Invest or make additional bond payments

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TStringList

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Hi guys,

Say I have R100k. I really want to use it to make more money so I am looking at options.

I also have a bond outstanding ~R500k.
Is it more advisable to pay off the debt than to try and flip the money?
 
Pay off the debt first. The interest from paying 400k instead of 500k per year is massive.
 
It depends on what you're thinking of doing with the R100k...

But it is going to be very hard pressed to find an investment that can beat the return of the interest you have to pay on your bond... unless you work at a bank and you have an incredible rate on your bond
 
But then offshore investments have been returning more than that consistently...

If you still had more than fire years left on your bond I'd invest it in an offshore ETF and forget about it.
 
Hamster said:
But then offshore investments have been returning more than that consistently...

If you still had more than fire years left on your bond I'd invest it in an offshore ETF and forget about it.
Click to expand...

Do you have any more info on this? Do you use a local company and what kind of vehicle?
 
TStringList said:
Do you have any more info on this? Do you use a local company and what kind of vehicle?
Click to expand...

EasyEquities, CoreShares and Sygnia.

Buy something like ASHGEQ, STXWDM, SYGWD and leave it.

EasyEquities is probably the easiest although there may be some admin involved because of the size of the sum of money you're depositing.

I love CoreShares but you'll be looking at something more US concentrated like the SP500.


Or just go to Sygnia, open an account and buy https://www.sygnia.co.za/etfs/fund-details/fund/msci-world-index-etf
 
Hamster said:
But then offshore investments have been returning more than that consistently...

If you still had more than fire years left on your bond I'd invest it in an offshore ETF and forget about it.
Click to expand...

I don’t know the specific returns on the above, but something to be careful of is that one pays one’s bond with post-tax money. The returns on investments are usually quoted pre-tax.

Also, one should factor in risk, not just expectation. The bond is roughly zero risk.
 
cguy said:
I don’t know the specific returns on the above, but something to be careful of is that one pays one’s bond with post-tax money. The returns on investments are usually quoted pre-tax.

Also, one should factor in risk, not just expectation. The bond is roughly zero risk.
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True, but over five plus years (or decades) tax becomes less of an issue so too the risk.

And don't forget - this bond is in South Africa. Location location location... :p
 
20 years ago, and I would have said settled the bond first. But, now, take whatever you have extra out of the country and invest abroad. Build up a nest egg, which may come handy in the near future. South Africa's property market is under severe attack by an illegitimate government, threatening to change the constitution to allow for Expropriation Without Compensation and most likely, sometime after that, actually taking properties from people.

Once the Constitution is changed, even though it can be done under "certain circumstances", you will never have any property rights again. Your property could at any day be identified as one that meets the criteria. So, pay your bond, but try to invest as little as you can in properties locally. Not a good investment in any sense.
 
Hamster said:
EasyEquities, CoreShares and Sygnia.

Buy something like ASHGEQ, STXWDM, SYGWD and leave it.

EasyEquities is probably the easiest although there may be some admin involved because of the size of the sum of money you're depositing.

I love CoreShares but you'll be looking at something more US concentrated like the SP500.


Or just go to Sygnia, open an account and buy https://www.sygnia.co.za/etfs/fund-details/fund/msci-world-index-etf
Click to expand...
Thanks, appreciate the info.
 
Jopie Fourie said:
20 years ago, and I would have said settled the bond first. But, now, take whatever you have extra out of the country and invest abroad. Build up a nest egg, which may come handy in the near future. South Africa's property market is under severe attack by an illegitimate government, threatening to change the constitution to allow for Expropriation Without Compensation and most likely, sometime after that, actually taking properties from people.

Once the Constitution is changed, even though it can be done under "certain circumstances", you will never have any property rights again. Your property could at any day be identified as one that meets the criteria. So, pay your bond, but try to invest as little as you can in properties locally. Not a good investment in any sense.
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But surely they cannot just start taking all our properties? I mean that will lead to an uprising. It sounds emotional, the way you describe it, rather than a forecast into the future. Yes, many people are deciding to leave but for others, there is still a thriving economy with many opportunities (in times of crisis).
 
TStringList said:
But surely they cannot just start taking all our properties? I mean that will lead to an uprising. It sounds emotional, the way you describe it, rather than a forecast into the future. Yes, many people are deciding to leave but for others, there is still a thriving economy with many opportunities (in times of crisis).
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You may want to ready my post again. Initially, no one will just take your property.

When the Constitution is amended to allow for EWC under certain circumstances, the government has effectively cancelled and done away with your and anyone else's property rights. Because, at any point in time, the government can make an announcement that your property will now be EWC due to X, Y and Z and they will take it without paying you a single cent and forcefully removing you.

This is the reason why private rights groups are fighting the amendment of the Constitution. They do not want to leave these loopholes open and see an end to property rights. There should be some form of compensation if they want to take your property for any reason. This will allow you to use the money to start afresh elsewhere. Also, this is the same reason why amending the Constitution to allow for EWC will fly in the face of various property rights agreements globally, one among which, AGOA, others the UN and more.

If this is forced through, there will be no uprisings, because what happened in Zim will transpire here too. If you refuse, you will be dealt with by the police, army and here the masses too. You and your family will simply pay with your lives for your refusal.

With amending the constitution, to allow for EWC, property values will just continue to fall in SA, as it is doing at this point in time. Very, very few investors will ever be willing to invest millions in properties that could be taken at any point in time. After some time, the property market will collapse and it will just be a small economical player.
 
Jopie Fourie said:
You may want to ready my post again. Initially, no one will just take your property.

When the Constitution is amended to allow for EWC under certain circumstances, the government has effectively cancelled and done away with your and anyone else's property rights. Because, at any point in time, the government can make an announcement that your property will now be EWC due to X, Y and Z and they will take it without paying you a single cent and forcefully removing you.

This is the reason why private rights groups are fighting the amendment of the Constitution. They do not want to leave these loopholes open and see an end to property rights. There should be some form of compensation if they want to take your property for any reason. This will allow you to use the money to start afresh elsewhere. Also, this is the same reason why amending the Constitution to allow for EWC will fly in the face of various property rights agreements globally, one among which, AGOA, others the UN and more.

If this is forced through, there will be no uprisings, because what happened in Zim will transpire here too. If you refuse, you will be dealt with by the police, army and here the masses too. You and your family will simply pay with your lives for your refusal.

With amending the constitution, to allow for EWC, property values will just continue to fall in SA, as it is doing at this point in time. Very, very few investors will ever be willing to invest millions in properties that could be taken at any point in time. After some time, the property market will collapse and it will just be a small economical player.
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Can anyone confirm this? :rolleyes:

If this will be the case then yes, it makes more sense to invest abroad.
 
TStringList said:
Can anyone confirm this? :rolleyes:

If this will be the case then yes, it makes more sense to invest abroad.
Click to expand...

Add EWC fears to the long list of other things wrong in SA at the moment. Your house, emergency fund, pension, RA etc. all have exposure to South Africa meaning whatever happens here affects the value and liquidity (houses, the property market is really struggling so all the money in your house is stuck).

Can just as well get some offshore exposure: Apple, Microsoft, Amazon...

EDIT: Not that I believe in the extreme version of EWC but I do believe others have those fears which really affects house prices. Who is going to want to buy my house if they think the government is going to take it.
 
Hamster said:
Add EWC fears to the long list of other things wrong in SA at the moment. Your house, emergency fund, pension, RA etc. all have exposure to South Africa meaning whatever happens here affects the value and liquidity (houses, the property market is really struggling so all the money in your house is stuck).

Can just as well get some offshore exposure: Apple, Microsoft, Amazon...

EDIT: Not that I believe in the extreme version of EWC but I do believe others have those fears which really affects house prices. Who is going to want to buy my house if they think the government is going to take it.
Click to expand...

Correct.

That being said, as EWC is currently written, it will affect anything else you own too. Your local investments, bank accounts, pension funds and more. If the Constitution ever do get amended, owning anything locally will be a daily risk for you in terms of losing it and not being able to be compensated if government decides to appropriate it for the "better of the country". In turn, all markets will be negatively affected, which will eventually lead to a natural decline in the value of all your assets and investments too. And then we are hoping that the world will accept this and not take any actions against government. If they do, your losses will be tremendous in a short period of time.

I am still of the opinion, if you have any additional money and are interested in investing it, South Africa is not the right place at the moment. Get your money offshore.
 
What is your interest rate on the bond?

You'll get exactly that in positive returns if you put the money in there.

If you don't you need to ask yourself if an investment would reach the same level of returns, which is unlikely at present, assuming your bond is anywhere near prime.
 
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