Things to do with extra cash

[patrick]

So I was lucky enough to bring some money in from overseas when the rand was pretty weak, ended up being close to R250k. I was toying with the idea of buying shares, but in the end did the safe thing and put it in the bond. To see if I made the right choice, I opened a trial share account and put the equivalent in fake money into the shares as I'd wanted to...

It's been 2 month now and 2 volatile months according to what people are saying about the market. The bond calculator says I save +- R1300 each month in interest, so R2600 in total. My fake share account is R11500 up. It seems I may have made the wrong call!

[Prof.]

MBPwRD

[Cius]

@patrick. You would have to wait and see. 2 months is a very short time for shares as the markets can be very volatile. I would compare after 2-3 years only.

Personally my shares are whipping my bond rate. I put into Satrix Divi about 5 years ago and so far my rate of return is about 11% which is well above my home loan rate. Also keep in mind I invested the money at the end of 2007 (really bad timing for the 2008 crash) so I did not exactly time the market well there. Still, with dividends being almost guaranteed and decent capital appreciation I like the long term prospects of shares.

That being said I also just put my spare money in my bond mainly because its accessible in emergencies where shares may not be depending on market cycles. Also I hate the idea of debt and just want to get rid of it ASAP.

[roberth]

@patrick. You would have to wait and see. 2 months is a very short time for shares as the markets can be very volatile. I would compare after 2-3 years only.

Personally my shares are whipping my bond rate. I put into Satrix Divi about 5 years ago and so far my rate of return is about 11% which is well above my home loan rate. Also keep in mind I invested the money at the end of 2007 (really bad timing for the 2008 crash) so I did not exactly time the market well there. Still, with dividends being almost guaranteed and decent capital appreciation I like the long term prospects of shares.

That being said I also just put my spare money in my bond mainly because its accessible in emergencies where shares may not be depending on market cycles. Also I hate the idea of debt and just want to get rid of it ASAP.

I agree, 2 months is very short. I am facing a similar dilemma, I already have an equity portfolio but need to decide if I should sell shares to buy a car or finance the car and hope the shares perform better than the vehicle finance interest rate. I have returned over 20% p.a. for the last 3 years (since I started investing) but luck definitely played a role and just because I got 20% in the past, doesn't mean I can do it in the future...

[patrick]

In a year I expect my bond to be sorted, so I'll play the market with fake money until then, but with tennant issues and all the maintenance and upkeep, I don't think I'll invest in a second property. I'd love to do a market course somewhere, anyone know of somewhere good that doesn't charge an arm and a leg?

[delta66]

i don't think you can go wrong if you settle all debt first, if you have excess amount invest in a good top40 stock, vodacom(VOD) is a great buy opportunity at the moment.

[Dolby]

If you don't know anything about the market, get someone else to help or go through a broker.

I've got a 24.73% return over 3.5 years

[roberth]

In a year I expect my bond to be sorted, so I'll play the market with fake money until then, but with tennant issues and all the maintenance and upkeep, I don't think I'll invest in a second property. I'd love to do a market course somewhere, anyone know of somewhere good that doesn't charge an arm and a leg?

Don't pay for a course. The JSE sometimes offer free seminars to teach people how the market works and encourage them to get involved. Some stockbrokers (PSG and Std Bank for e.g. sometimes offer free courses for their clients). Phone a stockbroker and ask them if they offer courses if you open an account. Or just read up online. The guys here are helpful http://www.sharenet.co.za/ and there is plenty of info in their forum from people who have previously asked for help and been answered.
If somebody is trying to make a living teaching others how to trade, it means he makes more off you than he could off the market. The dudes employed by stockbrokers to help their clients are very knowledgeable and work as traders / advisers / are active in the market and the stockbroker pays their salary, so you get their help for free (if you're a client).

[pboy]

no matter how much debt you have, or if you want to cash out savings to buy a car hoping that the interest rates comparison may be in your favour---please note: THE BEST PLACE TO KEEP MONEY IS IN INVESTMENTS! regardless of your debt and interest rates forays..

and the trick is to start yesterday.
you will lose out hopelessly in the end: compound interest takes time and patience...the more it grows, the MORE it grows.. understand??
it will grown, but you must make sure that you do not expect it to grow overnight.. nor can it grow unrealisticall ( dont expect R1k a month to give you R50k at the end of the year..)

alot of people know the term compound interest, but fail to exploit it... once your interest starts earning interest..and you keep that growing.. in time that effect if going to mothball into something substantial!
start yesterday.
do not stop. keep going. regardless of your debt situation.
that R50k you may think you can withdraw and smash your debt.. could grow up around 3x as much with a conservative interest rate.. and all you would have done with it was.. spend R50k...

[Goliath]

@patrick. You would have to wait and see. 2 months is a very short time for shares as the markets can be very volatile. I would compare after 2-3 years only.

Personally my shares are whipping my bond rate. I put into Satrix Divi about 5 years ago and so far my rate of return is about 11% which is well above my home loan rate. Also keep in mind I invested the money at the end of 2007 (really bad timing for the 2008 crash) so I did not exactly time the market well there. Still, with dividends being almost guaranteed and decent capital appreciation I like the long term prospects of shares.

That being said I also just put my spare money in my bond mainly because its accessible in emergencies where shares may not be depending on market cycles. Also I hate the idea of debt and just want to get rid of it ASAP.

I agree with above! I personally paid off debt, then money I dont need in short term I placed in my FNB Investor account and buy shares for long term..

[Flidiot]

If you would like to try to do something with the cash, drop me a PM with your details - I can get a buddy of mine to contact you, he's a CFA

[Benster]

As a referece point, go and look at the Alsi graphs for the last 3 years and remember in 2009 we had the financial crisis and the stock market tanked. Over the past 3 years it has recovered and it seems relativly easy to make money. Be careful to confuse luck with skill. There are significant risks building up in the global economy, lead by the European debt crisis. If you took educated investment decisions and made money - very well done. My gut feel is you took a guess and got lucky.

Back in my varsity days I also opened a trading simulator account. It was right before the Asian crisis. I lost a lot of virtual money that year. But luckily it taught me to do proper research and intoduced me to the concept of personal risk appetite. If I was you I'd keep the money in my bond until there is more certainty regarding the possible European defaults.

This in no way consitutes financial advice. Please consult a professional adviser.

[patrick]

If you took educated investment decisions and made money - very well done. My gut feel is you took a guess and got lucky.

I don't consider myself a gambler, so the picks were made in the most educated way I could gather with my short term gained knowledge. At the start MTN was looking really cheap, bought at R135 a share which was a p/e of 12.something with analysts predicting really good things for the year, and they dividend yield being fantastic. I put most of my virtual cash there. Kumba had an even better p/e and a similar dividend. Put a chunk there, it was a great pic. Then I bought some virtual UUU. It was a lousy pick even though the numbers looked good. It dropped, then stayed down, then recovered a little. Sold for a tiny profit, was a good call as it dropped again. Put that money into astral foods. They dropped, but again, have a great dividend and I'm willing to wait that out.

Then when I put my next batch of cash into the bond, a stock I was watching coronation fund managers, had a minor collapse. I thought it was unprecedented, and the figures for their year were very positive, so I used that as an entry point and as predicted it shot up. They also have a good dividend, something I like as you can see.

This month more money went into the bond, and again I bought more virtual shares. My pick for this month was Vodacom. I'm expecting them to go up to, but not soon. I'm not planning to be a short term trader, but a long term investor. I have a feeling I'll be better at picking entry points than exit points but time will tell. At present, my bond payments have saved me +-R4000 while my virtual shares have made me R9000 at present after todays disastrous day on the market. Going forward with the rate cut, my savings will be lower. Still I don't plan on putting any money into shares until the bond is paid. All this is just a learning experience...

[Tman*]

Playing with fake money VS real money is 2 different worlds.

Generally with fake money there is no emotion involved.