/snip
I'm 100% in cash within my share portfolio,
[...] I have lost my conviction to manage it any further. The guys at PSG aren't proactive, meaning they will help but its a your choice to choose and contact them etc.
[...] Now I have lost my mojo and I don't see anything I would want to buy on the JSE. Sitting in cash earning a few % which the JSE also takes a piece of with their Trustee Fees (ridiculous).
My options are.
1. Hope and hold for a huge pull back and apply the cash to a TOP 40 oversold share.
2. Transfer cash to my existing Liberty Agile and get on with my life.
This reads a lot like "I want to actively manage my portfolio/be an active trader/speculate but it's stressing me out and requires some work I'm not willing to do." Have you considered just... not? No sarcasm here, genuinely. Have you considered setting an
investment plan, implementing it and then going on with your life with an annual rebalance and a news diet? I think it would make the world of a difference. Your current approach sounds like a headache.
I gave up on Coronation last month - they want me to fill in paperwork everytime I make changes.
I'm about 100% sure that:
1. The paperwork can be done electronically (I see someone who is with Coronation posted later that that's what they do)
2. If you ever saw an unauthorized change on your accounts you would DEMAND to see the paperwork that proves they got the instruction from you. These companies also have to consider the legal ramifications of letting changes be made to a portfolio without something in writing. I think it's fair and hardly that much of an inconvenience.
Here I am wondering why you guys are still pumping money into your RA's instead of taking your money offshore.
Sure the tax break is nice, but having guavamint dip its hand into your funds isn't.
What gives? What am I missing? (legit question)
Lots of answers already covered this but there are several reasons:
1. The tax break isn't just nice. It's substantial for a lot of people. It would be silly to give the government a
guaranteed portion of your income
today out of fear that they
might, maybe, possibly, want access to a portion of your investments
at some unspecified time in the future. Consider the time value of money. Tax optimization is an important part of investing because tax is an expense and expenses are the only thing we can control.
2. People who invest directly offshore often have either a)
offshore income already so they don't have to worry about exchange costs (see Patrick of investor challenge whose blog I love but I take what applies to me and leave the things that are clearly for someone with a different income reality) or b) large enough incomes that they can regularly invest offshore even from rands cost effectively (see most of the super rich peeps on this forum). For the average middle class South African, it would take months if not years to accrue enough capital to send offshore and invest in a cost effective way (keeping in mind that the more you're converting, the better you can negotiate fees/transaction costs and shop around, get tighter spreads AND the lower your expenses once you get your capital to an offshore broker; think monthly/transaction fees being waved if you have certain account/transaction minimums).
Fees are the #1 thing you can control in investing (again) and so I find it bizarre that direct offshore investing is often touted so casually as if it isn't flipping expensive and largely impractical for most people who don't have that kind of cash pouring in in ZAR.
Are there exceptions, sure. But there's a reason people focus on the bird in hand rather than the two in the bush, so to speak. It's just more practical. Especially if they want to optimise their time in the market and not sit on cash while waiting to get to the dollar minimums required.
TLDR: Direct offshore exposure comes at a serious cost if you don't have large swathes of capital regularly available to convert OR aren't already earning in foreign currency and that can be another reason it's not most people's first port of call.
3
. I don't understand why it has to be either/or. Why not both? Especially if you're in the position to do the latter.
The point is that while our country's economy regresses more and more, I see the same people (aware and knowledgeable in their own right)
putting faith in government structured investment vehicles because government dangles a carrot on a stick.
@zerocool2009 did mention that it might be because of the penalties due to stopping contributions, which does make sense as well.
I obviously don't want this to happen,
but every now and then you see articles about them (government) marching forward with their plans.
Quite a bold assumption in that first bolded statement.
I agree that you shouldn't let the tax tail wag the investment dog, but not everyone cares to be 100% offshore equities. It's possible to use Reg 28 to do whatever your investment plan already proposes. For instance, if your asset allocation already includes listed property, do that in your Reg 28 wrapper and get the double tax benefit as a bonus--with compounding! If you were planning on having cash or bonds to fit your risk tolerance to smooth the ride so you don't freak out during crashes (more people need this than would care to admit it), voila do it in your Reg 28 product. If you have discretionary investments (direct or indirect offshore) and TFSA (same) then that 25% nonequity portion of the Reg 28 fund (and 70% local) will likely be even smaller in the overall allocation. I just don't see how you can beat an upfront 30-45% return via the refund that can be reinvested any way (and anywhere) you choose. Especially if you have no immediate plans to emigrate.
The second statement about "articles" is why I recommend people go on regular news diets. I'm not saying "prescribed assets" won't happen (as an aside, Reg28 Is already prescription). But I am saying that articles that give you "updates" about how "close" it is get more clicks than articles that outline how it would be completely counter to the trend of retirement reform in the industry over the last 30 years.
Nobody is writing the latter because nobody would read it. It's not sensational enough to point out how Reg 28 has progressively made retirement fund requirements more lax and diversified than they were under the previous regime. Nobody wants to read that we're progressing, that offshore allocations have been steadily rising in retirement funds, that things have been getting
better in retirement fund rules and oversight. Nobody wants to read the articles about crackdowns in the industry to protect investor rights. That just won't generate the clicks. But every time someone from the ANC sneezes they get asked about prescription and Eskom being bailed out by pension funds and so on. So obviously we get a lot of quotes about it and then we get more clickbait articles and then that prompts reporters to keep juicing the topic. It's such a predictable cycle at this point. Like I said, it may very well happen. But the news trend is hardly the thing I'd look to as an indication of its likelihood. It's a broken clock.
Hope that clears up some confusion since you said these were
legit questions and you were
genuinely wondering. That doesn't mean obviously that you have to change your strategy. Keep doing what makes sense for your personal goals and your longterm investment plan. But understand that what works in your personal circumstances (such as refusing a huge upfront return/cost saving and the opportunity cost of that refusal) may not work for others, especially individuals who make too little for direct offshore to be viable upfront or make too much to ignore a third to almost half of their income over a certain threshold simply disappearing into the thin air that is otherwise known as tax.
