Investing for income

[dakeyras]

There is an old Chinese proverb 'The best time to plant a tree is 20 years ago. The second best time is today'.

It is never too late to start, and even R15000 is good for a start. As you pointed out you will be adding surplus cash to the amount. If you stick to that then you will be surprised by the amount you can accumulate.

Like others have said, get rid of your debt first. You pay more interest on debt than you will ever be able to get on a investment.

You options regarding investments is many.

EDIT: Nevermind, just saw you mentioned risk-free.

[supersunbird]

Don't think we dont want you to safe, we'd love you to safe.

Its just that you cannot start withdrawing the money now. One needs to grow the "capital amount", as they call it. You have to grow it for around 10 years then you will be able to start taking income out of it, and not everything, because you need it to grow more still.

And if you get a 6% interest rate, official inflation is 6.3% and real inflation is more. Your money will loose purchasing power slowly. You need to invest in some kind of asset class that beats that. Retail bonds barely beat it at around 8%. Shares are historically able to give you better than any other asset class and will give you the best growth over 10 years if you reinvest the income you get from dividends.

Disclaimer: I'm not a financial adviser. This is just my opinion and I'm not liable for any outcome based on my opinion.

[Dolby]

Inflation is a sort of compounding interest, except you lose value. So if you assume inflation of 6 % compounded p/a, you'd get (1-0.06)^n after n years. So after 3 years, a future value of R100 has a present value of R83

Thanks!

[Greg C]

First off I am a professional and I hope that the following will not be offensive in anyway.

I commend you for all the honesty,but here is the raw facts

1)on your information,the interest payable on R15000 is 6% currently if you are lucky x 1/12 = R75 (No interest on interest reinvestment because you are not reinvesting in anything,you are hoping by the fund paying out more you will save more,which is a crude Human flaw. When people earn more that spend more,where as the idea is to earn more,and live at the same level accumulating and reinvesting savings

2)What is an Income based investment account?
If you would like to start saving and be comfortable at the end of retirement and as we say in the business, live at your current lifestyle the amount required,will adjust for inflation,for 25 years(as you have 25 years to retirement age) and we will bring that back to an amount you require to put away per month to achieve this comfortability.

It is next to impossible to assume anything as, I dont know what you earn per years, Do you have children,Do you currently have debt,ie bond car,What are your monthly expenses.

But lets try

Saving R1000 rand,Having it reinvested ontop of itself ,NEVER withdrawing until date of retirement(assuming this is just an interest account,nothing to do with pension fund) 25 years of saving R1000 per month at 6% interest

Future value = R 692993.96
A nice simple rule (general) is to say.The amount you earn per year x 3 (gross annual) is the amount you will need for comfortability

Hope this helps and i wasnt offensive.Just trying to help

[marco]

To make it simple. Just put your money on the JSE via a broker. Then choose 2 shares that are well diversified. They do about 60% PA and mostly do not follow the trend. They just go up and up.
I have been making a living off these 2 for a long time now and they are the most steady stocks on the JSE.
CML - Coronation Fund Managers. Well diversified.
AVI - Food manufactures. When all else falls, this will go up and up.
These 2 stocks will give you a steady income.
I have been trading stocks for 15 years and now have settled on the above 2 and no more trading.

[^^vampire^^]

To make it simple. Just put your money on the JSE via a broker. Then choose 2 shares that are well diversified. They do about 60% PA and mostly do not follow the trend. They just go up and up.
I have been making a living off these 2 for a long time now and they are the most steady stocks on the JSE.
CML - Coronation Fund Managers. Well diversified.
AVI - Food manufactures. When all else falls, this will go up and up.
These 2 stocks will give you a steady income.
I have been trading stocks for 15 years and now have settled on the above 2 and no more trading.

What is your average yearly return with these 2 stocks?

[SukkaFoo]

I went to a course a while ago presented by a guy named Charles Hattingh, he is a legend in the CA community (failed board 1 the first attempt and came first the second time or something along those lines). Anyway, Charles is probably in his late 60's, and he tells the story of how he earned a bonus of R10k just out of articles, and its obviously gone now. He presents the following 3 scenarios,

1) He had invested the money in cash and earned a 10% return over the 45 years
2) He had invested it in the JSE and simply earned what the market grew by over the 45 years (18%) and reinvested the dividends;
3) He had managed to outperform the market by 2 percentage points and reinvested

the results are as follows:

1) R700k
2) R17.2m
3) R36.6m

He pretty much advocates just investing in any of 4 or 5 shares of the top 40 and leaving things be. Compound interest is unbelievable.

[supersunbird]

I went to a course a while ago presented by a guy named Charles Hattingh, he is a legend in the CA community (failed board 1 the first attempt and came first the second time or something along those lines). Anyway, Charles is probably in his late 60's, and he tells the story of how he earned a bonus of R10k just out of articles, and its obviously gone now. He presents the following 3 scenarios,

1) He had invested the money in cash and earned a 10% return over the 45 years
2) He had invested it in the JSE and simply earned what the market grew by over the 45 years (18%) and reinvested the dividends;
3) He had managed to outperform the market by 2 percentage points and reinvested

the results are as follows:

1) R700k
2) R17.2m
3) R36.6m

He pretty much advocates just investing in any of 4 or 5 shares of the top 40 and leaving things be. Compound interest is unbelievable.

And that why I went with Satrix Divi and Rafi... the companies targeted have good dividends (and in Rafis case other things that will give good dividends in the future as well) and those good returns are being reinvested. Its not perfect but nothing is...

[alf101]

To make it simple. Just put your money on the JSE via a broker. Then choose 2 shares that are well diversified. They do about 60% PA and mostly do not follow the trend. They just go up and up.
I have been making a living off these 2 for a long time now and they are the most steady stocks on the JSE.
CML - Coronation Fund Managers. Well diversified.
AVI - Food manufactures. When all else falls, this will go up and up.
These 2 stocks will give you a steady income.
I have been trading stocks for 15 years and now have settled on the above 2 and no more trading.

Those horses have bolted.

Which stocks would you pick now?

[Freaksta]

Saving from a young age is very important! Granted if you want to take full advantage off investments you must take advantage of compound interest, you must re-invest what is earned. They say you can retire comfortably when you can live on the interest off your interest

That being said later on in life you will want a less risky investment but that will mean your growth will be less... Best to go see an adviser who can give you some unbiased feedback and built a bit of a plan around your current situation!

EDIT: only reason I posted was, because I was playing on my financial calculator, and with time on your side compounding FTW!

Interesting read :http://powerstocks.co.za/jse_safe.php

[akescpt]

Those horses have bolted.

Which stocks would you pick now?

what's happened to those stocks?

[alf101]

what's happened to those stocks?

Both have pretty much tripled in value since 2008 (when the crash happened).
A lot of shares have gone up since then.

They're unlikely to do similar in the next 4 years.

[HavocXphere]

I went to a course a while ago presented by a guy named Charles Hattingh

I think his wife wrote some of my acc text book.

A nice simple rule (general) is to say.The amount you earn per year x 3 (gross annual) is the amount you will need for comfortability

Not quite sure what you mean by that, but 3x certainly isn't enough for retirement. I'm guessing you mean in addition to the normal salary = comfortable?

I want to start with only R15000.00. I know its pathetic but its a start. I want that account to pay out all interrest on a monthly basis into my normal savings account.

15k is hardly pathetic. Paying out the interest is a bad idea though. To make progress you'll have to keep it in the investment for compound interest.

Also, forget the risk free part. Rather aim for well diversified.

[Moneywaster]

Sorry for taking so long to respond to all the questions and comments etc.
You guys have really given my great advice. The only dept I have currently is my creditcard and a loan. I figured that it is better to pay off the loan as its payment is R560.00 per month. That is a much better option than taking out R75.00 per month of interest earned... Thanks for pointing me in this direction.

I was asked what is my monthly income etc. I get so little that I don't really want to mention it here
I don't have car debt etc. Even my clothes are bought on my credit card, so the only dept I have is my credit card and a loan I had to take out for an emergency. My monthly income, after tax, pension, medical etc has allready been deducted is just over R12000.00 per month. I hope now you understand why I want to boost my monthly income with rent income

[UnUnOctium]

Sorry for taking so long to respond to all the questions and comments etc.
You guys have really given my great advice. The only dept I have currently is my creditcard and a loan. I figured that it is better to pay off the loan as its payment is R560.00 per month. That is a much better option than taking out R75.00 per month of interest earned... Thanks for pointing me in this direction.

I was asked what is my monthly income etc. I get so little that I don't really want to mention it here
I don't have car debt etc. Even my clothes are bought on my credit card, so the only dept I have is my credit card and a loan I had to take out for an emergency. My monthly income, after tax, pension, medical etc has allready been deducted is just over R12000.00 per month. I hope now you understand why I want to boost my monthly income with rent income

R12k nett is better than quite a few people. Most important advice I can give is to first align your priorities and goals.

If you want to live for the moment, don't bother with saving and just stay out of debt.

If, however, you want to be a bit more prudent or have some big plans for the future which require money, get out of debt, be prudent and save save save.

Lastly, if finances aren't actually a big part or too critical for your plans/goals, put it into some long-term investments. Coronation, Prudential can help you with those. Short term gains (i.e. 3-8 years) are best achieved with hedge funds though given how the big guys tend to avoid being aggressive.