Investment advice for a total noob

[carlf]

Good day everyone

I am totally inexperienced with investment and therefore I need some advice.

Due to circumstances, my fiance could save most of her salary now for a couple of years and is sitting with around R450 000 that is just lying in her cheque account and essentially losing value.

I told her that I would find out what is the most sensible thing to do with this money.

Now we will probably be looking at buying a house in the next year or 2. The timeframe isn't fixed, so I would probably like to have around R150 000 available within a 30 day notice period if I want to put down a deposit.

The rest I want to invest in some way that will generate a good return (hopefully well above inflation).

Liberty is offering a service where no commission or fees are payable until you get 13.5% or something like that. How is the fees then calculated and is this a good option?

Is there something else/better where I can invest in? Like I said, around R150k should be easily accessible, while the rest can be placed into a longer-term investment, something for the future (kids, retirement, etc).

I will of course discuss everything with a financial planner/advisor, I was just hoping for some general feedback to put me on the right track.

Any advise would be high appreciated.

 

[Messugga]

Contact a financial adviser. That's not the sort of money you want to invest based on the recommendation of some anonymous person on the internet.

As for the Liberty product - it's pretty good from what I'm told by guys who worked on designing it. I think you're a bit short on their requirements, but I might be wrong.

 

[carlf]

Like I said, I am not going to blindly follow the advise given here. I just want a place to get started.

Different financial advisers will give different advice and probably try to sell me on their own products. I just want to be armed with enough info to make an informed choice when approaching an adviser.

 

[phiber]

What the name or give us a link for the liberty product please.

 

[Chevron]

Good day everyone

I am totally inexperienced with investment and therefore I need some advice.

Due to circumstances, my fiance could save most of her salary now for a couple of years and is sitting with around R450 000 that is just lying in her cheque account and essentially losing value.

I told her that I would find out what is the most sensible thing to do with this money.

Now we will probably be looking at buying a house in the next year or 2. The timeframe isn't fixed, so I would probably like to have around R150 000 available within a 30 day notice period if I want to put down a deposit.

The rest I want to invest in some way that will generate a good return (hopefully well above inflation).

Liberty is offering a service where no commission or fees are payable until you get 13.5% or something like that. How is the fees then calculated and is this a good option?

Is there something else/better where I can invest in? Like I said, around R150k should be easily accessible, while the rest can be placed into a longer-term investment, something for the future (kids, retirement, etc).

I will of course discuss everything with a financial planner/advisor, I was just hoping for some general feedback to put me on the right track.

Any advise would be high appreciated.

Definitely a financial advisor.

I've PM'ed you mine.

 

[carlf]

What the name or give us a link for the liberty product please.

http://www.liberty.co.za/our-products/investment-and-savings/Pages/investment-and-savings.aspx

 

[supersunbird]

I don't personally like the Liberty Evolve product. Have a post where I analysed it a bit somewhere here, but I cant find about it now, but they make a lot off you for you the first 3 years (the guys designing it probably meant its good for Liberties pockets ), considering that the Top 40 index gave a return of around 18% last year.

Here is a article about it:
http://www.moneyweb.co.za/moneyweb-...ibertys-new-no-return-no-pay-product-for-real

If you believe in index tracking here are some options from Sygnia (index tracking unit trusts that very cheap at 0.4% fee, if you use the Boutique option). And fees are very important with index tracking, because they will all perform about the same:
http://sygnia.nedoweb.com/collectiv...3/10/Sygnia-Boutique-Fund-and-Fee-Summary.pdf

If you prefer managed funds there are many from Coronation, Allan Gray and such to choose from. And on some platform like Allan Grays you can choose unit trusts from other providers, not just theirs.

 

[carlf]

I don't personally like the Liberty Evolve product. Have a post where I analysed it a bit somewhere here, but I cant find about it now, but they make a lot off you for you the first 3 years (the guys designing it probably meant its good for Liberties pockets ), considering that the Top 40 index gave a return of around 18% last year.

Here is a article about it:
http://www.moneyweb.co.za/moneyweb-...ibertys-new-no-return-no-pay-product-for-real

If you believe in index tracking here are some options from Sygnia (index tracking unit trusts that very cheap at 0.4% fee, if you use the Boutique option). And fees are very important with index tracking, because they will all perform about the same:
http://sygnia.nedoweb.com/collectiv...3/10/Sygnia-Boutique-Fund-and-Fee-Summary.pdf

If you prefer managed funds there are many from Coronation, Allen Gray and such to choose from.

You used a lot of strange words...
"Index tracking" and "Unit trusts" doesn't really mean anything to me.

Like I said, I am a complete noob

 

[phiber]

You used a lot of strange words...
"Index tracking" and "Unit trusts" doesn't really mean anything to me.

Like I said, I am a complete noob

Cool, Evolve looks like a decent product for 3 years but since you are a noob chat to a financial advisor. Just remember to closely check the fees they take.

 

[supersunbird]

You used a lot of strange words...
"Index tracking" and "Unit trusts" doesn't really mean anything to me.

Like I said, I am a complete noob

You get Indexes for shares on the JSE. The Top 40 index for example, the 40 biggest companies on the JSE, you get a Top 10 property companies index, you get a DIVI index for companies that give the best dividends for the year (there formula and analyses), you get a FINI index for the 15 top financial companies like banks and such, and there are others. So if 2 products follow an index, they will almost always be the same in composition of shares in the same quantities (percentages of the index) as well as the return before fees.

OK, so there are Exchange Traded Funds, ETFs, like the Satrix Top 40, almost always index tracking funds.

Then there are Unit Trusts, which can be Managed funds but can also Index Trackers these days. Coronation Top 20 is a managed fund for example, a manager or a team decide which of the top 50 biggest companies will grow the best and they invest in those 20 best ones. Selling and buying according to their analyses and decisions reached. The Sygnia Top40 Index Fund is a unit trust the just follows the Top 40 index same as the Satrix Top 40 ETF and whatever other index fund whether ETFs or Unit Trusts.

The Liberty Evolve would have a 60% Top 40 index tracker unit trust component. So if you started with them last year, you would have gotten a 13.5% return and they would have kept the 4.whatever% growth above that for last year.

So, as I say, in index tracking fees are very important in similar products, why pay 1% if you can pay 0.5% for the same results? One can get say 25% return from a managed fund, so one might be willing to pay more as in say a 1.8% fee. But some managers can perform poorly and still want to charge a 1.8% fee. Some funds charge over up to 3%.

One can also have a mix of managed funds and index tracking funds if one wants.

The thing is one should educate yourself a bit before you go see an independent financial advisor, so as to not be sold something that's not ideal for you.

Hope this helps to explain some of the concepts, feel free to ask away for more clarity.

 

[saturnz]

if you are a complete noob I wouldn't dwell into financial products.

you stated you wish to purchase a property down the line, perhaps its best to start looking now, especially since the interest rate is only going to increase going forward.

you don't want to risk putting your money into something and then possibly get stuck with new problems down the line that you did not foresee because the financial advisor was throwing terms at you that you could not understand.

 

[Lukcydog]

I don't personally like the Liberty Evolve product. Have a post where I analysed it a bit somewhere here, but I cant find about it now, but they make a lot off you for you the first 3 years (the guys designing it probably meant its good for Liberties pockets ), considering that the Top 40 index gave a return of around 18% last year.

Just out of interest, where do you get the 18% return? From what I see, it only return 9.34% last year...

http://www.shareforum.co.za/competition/com_rankings.php?year=2013

 

[supersunbird]

Just out of interest, where do you get the 18% return? From what I see, it only return 9.34% last year...

http://www.shareforum.co.za/competition/com_rankings.php?year=2013

Saw it in the newspaper this morning, Pretoria News business section had a story on the bourse and said 18.something% from 1 Jan 2013 to 31 Dec 2013

Satrix Top 40 is 15.48% between 7 Jan 2013 and 7 Jan 2014.

Do we know over what period that 9.34% is? There was a bigish dip and then recovery start December I think, so if you closed at that time it would reflect poorer. Just shows the whole trying to time the market at your own peril thing.

 

[kiepie]

Sorry, for some reason my post never went through yesterday, here it is again.

Talking to a financial advisor will be the best thing to do. However then again they will pull a risk profile on the system at their disposal and invest the funds in various unit trusts according to your needs and risk assessment.

Coming from a LISP myself, watch out on the different type of fees included in the underlying funds. A lot of LISP companies are moving onto the clean fund price model.

I would personally advise on saving most of your funds going into a unit trust portfolio. (discretionary monies).

If your fiancé doesn't have a Retirement Annuity, maybe having a monthly debit order going off towards a Retirement Annuity isn't a bad idea. With a RA contribution you get a tax break as well (that tax law is changing however, but I believe for the better).

And then having a portion in the share market is also not a bad idea. Will PM you details on a FA and the share trading.

 

[carlf]

Hi guys

Thanks for all the advice. It is certainly a good start.

If you believe in index tracking here are some options from Sygnia (index tracking unit trusts that very cheap at 0.4% fee, if you use the Boutique option). And fees are very important with index tracking, because they will all perform about the same:
http://sygnia.nedoweb.com/collective...ee-Summary.pdf

I just want to make sure I understand this correctly. In another post you suggested to the OP to look at the Sygnia International
Equity Fund which has a management fee of 0.4%, with performance varying from 11% to 26%.

Now I see it has a high risk profile, which I am guessing means that it is kind of "Big risk, Big reward", but it can backfire and show negative growth as well in the short term?

Is the higher risk worth it or will it be better to look at a low to moderate risk fund with a management fee of 0.8%? I know this is very dependent on the amount of risk one is willing to take, but I just want to get an idea. On the high risk funds, what is the actual risk of "losing"?

 

[Keeper]

Remember to keep at least R10K aside for 1 bitcoin at least
Investing in satrix/etc is good and all that, but 15% pales in comparison to 900% year on year.

Not telling you to invest it all, just a fraction - In two years it might very well be worth more than the other 98% invested in Satrix or whatnot.

 

[supersunbird]

I just want to make sure I understand this correctly. In another post you suggested to the OP to look at the Sygnia International
Equity Fund which has a management fee of 0.4%, with performance varying from 11% to 26%.

Now I see it has a high risk profile, which I am guessing means that it is kind of "Big risk, Big reward", but it can backfire and show negative growth as well in the short term?

Is the higher risk worth it or will it be better to look at a low to moderate risk fund with a management fee of 0.8%? I know this is very dependent on the amount of risk one is willing to take, but I just want to get an idea. On the high risk funds, what is the actual risk of "losing"?

Well, I think I suggested that as a option if looking at diversified portfolio composed of local share funds, international share funds and property and maybe some bonds. The Sygnia International Equity Fund is not a index tracker fund though, but it still cheap.

By its nature any foreign/international investment like the Sygnia International Equity Fund or the Coronation Global Managed or whatever international unit trust or even direct investments in overseas shares, bond, property or currency has a higher risk due to the Rand fluctuating against other currencies, at can weaken or strengthen at any time.

The risk is worth it if you can be invested for the long term, and to lower the risk a bit, one can invest in it monthly, or phase in the capital over a period, so as to average out the fluctuations.

 

[w1z4rd]

Diversify. Ive got money in shares, unit trusts, property and a tiny bit in gold. The majority of my money is spread across low risk investments... a very small bit is high risk (and I list gold as high risk).

 

[Garson007]

Curious, why do you have any money in gold?

 

[w1z4rd]

Curious, why do you have any money in gold?

Speculative and cause its shiny. There is just something cool about holding kruger coins or having a couple of tiny bars. I do however understand that its value can drop to almost nothing over night. I wouldnt buy more gold now. The markets are doing good and will do well for a while longer.