Hypothetical but serious: what would you do with R1M?

supersunbird

supersunbird

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Come on guys, I'm sure he is not asking on how he can achieve immediate financial freedom with R1 mil, but how he can use that to achieve eventual financial freedom.
 
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saturnz

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supersunbird said:
Come on guys, I'm sure he is not asking on how he can achieve immediate financial freedom with R1 mil, but how he can use that to achieve eventual financial freedom.
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in order to do that, you first need to know what your costs are and then trying to match that

nobody has bothered mentioning the costs of living yet...
 
Marius Flash

Marius Flash

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supersunbird said:
Come on guys, I'm sure he is not asking on how he can achieve immediate financial freedom with R1 mil, but how he can use that to achieve eventual financial freedom.
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Like this ! 1 Million rand invested in a prime fixed deposit over several years earns compound interest - forget it's there for 5 years and you will be amazed at how much interest + compound interest was earned over that period. I would do just that if given the opportunity with 1 million rand.
 
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saturnz

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Marius Flash said:
Like this ! 1 Million rand invested in a prime fixed deposit over several years earns compound interest - forget it's there for 5 years and you will be amazed at how much interest + compound interest was earned over that period. I would do just that if given the opportunity with 1 million rand.
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yeah but that won't result in financial freedom in the future, unless you do something with the interest yield (once again we do not know the costs of living)

however I can say with certainty that just leaving R1m in an account earning interest will result in the R1m being eroded by inflation

what you need to have is the R1m capital increasing together with whatever yield you make on the capital amount
 
supersunbird

supersunbird

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Marius Flash said:
Like this ! 1 Million rand invested in a prime fixed deposit over several years earns compound interest - forget it's there for 5 years and you will be amazed at how much interest + compound interest was earned over that period. I would do just that if given the opportunity with 1 million rand.
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Invest in the stock market (locally and internationally) and give it 10 years and you'll see even more amazing things.
 
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Milano

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What has given the best return over the past 5/10/15/20/25 and 30 years?
 
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saturnz

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Milano said:
What has given the best return over the past 5/10/15/20/25 and 30 years?
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there is no passive solution that will result in financial freedom, unless he already has an endowment and income to supplement this windfall

an active solution is required, which given its fluid nature, cannot really be put on paper
 
Marius Flash

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supersunbird said:
Invest in the stock market (locally and internationally) and give it 10 years and you'll see even more amazing things.
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Heard this too many times, and almost too good to be true? It is a RISKY business when you invest in the stock market, I'll only consider the stock market if my Capital is guaranteed. Too loose 500K or more in the stock market would be disastrous.
 
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Milano

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It is feasible that a property bought for R1m today may be worth R50m in 35 years time. But what will R50m be worth? R1m today? And then after factoring in economic/political currency risks what will R50m be worth in $US in 35 years time.
 
supersunbird

supersunbird

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Marius Flash said:
Heard this too many times, and almost too good to be true? It is a RISKY business when you invest in the stock market, I'll only consider the stock market if my Capital is guaranteed. Too loose 500K or more in the stock market would be disastrous.
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If it is guaranteed then you not investing it in the stock markets. A diversified portfolio will prevent shocks.

Say a 2008-like crash happens, you will only lose money if you sold it when it was 50% down. If you had just kept is invested you'd be very well off now. and in the meantime, when it was low, the dividends and REITs income and interest would have bought more of the good stuff when it was cheap.

I can give example on the best low risk money market and income fund vs something balanced in the market over 7 years, if you want
 
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chrisc

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Finbond Bank offer 11% on participation bonds. At 11%, less the 20% withholding tax, you would receive R8000,00 a month
 
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saturnz

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Milano said:
It is feasible that a property bought for R1m today may be worth R50m in 35 years time. But what will R50m be worth? R1m today? And then after factoring in economic/political currency risks what will R50m be worth in $US in 35 years time.
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well if you spend the R1m today, it will be worth nothing in 35 years time, whereas the property will be R50m

in order to know what R50m in the future is worth today, you have to make assumptions about inflation and returns on investment (government bonds) over the 35 years and then discount it back to today to get some approximation of its worth

these are not unknowns that can't be solved

if you don't want to make assumptions, you can go back 35 years and use an appropriate time series to do the calculation
 
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