Best 5 year investment

[Acajou]

Hi guys

I'm looking to save up to buy my next car cash (or at least have enough money to settle the finance immediately).

What would be a good vehicle to do this? It needs to be something I can contribute a variable amount to monthly, so fixed deposits and such are out. I'd also need to cash it out after 5 years so TFSA's and things with tax implications (advice on what to avoid here would be appreciated) are also out.

Let's assume I have no debt, I have a TFSA, I'm contributing to an RA, and I have a sufficient emergency fund in a 32 day account earning about inflation+change.

What would be a good place to park around R1k a month that would earn decent (~10%) interest/growth?

TIA

 

[Priapus]

R1k a month? What sort of car are you after? Even with healthy interest rates, you'll need to look for a car under or around 100k at that rate.

 

[falcon786]

If you'd put r1k per month into bitcoin in the last 5 years you'd probably have more than enough for a lambo or 2.

 

[Acajou]

If you'd put r1k per month into bitcoin in the last 5 years you'd probably have more than enough for a lambo or 2.

I'm considering putting a few hundred bucks aside to dabble with that, but it would be nice to have something a bit more stable as well.

R1k a month? What sort of car are you after? Even with healthy interest rates, you'll need to look for a car under or around 100k at that rate.

R1k is what I can afford now. Obviously that will increase as my salary increases and I have more disposable income. I also have a car that I can sell to provide the bulk of the funds.

 

[Hamster]

/inb4 Bitcoin

 

[Priapus]

R1k is what I can afford now. Obviously that will increase as my salary increases and I have more disposable income. I also have a car that I can sell to provide the bulk of the funds.

My comment wasn't to be disrespectful. My point was with R1k, you might as well just stick it into a Flexi deposit account. What's your end goal 100k ?
Secondly, forget about Bitcoin - a few hundred bucks will not get you any traction there. The fees on BTC are insane - like $40 per transaction.

 

[fish_man]

/inb4 Bitcoin

Too late

 

[Hamster]

1. Add the money to your 32 day account and get guaranteed growth

2. Go with an ETF. Higher risk but you do have 5 years. Over that time it might get you more than the 32 day will

3. Shares...if you pick right you can be up 40% by end 2018 (or pick another Steinhoff and lose it all in a day)

Personally I'd go 90% ETF and 10% crypto. You may lose out but chances are you'll gain quite a bit over the next 5 years. And if you cash out after 5 years it's only CGT you have to worry about.

 

[Hamster]

Too late

G'dammit

 

[Muttley]

My question is, why are you saving up to purchase something that's just going to depreciate?

Unless you need the vehicle cos yours is farked, I wouldn't waste my money - too many folk in SA get themselves into trouble by purchasing such items cos they need to have the right image/street cred.

 

[envo]

My question is, why are you saving up to purchase something that's just going to depreciate?

Unless you need the vehicle cos yours is farked, I wouldn't waste my money - too many folk in SA get themselves into trouble by purchasing such items cos they need to have the right image/street cred.

Vehicles, depending on the make/model you buy, tend to depreciate around 10-15% a year. The first year has the biggest depreciation, but it averages out over 5 years.

If he buys it cash, he can get a much better price on the vehicle as you have a better negotiating platform, whereas if he financed it, the dealership in question has to wait for the money to be paid out/subject to bank costs and fees etc.

He also has a trade-in, including the cash he would make the purchase with.

Over 5 years, the interest he will have to pay is 0%, whereas with a bank, it's a little bit more than that

So if he were to buy a 400k car, and trade-in with 80k vehicle he already owns. His repayment, if financed, is R447k over 60 months

No deposit, that jumps to R558k.

So he will save himself up to 158k in total by buying it outright over the 5 year period. If he were to then save that 158k over 5 years, not only would he have a vehicle that is still worth quite a bit, but he can even go ahead and get himself R500k car then... cash.

R0 monthly repayment (forgetting insurance) and R0 interest outweighs the depreciation he will "suffer" by a large margin.

On the flipside, if he were to save his money and decide not to buy a new car, he has that money saved...and not thrown in after a big interest payment. He also is not looking for immediate purchase, but is planning things out, so the whole comment of street cred/image is blown out of the water, just for the fact that he has a 5 year plan.

 

[supersunbird]

My question is, why are you saving up to purchase something that's just going to depreciate?

Unless you need the vehicle cos yours is farked, I wouldn't waste my money - too many folk in SA get themselves into trouble by purchasing such items cos they need to have the right image/street cred.

If you can prevent accidents, that's great.

The technology in car safety has jumped greatly, even in just 12 years. So a new car (there are exceptions) is often safer than old car. And SA has a lot of crashes and road deaths, so that is one valid consideration for a newer vehicle.

 

[Muttley]

My comment above is just a warning not to buy a car for the sake of impressing others like so many in SA do.

If it's for other reasons (safety/more space required etc) I'm all for it..

 

[Priapus]

My comment above is just a warning not to buy a car for the sake of impressing others like so many in SA do.

If it's for other reasons (safety/more space required etc) I'm all for it..

What about if you want that new car, for you. No real reasoning behind it?

 

[Muttley]

What about if you want that new car, for you. No real reasoning behind it?

Free world economy... go for it

 

[falcon786]

Vehicles, depending on the make/model you buy, tend to depreciate around 10-15% a year. The first year has the biggest depreciation, but it averages out over 5 years.

If he buys it cash, he can get a much better price on the vehicle as you have a better negotiating platform, whereas if he financed it, the dealership in question has to wait for the money to be paid out/subject to bank costs and fees etc.

He also has a trade-in, including the cash he would make the purchase with.

Over 5 years, the interest he will have to pay is 0%, whereas with a bank, it's a little bit more than that

So if he were to buy a 400k car, and trade-in with 80k vehicle he already owns. His repayment, if financed, is R447k over 60 months

No deposit, that jumps to R558k.

So he will save himself up to 158k in total by buying it outright over the 5 year period. If he were to then save that 158k over 5 years, not only would he have a vehicle that is still worth quite a bit, but he can even go ahead and get himself R500k car then... cash.

R0 monthly repayment (forgetting insurance) and R0 interest outweighs the depreciation he will "suffer" by a large margin.

On the flipside, if he were to save his money and decide not to buy a new car, he has that money saved...and not thrown in after a big interest payment. He also is not looking for immediate purchase, but is planning things out, so the whole comment of street cred/image is blown out of the water, just for the fact that he has a 5 year plan.

Agreed.That's why I buy my cars cash too,don't want to over pay or get myself into debt ever.

 

[Hamster]

My question is, why are you saving up to purchase something that's just going to depreciate?

I hate this super frugal mindset/trend that is doing the rounds these days. By this logic we should resort to only drinking water and eating maize products because nice food is a waste of money and so is an internet connection (read a book, stop wasting money on Netflix and DSTV)

What's the point of working and saving if you can't enjoy your money?


EDIT: Also, if you can save on the interest a new car will cost you why wouldn't you?

 

[Acajou]

Thanks for the replies guys.

I've been looking at crypto, but honestly it hurts my brain a bit and I don't really know if I have the free cash to be gambling. Also 40% fees? That's rough, probably won't be anything left after that.

ETF's seem like a decent idea. 5 years seems like it would be a decent amount of time to see higher growth than in a 32 day account. Does anybody have any suggestions? Some sort of Top 40 fund on EasyEquities?

 

[Hamster]

Thanks for the replies guys.

I've been looking at crypto, but honestly it hurts my brain a bit and I don't really know if I have the free cash to be gambling. Also 40% fees? That's rough, probably won't be anything left after that.

ETF's seem like a decent idea. 5 years seems like it would be a decent amount of time to see higher growth than in a 32 day account. Does anybody have any suggestions? Some sort of Top 40 fund on EasyEquities?

EasyEquities definitely for these "small" amounts. The minimum fees of other brokers will kill you.

If I was you I wouldn't split it up too much.

MAPPSG is a good all round ETF for local exposure and ASHGEQ is good for offshore exposure (both developed and emerging).

If you split it 50:50 between those two you should have a decent and very diversified portfolio.

If you are willing to risk a bit more you can add SYG4IR and ETFRHO.

 

[Hamster]

OR if you have R20k lump sum to get started with (I think that's the minimum), you can go to Sygnia and invest in their Skeleton 70 fund which contains almost everything you'll ever need.