed and how the provider makes money are all on the list. Kris

In general, people don’t know how to talk about money. Add feelings and relationships to the mix and you have a lot of room for awkwardness. Your future financial security will be heavily influenced by the financial behaviour of your partner. You owe it to yourself to ensure that you know exactly what you’re in for. When I was younger I got heavily indebted. This was bad. I did, however, learn a number of important life lessons from that experience. One unexpected upside is that debt forced me to talk about money to my partner. Our openness about money is something we’ve come to take for granted. As I’ve become more open about my own finances, my friends have been talking to me about theirs. I’m often surprised that couples who are so comfortable sharing every other aspect of their lives struggle to have basic financial conversations. In this episode, Simon and I try to figure out the best way to start talking about money with your partner. It doesn’t take us very long to become tangled up in the complexities of love and money. It’s hard, you guys. If you have any tips, please send them to ask@justonelap.com. Kris

Whenever I think I have a handle on tax and investments, some fresh hell reveals itself. Our friend Ros Brodie had a fascinating question about share events and capital gains tax (CGT) this week. I was hugely impressed that she managed to sell a share she never bought. It’s exactly the kind of voodoo I can get behind. Ros had two CGT questions. Firstly, how does tax work if you take shares in lieu of dividends? Secondly, what about shares she got as a result of the unbundling of a different share? Carel Nel wrinkled my brain in this episode. It turns out residual payments on home loans are a thing. I did not know this. What Carel found out, to his dismay and mine, is that you still pay interest on the residual amount. His email is below. Once again I’ve shortened it somewhat, but the good bits are there. I've been trying to figure out how residual payments on a loan work, but it doesn’t make sense to me. The way I understand that it is if you take a residual of whatever amount, this amount is payable at the end of the term, whether you pay it in a lump sum or refinance it. What makes sense to me is then that this residual should not be part of the loan calculation at all. Let's say you take a loan of R100 000, you pay a deposit of 10% and you elect to take a residual of 25%. This means that effectively you need a loan of R65 000. So, the monthly installments should be calculated with R65 000 as the total, the term and interest rate indicated. Right?* The interest paid each month is calculated on the total amount outstanding which includes the balloon amount. After every month's payment, the total outstanding goes down less due to the lower installment meaning you pay more interest. What I would have hoped for was if the interest is not calculated to included this balloon amount. *Turns out this is not right. As Simon points out in the episode, when you take the loan amount, the bank gives you the full amount, even though you are paying back a smaller principal amount. If you listened last week you would have heard us mention the new US Treasury Bond ETF by RMB. I was piqued, so I found out more. If you are equally piqued, read it here. Lastly, Simon did his super cool tax-free investment talk for 2017 last Thursday. It's always chockers full of information. View it here. In addition to the great presentation, I met someone who has started an investment education club, which excites me more than anything investment-related should ever excite anyone. If you don't ordinarily come to the JSE Power Hours, you're missing out. Kris

Good news! This episode is a respectable just-over-30-minutes long. We recorded earlier than usual, which means there’s quite a bit of feedback we didn’t get to. We will get to all of that next week. Two weeks ago I featured the NewFunds TRACI ETF and came across this sentence, “The TRACI index measures the mark to market value of the income earned from rolling a 3-month money market deposit on a monthly basis.” I don’t know about you, but there’s very little of that makes sense to me. This week I try to get to grips with the whole money market concept. Turns out I had some serious misconceptions. The NewFunds TRACI is one of the ETFs in our portfolios. Go check them out here. Finally, I got this email from Jo Thies. It’s too long to feature in an episode, but I really enjoyed it and thought I’d share. I’ve shortened it, but you’ll get the gist. “I’m pretty sure saving for retirement is really bad. First let me qualify this unpopular notion with a paragraph. Possibly more than one depending on how worked up I get. First off having cash, investments etc when you choose to retire is really nice. But so is a cup of tea. And having more cash when you retire is obviously better than having less cash. But if you really want to retire and sit around… and…  while away your time before your foamy, gurgling death in hospice… you need a metric fuck tonne of cash when you die. Like literally. Actually, wait… you want to retire? Basically this means you’ve fucked up your whole life. For realzies. They sold you the kool-aid. And you drank deep. You’re on step eight of your ten step life. Next stop… smelling like an old person and death. Some people like to imagine step nine is travel and boat cruises… but it’s not. It’s a weird musty smell and having suspicious-looking growths zapped off your wrinkly, sun damaged skin and pencilling funerals into your diary every weekend as your friends and family kick off. Fuck me I can’t wait. So, I have to save and invest FOR MY WHOLE ENTIRE LIFE in anticipation of this. So some motherfucker (and I don’t use this term lightly) who sold me an RA (when I was a total financial noob) gets commission for their rest of their lives. Whereafter they will hopefully burn for eternity. Let’s be honest, if somebody is going to burn I’d rather it be them…. Anyways. I don’t like to name names. I like to be Stealthy that way. But imagine someone who wants to retire when he’s 45. We have to start somewhere. So let’s start with science. Because science is awesome. And finance is just okay. We’re using out-dated models and concepts that were struck in the fifties. Expected life span. You see we all have just one lap. Let’s say it’s 400m, only halfway through the race someone has changed it to 800m. My expected death is age 78, statistically speaking. I’ve just turned 38. It feels ancient. Some days I wonder how people who are 48 get out of bed in the morning without painkillers? Simon? Any tips? Only, my life expectancy is probably not 78. It’s probably closer to 100. Mind you for the proletariat its still 78. But being a 1%’er I’ll probably be in a position to afford the miracles of science that are coming. The nano-machines. The new organs (with modifications). The rejuvenation clinics. The implants that tell me three days in advance that I’m going to have a heart attack (just enough time to pop down to Sandton clinic and have flawless robotic surgery and a flat white). My 10 month old daughter will likely live to be 120… maybe longer. And for her children death maybe something that only happens to the poor or unlucky people. Imagine at 45 you’re gonna have live like… 60 years off your retirement funds. I’m making an assumption that you’re healthy. And don’t get shot in the face, which is an annoying possibility living in South Africa. Or get annihilated driving your scooter - if ever there was a life reducing way to spend your time. That’s a long time. And investments are super fickle. I’m not even contemplating a post Trumpian dystopian future where we trade cigarettes and blowjobs for potatoes and spam. My issue is about how we look at our lives. We get this corporate bullshit pumped down our throats as soon as we’re born. This is your life. Go to school. Get a degree. Get a job. Work 9 to 5. Buy a house you can’t afford. Buy a car you don’t need. Breed. Retire. Die. The more we educate ourselves, the more we learn, the more we realise there are other ways. (Which is why I love your show) Markets may crash. You may lose everything. But no-one can take away what's it your mind.) Instead of retirement shouldn’t we be punting a concept of designing our lives better? At the moment the way we use our money doesn’t make sense. We kill ourself to hoard our money away for a period in our lives where we can’t really make full use of it anymore. It’s a terrible sliding scale. We can work harder, skimp more, save more, retire earlier. Or draw it out. Work longer into our lives… but then decreasing the time we have available to enjoy life. Money (and by association our investments) should be the scaffolding we use to build our lives, not some weird fucked up end game. To complain without offering a solution is to whine. I don’t want to whine. I’m not saying mine is the only solution. Or even a solution. But I’d love to have the conversation. I don’t want to retire. Neither do I want work a 9 to 5 job for the rest of my life. But why are those our only two options? Fuck you social norms. Fuck owning a house. Fuck owning an expensive car (Sorry, Kristia… An Alpha? When you break it down, that’s just vanity. An Atos is totally functional.)* Anyways. I’m trying to practice what I preach. I want income streams that can potentially last forever, and since I’ve procreated, potentially create legacy. Ideally I’d like a dividend income, a rental income and being an entrepreneur some sort of company income that doesn’t require my permanent presence, so I can do other stuff. Carpe diem. Or any other carp, really. *Yes, Jo, but aren’t I entitled to my little pleasures? Kris

Sometimes a lot of deliberation about money ends in an either, or situation. This week is all about those dilemmas. Firstly, we think about monetising our podcast. It seems only logical that a podcast about money should make some money. Do we find a sponsor for the podcast or rely on our listeners for donations? Our listeners have dilemmas about who to trust with their money, whether to buy the Preftrax ETF, how much should be invested offshore and how to handle different investment horizons. We manage to get around to all of this and to pontificate a bit, which is why this is another very long episode. It might be the new normal. Lastly we are thrilled to find a happy retiree with an awesome name. Our stomach-dropping moment comes courtesy of John Morrison. He points out buying a living annuity is a decision worth millions. Why is nobody talking about this? Please let us know if you have any strong feelings about podcast sponsorships. Also write in if you're happily retired. Remember, The Fat Wallet Show is a show about questions. Send all of this, and all your other random thoughts to ask@justonelap.com. Kristia

Assuming your life went well and you made good decisions, you are now ready to retire. In addition to old-fashioned retirement products, you have a personal investment portfolio, a tax-free account filled to the brim with ETFs you love and some cash. Now what? Selling shares for income can’t be a pleasant experience - especially when earning an income is no longer an option. You are eating into wealth accumulated over a lifetime. It’s easy to forget that this is what all that wealth accumulation was all about. In this episode of The Fat Wallet Show, Simon and I discuss the 4% rule, so beautifully explained by our friend Stealthy Wealth here. Then we try to work out how you should go about deciding which assets to chop to make up the 4% you are allowed to take every year. We deal with the somewhat more philosophical problem of dying with your entire fortune intact and wonder if anybody actually knows a successful, happy, active retiree. This episode is slightly longer than usual, because we also try to work out how to spot a scam and how to choose between different listed companies in the same industry. Somewhere in there I confess something that I’ve successfully kept under wraps for many years. If you know of or are a successful retiree, please tell us your story. If you have a question, even if you think it’s stupid, ask us. You can do both of those things at ask@justonelap.com. We are, as always, grateful for your time and attention. Kris

We were thrilled to discover that our podcast has been downloaded 18 000 times since we kicked off in May last year. Excuse me a minute while I do a spastic dance where nobody can see me… Okay, back to business. Kids, death and taxes - three things Simon and I try to avoid at all times. This week we answer two listener questions about investing for children. Nolan hopes to leave his kids properties, but wants to avoid estate duties. Is this even possible? Chantelle opened an Investec tax-free account for her two-year-old, but was told she’s not allowed to invest that money until her child is seven. This didn’t make a whole lot of sense to me. Seven years is a lot of investment time to lose out on. Luckily Simon knows how to get around this seemingly arbitrary limitation. I’ve decided that it’s time to share all of the mind-bending money hacks our listeners have been sharing this year. I’m going to interview people whose personal finances inspire me. You might not think that personal finances can be inspirational, but you’d be wrong. You’ll see. If you think your financial management techniques can help others get a handle on things, write us at ask@justonelap.com. If you love us and want to show it, please review us on iTunes. We’d really appreciate it. Kristia

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. Kris

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. Kris 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 #fatwallet first! After half a year we managed a #skype recording to protect me from whatever plague Simon has. Weirdly, this #podcast is about choosing a medical aid. I did the entire thing in my #pilates outfit on an #exerciseball 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. Kris

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. Kris

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, 2016  You 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. Kris

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. Kris

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. Kris

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. Kris

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! Kris *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.  Kris

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. Kris

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. Kris

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. Kris *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.   When you try to record a #podcast and use a #selfiestick for the first time. A photo posted by Kristia Van Heerden (@k_r_isis) on Jul 6, 2016 at 2:57am PDT   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

The more questions I ask about investing, the more questions I have. While talking derivatives last week, Simon mentioned arbitrage. It’s a term smart folks like to use a investment conferences. When they do, I nod and hope people can’t really smell fear. In this episode I find out arbitrage is a lot like being Batman – all you really need is a ton of money and dead parents. I’m only half kidding. When a share is traded on more than one market, price differences creep in. Arbitrage is when you buy the cheaper share on one market and sell it at the higher price on the other market. I thought this sounded like a pretty awful way to earn a living, but it turns out computers can do it for you while you do things that are fun. Like be Batman. This is a show about questions. Send yours to ask@justonelap.com. Kris PS - we still waiting on iTunes to approve our submission :(    

  Recording Fat Wallet #4. I finally stump @simon_brown_za in this one! A photo posted by Kristia Van Heerden (@k_r_isis) on Jun 15, 2016 at 3:21am PDT  Sometimes it seems like derivatives exist simply to vex me. I know, academically, that the world doesn’t revolve around me, but seriously derivatives: what the hell? In this episode of The Fat Wallet, I reach for that eureka moment. Then I stop reaching because injuries are a real risk. I’ve been trying to get at derivatives for about four years. Brilliant Lauren Bodington from 28E Capital once spent what must have been a long, frustrating hour explaining the bare bones. I thought I was pretty smart after that conversation, but every time I add a single new fact, my tower of knowledge crumbles like this metaphor. Here’s what I know: futures contracts are the easiest derivatives products to understand. They are contracts to buy something at a set price at a future date. Their slightly more nasty cousins are contracts for difference (CFDs). Those are bets on what the price of something is going to be at some future date. Warrants, options and swaps were on the list of things I wanted to talk about, but they are so ugly I didn’t even look at them. They’ll get their own episodes once I muster the energy. For now, brace for impact. Kris

I like to think about investment fees. A man in a clown suit can lure me into a panelled van with a cheap ETF. Over the last week or so, however, I’ve come to realise that an ETF’s price tag is only one part of a much bigger picture. Yes, Big Bad Industry, I realise this is common knowledge to you, but I’m a retail investor, remember? Until now nobody told me. Following the now fabled conversations with Roland Rousseau – the unofficial mascot of The Fat Wallet Show – I’ve been paying much more attention to things like sectoral exposure and risk in ETFs. I enthusiastically share my findings on exposure the NewFunds GIVI in this Periscope. I’m starting to discover cheapness is relative when it comes to ETFs. So far, I’ve been focusing on a combination of total expense ratio (TER) and brokerage fees. However, Roland mentioned churn in ETFs. I knew churn wasn’t part of the TER, but I had a sneaking suspicion that I was paying for it anyway. In this episode, I talk to Simon about churn, we take a little trip to spread and finally end up at tracking error. I have to go back and back again a few times to wrap my head around it. I’m here to learn, so that’s okay. I think every question deserves an answer. If you’ve been wondering about personal finance or investment concepts, drop your questions to ask@justonelap.com. I’ll try to help you find the answer. Kris

Fund of funds with Keith Mclachlan Fund of funds are the Russian nesting dolls of investment. When you strip away all the layers, are you left with fees or profit? In the second episode of The Fat Wallet Show, Simon and I bedevil industry boytjie* and small caps fund manager Keith Mclachlan about these products. Keith reckons the collective investment scheme tax shuffle, institutional fee efficiency and access to products not ordinarily available to retail investors make funds of funds worthwhile. He has a point, until he starts talking about “fuzzy logic” (which, I’m pretty sure, is a type of washing machine setting) and how you have to trust the fund manager. Is there a person in the world that I trust enough not to fleece me on fees and to make decisions that will benefit me and not him? Haha! Yeah, right. There is a moment right in the middle when we all go really quiet to process everything. Not great radio-ing, I know, but sometimes the brain needs a while to catch up to the information. We recorded this episode at the JSE right before Keith did a very enlightening presentation on buying small caps. He talks about the process of selecting a good stock that will be valuable to any investor. It’s worth a watch here. * I once called him something way worse in a poker game. I know he’ll forgive me.

What's with structured products? Welcome to The Fat Wallet Show! It’s our maiden voyage, and we’re happy to have you on board. We’re excited to introduce uncertainty, irreverence and the subtle art of asking questions to your portfolio. Phrases like, “I’m not sure” or, “Let me look that up and get back to you” or, “I don’t know” don’t exist in the financial services industry. If you ever had a financial question you were too embarrassed to ask, you know what we’re talking about. In this business, appearances matter, and nobody wants to seem like they don’t know how things work or what the outlook is for the buchu industry. It’s easy to excuse that little vanity, except that people in the investment industry are meant to service investors - people like you and me who need to figure out what to do with our money. The Fat Wallet Show is a show about questions. It’s about admitting that we don’t know everything, but that we’re willing to learn. Most of all, it’s about understanding as much as we can to make us all better investors. In this episode we discuss what structured products are and whether they’re something individual investors should be thinking about. We talk about people who are smarter than us, people who like to pretend they’re smarter than us, tulips and rich people. It’s a lot more fun than structured products have any right to be. There’s no such thing as a stupid question in this show. If you have unanswered financial questions, this is your opportunity to have them answered in a way that even I can understand. Pop them to us at ask@justonelap.com. Kristia