What's new
Carbonite

Welcome to Carbonite! Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!

Financial Future. Where to Start...

Anzarrah

Junior Member
Rating - 100%
13   0   0
Joined
Jun 29, 2016
Messages
321
Reaction score
55
Points
785
Location
Pretoria
So I've come to the point in my life, where I need to start thinking about investing for the future. I've noticed my older family members are living just to get buy also having to work well past 65.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

They only "Savings" and "Retirement" I have are in Nedbank and FNB Interest accounts/notice accounts.

We spent a large portion of our savings to settle down as our son was born in March. So our monthly expenses has settled and our budget stabilized. Looking to go for the more stable root now.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it? I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Would just like some personal experience replies instead of the google do this do that.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)
Do I put portions towards RA/Investments/TSFA do I put everything in RA?
I do also have a bond which I'm planning to add around 15% more to the payments to get that settled quicker?
Do a buy stock, share etc?


The only debt I have is my car and bond. I live on a very strict budget so putting away money is easy for me. It is just not growing as I think it should

Don't know if it will help but some goals:

1. Retirement Income - Covering all my expenses at that time
2. Sons Education and Jump Start (Currently getting a combined contribution of R1000 per month to a savings account, which we plan on giving him for his 18/21 bday as a gift) - Would like to get as much as possible 18 Years to go.
3. Debt Free
4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.
5. Would like some security maybe foreign investments as well as local.

Any advice would be welcomed.
 
Last edited:

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
 

CRE4MPIE

Resident Forum Troll
VIP Supporter
Rating - 100%
238   0   0
Joined
May 19, 2010
Messages
3,648
Reaction score
875
Points
3,435
Age
44
Location
From the Grassy Knoll !
So I've come to the point in my life, where I need to start thinking about investing for the future. I've noticed my older family members are living just to get buy also having to work well past 65.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

They only "Savings" and "Retirement" I have are in Nedbank and FNB Interest accounts/notice accounts.

We spent a large portion of our savings to settle down as our son was born in March. So our monthly expenses has settled and our budget stabilized. Looking to go for the more stable root now.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it? I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Would just like some personal experience replies instead of the google do this do that.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)
Do I put portions towards RA/Investments/TSFA do I put everything in RA?
I do also have a bond which I'm planning to add around 15% more to the payments to get that settled quicker?
Do a buy stock, share etc?


The only debt I have is my car and bond. I live on a very strict budget so putting away money is easy for me. It is just not growing as I think it should

Don't know if it will help but some goals:

1. Retirement Income - Covering all my expenses at that time
2. Sons Education and Jump Start (Currently getting a combined contribution of R1000 per month to a savings account, which we plan on giving him for his 18/21 bday as a gift) - Would like to get as much as possible 18 Years to go.
3. Debt Free
4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.
5. Would like some security maybe foreign investments as well as local.

Any advice would be welcomed.
Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
 

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
😁

That's where discipline comes in.

I know all about it too - same boat
 

Anzarrah

Junior Member
Rating - 100%
13   0   0
Joined
Jun 29, 2016
Messages
321
Reaction score
55
Points
785
Location
Pretoria
Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I just don't know which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
 
Last edited:

Anzarrah

Junior Member
Rating - 100%
13   0   0
Joined
Jun 29, 2016
Messages
321
Reaction score
55
Points
785
Location
Pretoria
Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
We are super strict budgeting keeping with it. We have daily budgets , monthly budgets. We eat out maybe once a month( we cut this out a lot, more for the health benefit). We buy in bulk save were we can. CUD has completely stopped since son was born so that problem has been sorted.

Now we just need to save "better/smarter"

Thank you for the site, will be reading through it.
 

CRE4MPIE

Resident Forum Troll
VIP Supporter
Rating - 100%
238   0   0
Joined
May 19, 2010
Messages
3,648
Reaction score
875
Points
3,435
Age
44
Location
From the Grassy Knoll !
We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I'm just which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
Interest is essentially money you're just throwing away ... so get rid of that first.

FNB has a great account called a Money Maximizer if you're lazy and don't want any risk - 7.1% p/a return and the moneys available immediately. Minimum balance applies etc. R500k will yield about R3k pm on that which will increase slightly every month due to the re-investment (unless you cash that out )

There's a few good articles on Mr. Money Moustache - especially on the "Start Here " button on how to save , invest and re-invest to ensure you can retire within the first 10 - 15 years of working.

If only I knew about this when I was 25 ...
 

pXius

Sir Cud.
VIP Supporter
Rating - 100%
83   0   0
Joined
Apr 22, 2010
Messages
1,141
Reaction score
497
Points
2,355
Location
Hartbeespoort / Randburg
We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I'm just which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
Your interest rate on your house will almost always be more than the interest rate on an investment.
Depending on your capital.

So to make your decision easy whip up an excel sheet with the following,

1 section with your bond, outstanding bond value and it's monthly installment based off it's interest rate.

A second section where you start to invest say R5k a month that calculates earnings(interest received) monthly based off the avg investment interest rate for the product you're looking at, adding a new R5k every month like you plan to do.

Now run it over 5-10 years and see what your financial standing is.

Now do the same but add the R5k to your bond payments instead and compare.
 

Harbinger2000

New Member
Rating - 100%
4   0   0
Joined
Oct 4, 2019
Messages
27
Reaction score
3
Points
85
Age
37
In support of @[U]pXius[/U] 's comment above, try checking out the loan/homeloan calculators on the banks' website.

I know FNB's calculator allows you input expected additional monthly amounts showing the difference between just making the expected payment without additional payment vs adding additional payments. It can be rather eye opening on the difference a small additional payment makes over the course of a 20 year loan.

Any additional payment made earlier on in the loan has an effect on the loan interest over the entire loan period. Each monthly payment is used to first address the loan interest for that month and the remainder after subtracting the interest is then applied against borrowed amount. For example, my very first month's payment on my loan had a bit less than 20% (if I recall correctly) of the actual payment detracted from the borrowed amount.

Loans over time really eat up cash, a home loan over 20 years have you pay back more than double the borrowed amount if I recall correctly. Car loans interest over 5 years I think is usually 50% or more of the burrowed amount, speaking on possible correction as it has been a while since I did the numbers.

I would also recommend trying to see a broker for advise, they just know better what is currently going on.

For possible RA's perhaps check out Allan Gray which has 2 different funds you could pay into, with I believe have a monthly payment option of R500.

Good luck
 

LouisABC

Junior Member
Rating - 100%
55   0   0
Joined
Jan 22, 2016
Messages
505
Reaction score
96
Points
1,085
Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
Not really the best advise throwing all your cash into a depreciating "asset". Just to clear off debt and get rid of the interest. In the short term, yes you will save some money, but have you ever considered what would the impact be on the long term? Penny wise and pound foolish!

Home loan is a good way to save over interest, but should not be the be all and end all where all spare cash go, as you won't be diversified and a home is not very liquid and various over factors means it aint the best investment vehicle.

Should rather aim to preserve the capital and look at areas on how you can obtain a net return (after tax), which would exceed the cost of capital. Also, you are throwing away liquidity and not getting any "return", only saving cost. If the interest on the car bugs you, sell it and buy something you can afford cash.

Interest is essentially money you're just throwing away ... so get rid of that first.

FNB has a great account called a Money Maximizer if you're lazy and don't want any risk - 7.1% p/a return and the moneys available immediately. Minimum balance applies etc. R500k will yield about R3k pm on that which will increase slightly every month due to the re-investment (unless you cash that out )

There's a few good articles on Mr. Money Moustache - especially on the "Start Here " button on how to save , invest and re-invest to ensure you can retire within the first 10 - 15 years of working.

If only I knew about this when I was 25 ...
Mr Money Moustache (I did not read any of the "advise"), would look at basic principles, i.e. cost savings, disposable income, use Financial Advisor jargon to say save x% of your income, to ensure financial security, but it remains basic and won't factor in everything, especially which would be beneficial in your country of residence.

Most people are recommended a financial adviser, yet to afraid to go there, because of fees (which by the way can be negotiated), however do they even understand the following, the main reason for a financial advisor (not all are great and are only their for comms, so you need to understand this as well):
* Tax implications (unit trusts, trading (shares vs forex, capital vs income), RAs, Pensions, TFSA, section 12J);
* Financial immigration options;
* Disposable income;
* Cost of capital vs return on capital;
* Liquidity of investments;
* Research as much possible as you can, and expand your knowledge and give yourself that financial power, this would serve you great in the long term!
etc

What you are asking, is not something that can be answered in a quick thread over a forum. also, a lot of people will have opinions, as this is what they believe and what they have been told is best, yet, is it really?

Some basics will be beneficial, but to really obtain long term growth, the answer to your need will be more complex, just make sure of the following:
1. Live within your means (budget, compare with actual and understand your disposable income);
2. Get those tax benefits and optimal returns;
3. Don't over in-debt yourself;
4. Leverage your capital from your access bond on your home loan;
5. Don't believe in the braai talk of promised return of 30% in 6 months, as the guy, know a guy, whom invested and now living the high life.

Good luck
 

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
Not really the best advise throwing all your cash into a depreciating "asset". Just to clear off debt and get rid of the interest. In the short term, yes you will save some money, but have you ever considered what would the impact be on the long term? Penny wise and pound foolish!

Home loan is a good way to save over interest, but should not be the be all and end all where all spare cash go, as you won't be diversified and a home is not very liquid and various over factors means it aint the best investment vehicle.

Should rather aim to preserve the capital and look at areas on how you can obtain a net return (after tax), which would exceed the cost of capital. Also, you are throwing away liquidity and not getting any "return", only saving cost. If the interest on the car bugs you, sell it and buy something you can afford cash.



Mr Money Moustache (I did not read any of the "advise"), would look at basic principles, i.e. cost savings, disposable income, use Financial Advisor jargon to say save x% of your income, to ensure financial security, but it remains basic and won't factor in everything, especially which would be beneficial in your country of residence.

Most people are recommended a financial adviser, yet to afraid to go there, because of fees (which by the way can be negotiated), however do they even understand the following, the main reason for a financial advisor (not all are great and are only their for comms, so you need to understand this as well):
* Tax implications (unit trusts, trading (shares vs forex, capital vs income), RAs, Pensions, TFSA, section 12J);
* Financial immigration options;
* Disposable income;
* Cost of capital vs return on capital;
* Liquidity of investments;
* Research as much possible as you can, and expand your knowledge and give yourself that financial power, this would serve you great in the long term!
etc

What you are asking, is not something that can be answered in a quick thread over a forum. also, a lot of people will have opinions, as this is what they believe and what they have been told is best, yet, is it really?

Some basics will be beneficial, but to really obtain long term growth, the answer to your need will be more complex, just make sure of the following:
1. Live within your means (budget, compare with actual and understand your disposable income);
2. Get those tax benefits and optimal returns;
3. Don't over in-debt yourself;
4. Leverage your capital from your access bond on your home loan;
5. Don't believe in the braai talk of promised return of 30% in 6 months, as the guy, know a guy, whom invested and now living the high life.

Good luck
If you say so.

My interest saving of just under 2mil on my bond over the term says otherwise.

Each to their own I guess. Sure makes me feel better not having had to have paid all that over in what amounts to as a loss.

Sure makes me feel even better having the agility to take those funds and divert them to a more feasible investment avenue.
 

LouisABC

Junior Member
Rating - 100%
55   0   0
Joined
Jan 22, 2016
Messages
505
Reaction score
96
Points
1,085
If you say so.

My interest saving of just under 2mil on my bond over the term says otherwise.

Each to their own I guess. Sure makes me feel better not having had to have paid all that over in what amounts to as a loss.

Sure makes me feel even better having the agility to take those funds and divert them to a more feasible investment avenue.
Look, you are comfortable with that, because that is what you can calculate and understand. It's a simple calculation the saving, but nothing scares people like uncertainty. Also, investments is complex ,with a lot of stuff to take into consideration, so it is not for everyone. I am just wondering, you now have the agility to take those funds you saved on interest and divert them to a more feasible investment, which might be?

Look, paying off a car quicker hardly has any financial freedom prospects, a bond, yeah, you will save interest, but what happens after that, once paid off, where do you go? Also will the return on your house exceed that of over capital investment options? How did you diversify and also what tax benefits you got from your house? In SA, we get taxed heavily, be it directly or indirectly.

The access bond can be used nicely to your benefit, to save interest, direct capital investments and obtain tax benefits. Leaving all the cash there is like leaving it all in a fixed deposit, you have certain returns, with low risk, but has a lot of short falls.
 

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
Look, you are comfortable with that, because that is what you can calculate and understand. It's a simple calculation the saving, but nothing scares people like uncertainty. Also, investments is complex ,with a lot of stuff to take into consideration, so it is not for everyone. I am just wondering, you now have the agility to take those funds you saved on interest and divert them to a more feasible investment, which might be?

Look, paying off a car quicker hardly has any financial freedom prospects, a bond, yeah, you will save interest, but what happens after that, once paid off, where do you go? Also will the return on your house exceed that of over capital investment options? How did you diversify and also what tax benefits you got from your house? In SA, we get taxed heavily, be it directly or indirectly.

The access bond can be used nicely to your benefit, to save interest, direct capital investments and obtain tax benefits. Leaving all the cash there is like leaving it all in a fixed deposit, you have certain returns, with low risk, but has a lot of short falls.
It's really quite simple to understand, and you don't really have to apply much of the garbage you're ranting on about.



As to what avenues I currently have to divert my funds, a whole lot more options become available once ones debt is settled. One of the largest debts a person has in their lifetime is a mortgage.

It's really, really that simple. Investing money when one has debt is borderline silly, especially a debt as large as a mortgage.

The numbers speak for themselves. My numbers certainly do and it works for me.

Like I said though, each to their own and if your black magic fukkery formula is working for you - then kudos to you. There isn't a one size fit all solution to it I guess.

OP - best you perhaps speak to a financial advisor.
 
Last edited:

LouisABC

Junior Member
Rating - 100%
55   0   0
Joined
Jan 22, 2016
Messages
505
Reaction score
96
Points
1,085
Sucks savings 10% on a mortgage, when I can get returns in diversified markets, some in the US, gimming returns over 15% (investment picking is required, to understand underlying assets, industries involved, customer footprint and also who on earth Trump will be going to war with next).

So ya, paying a home loan faster, to save 10% on an "asset" growing at a measly 3-5% in the last few years(check fnb research if you want), not factoring in any maintenance, insurance, liquidity, diversification, etc, sounds like great advise.

So if all the various stuff I am ranting about is garbage, you still have a lot to learn, as tax, RA, tfsa, section 12J, unit trusts, shares, tax havens, are all those wonderful other avenues you will need to explore.

Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
 

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
Sucks savings 10% on a mortgage, when I can get returns in diversified markets, some in the US, gimming returns over 15% (investment picking is required, to understand underlying assets, industries involved, customer footprint and also who on earth Trump will be going to war with next).

So ya, paying a home loan faster, to save 10% on an "asset" growing at a measly 3-5% in the last few years(check fnb research if you want), not factoring in any maintenance, insurance, liquidity, diversification, etc, sounds like great advise.

So if all the various stuff I am ranting about is garbage, you still have a lot to learn, as tax, RA, tfsa, section 12J, unit trusts, shares, tax havens, are all those wonderful other avenues you will need to explore.

Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
I think you missed the point entirely where I mentioned I SAVED just under 2mil in interest on the term of my home loan . A tangible saving.


Here - let me dumb it down for you a little

Had I carried on the trajectory of paying just my monthly repayment for the 20 year period of the home loan - after 20 years I would have paid 2 million rands more in interest.

Due to the fact that I chose not to do that - in the long term I have saved R2 million that would have otherwise gone to the bank.

Due to the fact that I no longer have crazy monthly repayments on my home loan of which a large portion of which would have been the interest alone each month, I can look at taking that same money and investing it in whichever avenue I feel would give me best returns on my investment.

Ergo . . . I have saved both money and time settling my bond sooner. Investments and time go hand in hand, therefore I now have that saved time for my investments to grow exponentially.

I'm guessing you still don't see the logic - but that's fine. I do. And that's all that matters.

And OP - the only sense the guy makes is . . . it's best you get professional advice and not schmucks dispensing advice on an internet forum.
 

Recho

Cannon Fodder
Rating - 100%
8   0   0
Joined
Nov 12, 2014
Messages
458
Reaction score
232
Points
1,015
Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
That is about the only worthwhile (and very true) thing that Louis said. These types of threads are always dangerous as no-one without the proper FAIS Act qualifications should be dispensing financial advice. Should the op follow any of it and it doesn't work out he can sue the person that dispensed the advice for damages incurred.

I work in the industry, I can either dispense advice or put you in contact with people that can provide you with the necessary advice. In short it will be about debt, and then retirement assets and then income generating assets, but it is all about the details.
 

LouisABC

Junior Member
Rating - 100%
55   0   0
Joined
Jan 22, 2016
Messages
505
Reaction score
96
Points
1,085
So glad
I think you missed the point entirely where I mentioned I SAVED just under 2mil in interest on the term of my home loan . A tangible saving.


Here - let me dumb it down for you a little

Had I carried on the trajectory of paying just my monthly repayment for the 20 year period of the home loan - after 20 years I would have paid 2 million rands more in interest.

Due to the fact that I chose not to do that - in the long term I have saved R2 million that would have otherwise gone to the bank.

Due to the fact that I no longer have crazy monthly repayments on my home loan of which a large portion of which would have been the interest alone each month, I can look at taking that same money and investing it in whichever avenue I feel would give me best returns on my investment.

Ergo . . . I have saved both money and time settling my bond sooner. Investments and time go hand in hand, therefore I now have that saved time for my investments to grow exponentially.

I'm guessing you still don't see the logic - but that's fine. I do. And that's all that matters.

And OP - the only sense the guy makes is . . . it's best you get professional advice and not schmucks dispensing advice on an internet forum.

Yeah yeah, we get it, the bank gave you the number as per the amortization schedule or you googled some financial calculator and filled in the basics to get a number. Do you even know how to calculate it?

So glad you saved the R2m, you have noted that a few times. You still haven't noted where you want to go with all this excess cash now, seeing that the bond is paid?

Look, fully understand why you did it, as to save interest and the safest option for those that want certainty and don't understand the complex world of economics, financial markets, shares etc, however, was this the best option, taking into account the lack of tax benefits and diversified investment vehicles? I don't think that was even a consideration.

PS - There is times in the market when you need to hold onto cash and times to be invested, hence an access bond on a mortgage loan can be utilized in a very effective manner, when this is applicable.

That is about the only worthwhile (and very true) thing that Louis said. These types of threads are always dangerous as no-one without the proper FAIS Act qualifications should be dispensing financial advice. Should the op follow any of it and it doesn't work out he can sue the person that dispensed the advice for damages incurred.

I work in the industry, I can either dispense advice or put you in contact with people that can provide you with the necessary advice. In short it will be about debt, and then retirement assets and then income generating assets, but it is all about the details.

And as for a financial adviser, don't think they are all knowing, in the end, most is just some sales person, with basic qualifications, selling predefined products form their institutions. Most doesn't even understand the basic underlying investments or the assets thereof. The only real benefit of a financial adviser, is to give you the options of the various products. In the end, it's a sales person chasing commissions, that's why the life insurance and income protection is the be all and end all for financial freedom. CFA is the actual guy doing all the work and creating wealth for you.

Look, what do I know, at least my diversified portfolio is showing health real US dollar returns (yeah, I measure my portfolio against a 1st world economy), I have liquidity and can financially and physically immigrate, without having a concern of assets being stuck in one place, apart from my house, but that is a small chunk of the portfolio.

Here's some good reading as a start for the OP:




Most of the local asset managers have insightful reading material, which is a good starting point.

And a reminder, fees can be negotiated with a financial adviser.
 

erosennin1111

Well-Known member
Rating - 100%
14   0   0
Joined
Oct 17, 2010
Messages
124
Reaction score
6
Points
1,285
Location
Cape Town
I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Okay so lets start here! All of the above companies are fund managers and do the same thing except for Easy Equities.
Easy Equities is a nice platform to buy shares (shares, equities and stocks are synonyms). This means you need to take responsibility for your own choices as far as investing. To avoid all that you go to a fund manager. They create a big old fund with their choice of shares/property equities/bonds/currency... you just need to make contributions to the fund.

A financial adviser helps you to choose which fund. The problem with a financial adviser is that once you have made your fund choice they will take fees from your investment. They charge two types of fee:

Initial: This a percentage for every contribution made to your fund, if you pay R5000 monthly they will take a percentage of each R5000 paid
Ongoing: This is an ongoing monthly percentage of your investment's worth

Your adviser will either charge one type or both.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

You get three types of investments with a fund manager-

Local Unit Trust:
The default investment that allows you to invest as much money as you want for as long as you want. You're able to withdraw your money from this product at any time.

Tax Free Investment:
An investment that only allows you to invest R33000 per tax year, you can do this for about 15 years before you reach the max allowed amount of R500 000. If the amount you invested grows to R2 000 000 that entire growth of R1 500 000 is tax free.

This product is considered a long term investment because if you withdraw from the investment it takes from your lifetime limit. If you add R33 000 in the 2019 tax year and withdraw that R33 000 in that same year, you will now be stuck with a lifetime limit of R466 000.

Retirement Annuity:
You can contribute as much money to this product as you want but you can only withdraw the money at the age of 55 or older. When you do retire out of a retirement annuity you can only take a maximum of one third of the full amount, the rest of the money needs to be put into a Living Annuity. The benefit of a retirement annuity is the tax rebates, what does that mean?

You are taxed by SARS according to the following table: SARS personal income tax table
If you earn R300 000 and contribute R50 000 to your retirement annuity, SARS will tax you as though you only earned R250 000 for that tax year.

Niche Products:
Endowments, Preservation Pension funds, Preservation Provident funds and Living Annuities. I don't really want to talk about these but Pension and Provident funds are investments created by your work for you as an employee. The equivalent of a pension or provident fund for private individuals is a retirement annuity.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it?

See my info on Financial advisers above.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)

You can run a debit order, by most fund managers the minimum for the debit order is R500. These debit orders are not compulsory and you're permitted to cancel at any time. You can also make lump sum contributions at your own discretion.
You can also split your contribution to different funds within a single unit trust/tax free investment/retirement annuity.

Do I put portions towards RA/Investments/TSFA do I put everything in RA?

See what a retirement annuity entails above, I'd suggest using up your tax free allowance. The tax free only allows R33 000 per year, if you skip your 2019 contributions you cannot make a R66 000 contribution the following year.

Do a buy stock, share etc?

Not if you do not know what you're doing, it's much simpler to leave your money with a fund manager.

HOW TO CHOOSE A FUND? This is the most important question you need answered:

A fund is basically made up of these assets: Equities, property equities, bonds and money.
The above list is in order of most volatile to least volatile.
Volatile assets generate larger returns in the long term (5 or more years) whilst the least volatile assets generate a fairly consistent interest rate.
When choosing a fund you can either choose to go into an equities only fund, safe assets only fund or a combination of both.

4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.

For short term savings you're going to want to go into safer funds that consist mostly of bonds and money.
For the long term you're going to want to go into an equity only fund, do this for your tax free investment.

1. Retirement Income - Covering all my expenses at that time

Interest bearing funds generate about 7 to 8 percent interest rate annually, you need R8 600 000 to generate R602 000 interest annually.
That works out to about R50 000 a month.
BUT you also need to take inflation into account, minus 5 percent from the performance of your fund.

5. Would like some security maybe foreign investments as well as local.

Fund managers offer direct offshore investments (where you invest in dollars, you need to send dollars to the fund manager to invest) and feeder funds (these are also invested offshore but allow you to invest in Rands).
 
Last edited:

Sam_i_am

Well-Known member
Rating - 100%
99   0   0
Joined
Apr 24, 2010
Messages
390
Reaction score
11
Points
1,385
Location
Johannesburg
A lot of advice on saving money above, and all valid. I've pretty much paid off my bond, and leave just a tiny balance to keep it open, in case I need to pull the cash out for an emergency or big investment elsewhere. My cars also paid off about 4 years ago and haven't replaced them and don't intend to. The feeling of not having to pay for a car and homeloan every month is so liberating and the extra cashflow can be used to build up your savings or fund those nice to haves.

But one point I'd also like to add is that saving alone can only go so far. You'll reach a point where if you want to save more you will just need to earn more, be it from a better job or from investments or side hustle. Therefore you will always need to push yourself and constantly learn and reinvest in yourself
 

Qui_Illustrati

VIP
VIP Supporter
Rating - 100%
149   0   0
Joined
Sep 2, 2013
Messages
1,929
Reaction score
561
Points
2,515
Location
Cape Town
So glad



Yeah yeah, we get it, the bank gave you the number as per the amortization schedule or you googled some financial calculator and filled in the basics to get a number. Do you even know how to calculate it?

So glad you saved the R2m, you have noted that a few times. You still haven't noted where you want to go with all this excess cash now, seeing that the bond is paid?

Look, fully understand why you did it, as to save interest and the safest option for those that want certainty and don't understand the complex world of economics, financial markets, shares etc, however, was this the best option, taking into account the lack of tax benefits and diversified investment vehicles? I don't think that was even a consideration.

PS - There is times in the market when you need to hold onto cash and times to be invested, hence an access bond on a mortgage loan can be utilized in a very effective manner, when this is applicable.




And as for a financial adviser, don't think they are all knowing, in the end, most is just some sales person, with basic qualifications, selling predefined products form their institutions. Most doesn't even understand the basic underlying investments or the assets thereof. The only real benefit of a financial adviser, is to give you the options of the various products. In the end, it's a sales person chasing commissions, that's why the life insurance and income protection is the be all and end all for financial freedom. CFA is the actual guy doing all the work and creating wealth for you.

Look, what do I know, at least my diversified portfolio is showing health real US dollar returns (yeah, I measure my portfolio against a 1st world economy), I have liquidity and can financially and physically immigrate, without having a concern of assets being stuck in one place, apart from my house, but that is a small chunk of the portfolio.

Here's some good reading as a start for the OP:




Most of the local asset managers have insightful reading material, which is a good starting point.

And a reminder, fees can be negotiated with a financial adviser.

Sure thing bud. Sure thing 😂
 

Top Donors

$301.00
$200.00
$165.00
$120.00
Top