Hypothetical but serious: what would you do with R1M?

[supersunbird]

You understand that the 13% is annualized right?
Its an average over 5-7years.
So pointing out that you were above average in 1 of
the years (also 5 years ago) is like saying I won a poker
game at college, hence I must be a poker genius...

You also completely ignored the quote:

Last 2 years (actually 3) is clearly not a bull market.

You should apply your Dr Zoidberg about logic to yourself and the "This only works if the "new" investment outperforms the banks loan ~11%".

He doesn't have a bond (OP clearly says no debt), so it's not a " invest or bond" question.

I'm saying he should not invest in a buy-to-let property/ies with his R1 mil. If one wants to go into buy-to-let one does it with the banks money (and the tenants money) and due care not to overextend, and you invest your R1 mil in the markets and you can eventually have financial freedom.

 

[Gnarls]

So debt is off the table, in that case I would invest it all over time in my pension (current age 38). I would for the next couple years put the max tax allowable limit (27% I think these days) of my salary into my pension instead of what I am currently paying and would use the 1 Mil to bridge the difference. Would use a combination of short and medium term savings vehicles to keep the money growing while I am steadily deploying it to the pension fund. So money market, fixed deposits, etc. I guess it would take 10 to 11 years to get it all in the pension fund in the most efficient way possible (with the tax benefit).

I would stay a million miles away from crypto currency. I see a bubble and the pins are starting to home in on it.

I'm assuming you're maxing your TFSA account too?

The big question as others have stated is whether the op wants to quit working and live off this million?

 

[Jet-Fighter7700]

Bitcoin

this, especially if as the BTC supply gets tighter
the price will skyrocket,

almost like those stamps that you brought for 50c back in the day, but worth a lot now.....

 

[Jet-Fighter7700]

Put it on black

if you got the "round things" for it,

as you could lose everything in one go...... if it comes up green/red....

 

[bchip]

Last 2 years (actually 3) is clearly not a bull market.

At no point did I say the last 3 years was a bull market, not sure where you get that from
as I kept saying the last 2 years had terrible performace.

I'm saying he should not invest in a buy-to-let property/ies with his R1 mil. If one wants to go into buy-to-let one does it with the banks money (and the tenants money) and due care not to overextend, and you invest your R1 mil in the markets and you can eventually have financial freedom.

How would you do this without a bond?

So 200k goes to a deposit for the bank, you have debt of R 800k + a house,
then you invest the remaining 800k into the market...and the market tanks 50%
and because of the recession you lose your job.

Original:
1,000,000 = 200dep + 800house -800loan +800 shares

Markets tank scenario:
200,000 = 200dep + 400house -800loan +400 shares

Bought house in full (market tank scenario)
500,000 = 500house + income and no debt

Bought shares in full (market tank scenario)
500,000 = 500shares + income and no debt

Is this a realistic scenario? It has happened in SA 3 times in 20 years.
So the advise your giving has bankrupted 3 different groups....hence the zoidberg comment.
Its the turkey before thanksgiving scenario...everything is awesome advise until D-Day.

Somebody who never took that risk and paid the house off in full, weathered the recession
and got income in, even though he lost his job.

 

[supersunbird]

At no point did I say the last 3 years was a bull market, not sure where you get that from
as I kept saying the last 2 years had terrible performace.




How would you do this without a bond?

So 200k goes to a deposit for the bank, you have debt of R 800k + a house,
then you invest the remaining 800k into the market...and the market tanks 50%
and because of the recession you lose your job.

Original:
1,000,000 = 200dep + 800house -800loan +800 shares

Markets tank scenario:
200,000 = 200dep + 400house -800loan +400 shares

Bought house in full (market tank scenario)
500,000 = 500house + income and no debt

Bought shares in full (market tank scenario)
500,000 = 500shares + income and no debt

Is this a realistic scenario? It has happened in SA 3 times in 20 years.
So the advise your giving has bankrupted 3 different groups....hence the zoidberg comment.
Its the turkey before thanksgiving scenario...everything is awesome advise until D-Day.

Somebody who never took that risk and paid the house off in full, weathered the recession
and got income in, even though he lost his job.

Correct original scenario:
Get 100% bond for R600 000 max (sectional title) and invest R1 million in a diversified portfolio (75% directly overseas and 25% locally).

Which market tanks, overseas or local, for the scenario?

 

[bchip]

Correct original scenario:
Get 100% bond for R600 000 max (sectional title) and invest R1 million in a diversified portfolio (75% directly overseas and 25% locally).

Which market tanks, overseas or local, for the scenario?

Why not replay 2007-2008 for us...in other words all world markets

1000 = 1000shares + 600house - 600loan
200 = 500 + 300 - 600

You are simply gearing yourself, same as a CFD trader.

 

[satanboy]

if you got the "round things" for it,

as you could lose everything in one go...... if it comes up green/red....

Gee....and here I thought payouts were for black, green and red if I played black.

/back to the drawing board

 

[supersunbird]

Why not replay 2007-2008 for us...in other words all world markets

1000 = 1000shares + 600house - 600loan
200 = 500 + 300 - 600

You are simply gearing yourself, same as a CFD trader.

If you don't want the risk, don't get the bond (or property) at all then.

All you are doing with buying it outright is put your risk in 1 asset, the tenant could stop paying and squat, the house prices could stagnate or go into decline for other reasons that bring to price down.

It's only a loss if you sell it. That 1000 share value you bought in the S&P 500 that you bought on when it was at it most expensive on 12 Oct 2007 fell to 425 share value on 6 Mar 2009 (at it's lowest), but then would have grown back to 1560 share value today.

Maybe if you heart is set on having a SA property portfolio, then buy 3 x R600 000ish properties with R166 000 deposits each and invest the rest in the markets. At least more diversification that way.

 

[Splinter]

Maybe if you heart is set on having a SA property portfolio, then buy 3 x R600 000ish properties with R166 000 deposits each and invest the rest in the markets. At least more diversification that way.

Again, you need security to purchase property with a bond. No ways is R1m going to get you "3 x R600 000ish" properties. With change to nog al!

But where are you going to get these R600 000 properties? And at what rental?

 

[Splinter]

50% BTC and 50% ETH.

Great advice - if you prefer gambling somewhere other than a casino or race track.

 

[supersunbird]

Again, you need security to purchase property with a bond. No ways is R1m going to get you "3 x R600 000ish" properties. With change to nog al!

But where are you going to get these R600 000 properties? And at what rental?

If you can't manage that, then you leave this property idea behind...

 

[Splinter]

If you can't manage that, then you leave this property idea behind...

Exactly.

Although I'm sure you know that I have a rental property myself?

 

[supersunbird]

Exactly.

Although I'm sure you know that I have a rental property myself?

And I had one for 8 years myself. Made a tidy profit selling it (and it's why I owe SARS this year haha).

 

[Gnarls]

Would R1 million be enough to sell covered calls?

 

[Splinter]

And I had one for 8 years myself. Made a tidy profit selling it (and it's why I owe SARS this year haha).

Why did you sell then? I could make a "tidy profit", but that is not want I want it for. Nor the reason I am looking to buy another rental property in the near future.

 

[supersunbird]

Why did you sell then? I could make a "tidy profit", but that is not want I want it for. Nor the reason I am looking to buy another rental property in the near future.

I think the area it is in will not have good growth in prices going ahead, I also paid off my debt (ok, R7000 left on my car but will hopefully kill that in Oct, and nothing else) with it and saving and investing about 35% of my gross income and paid off my parents house, which will be inherited someday...

It's also nice not to have attend the AGM which they always wanted to hold in the middle of winter haha.

 

[Splinter]

I think the area it is in will not have good growth in prices going ahead, I also paid off my debt (ok, R7000 left on my car but will hopefully kill that in Oct, and nothing else) with it and saving and investing about 35% of my gross income and paid off my parents house, which will be inherited someday...

It's also nice not to have attend the AGM which they always wanted to hold in the middle of winter haha.

Ok, fair enough. You were looking after your folks (I totally respect that!) and investing in your future. Just make sure you are in their will

 

[Papsak]

Financial freedom on 1 mill? tough one.

You can get around 10% return on a selection of REITs ( TWR, TEX, rebosis, DELTA) - actually 1/4 in each will probably get you 11% - pretty stable and with a rand hedge in TEX and TWR. Will on the whole grow inline with inflation so thats around R9 166 per month less a bit of tax R525 p/m gives you R8641.

So get a flat for R4000
Food R2000
R2000 for the rest
and save R641.

Because you should always save, even a little bit!

 

[rietrot]

I would probably buy a established business or small shop/franchise in a mall.
It will be more work, but for me being my own boss is financial freedom.
I don't know the financial details so I'm not sure how viable this plan is.

Ideally I would become a beach hobo and use the money for food or drugs when I don't feel like begging for the day, but after my last trip to the south coast it seems like this idea is way to popular and all the good spots are already teken.