investment advice please

[sbu22]

please advise.

What is the most return that i can get from an investment of 400k?

Im an investment noob so options with the least minimum risk.

I was going to purchase a 400k car cash but a fellow forumite opened my eyeys and suggested investing the cash and using the returns to pay,off the car.

So please advise.

Thank you

 

[rorz0r]

Good choice over buying a car but when it comes to investment maximum return and minimum risk are at opposite ends of the scale.
Personally I'd buy one or 2 small flats for rental purposes. Ie 200k deposit on a 600k place then the rental shortfall wouldn't be much.
2 of those and you have a 1.2m investment with the bonds covered and increasing rental income.

 

[Messugga]

Good choice over buying a car but when it comes to investment maximum return and minimum risk are at opposite ends of the scale.
Personally I'd buy one or 2 small flats for rental purposes. Ie 200k deposit on a 600k place then the rental shortfall wouldn't be much.
2 of those and you have a 1.2m investment with the bonds covered and increasing rental income.

That ties up his funds until the bonds have been paid off, however, and he needs a car fairly soon.
What he is looking for is something with relative quick returns that he can use to pay his cart's loan. Personally, I think it's a tad optimistic to try and find a relatively low risk investment that will give greater returns than prime or whatever the interest rate on the car's loan will be, especially considering that he'll be paying tax on a good portion if not all of the return on the investment.

 

[HavocXphere]

please advise.

What is the most return that i can get from an investment of 400k?

Im an investment noob so options with the least minimum risk.

I was going to purchase a 400k car cash but a fellow forumite opened my eyeys and suggested investing the cash and using the returns to pay,off the car.

So please advise.

Thank you

That idea just won't die apparently.

The only time when it makes financial sense to borrow money & then invest it is where the risk adjusted return on the investment reliably exceeds the borrowing costs, which is not going to happen here unless you have some cunning plan that nobody else thought of.

These leveraging scheme people have rely on factors that are far from certain (e.g. increasing property prices) and carry a sizable dose of risk (e.g. Prime shoots up). In this particular case even that won't help...the value of the car isn't going to increase....quite the opposite. They *can* work, but at the end of the day its a gamble. If its a gamble you want then you might as well compress it into a shorter time-frame: 50k personal loan to buy leveraged fin instruments. Which btw is bad advice too.

As for returns. <32k per year for "minimum risk", 80k+ for high risk. Thumb sucked figures of course, and yes you'll pay tax on those though at different effective rates for the two. The first would be something like RSA retail bonds the second listed shares (& lots of luck while picking them).

I'd recommend buying a modest car ~200k cash & investing the rest.

 

[rorz0r]

Sorry missed the part about still wanting to buy a car... definitely wont be able to do that and get a 400k still. Honestly if you want lowest risk and highest returns buying the car now cash wouldn't be a bad way to go but cars are such a waste of money, and especially 400k cars... if you still want a 400k car NOW then any other structure is just a complicated way to blow 400k.

 

[DJ...]

Simply put you need to speak to a financial advisor. The fact that you need some liquidity means that you should be investing in/creating a high dividend yield portfolio...

 

[froot]

Simply put you need to speak to a financial advisor. The fact that you need some liquidity means that you should be investing in/creating a high dividend yield portfolio...

+1.

Good going on not purchasing a car. Car != investment. Car = loss.

I also advise speaking to a financial advisor. The near future for the economy is not looking good, so you need to be very sure of exactly what you invest your money in. It would be well worth your while.

Investing money in property is always good, but it's a long term investment and requires attention, unless you have someone that will take care of it for you.

 

[borga]

The way I understand it you wanted to buy a car cash, but someone suggested to invest the cash, buy the car on a loan and use the returns on the investment to pay back the loan?

That is a good idea if you can get a higher return on your money than the cost of the loan, however there are some things to be aware of.

With the same instrument, loaning money will always charge a higher rate than you will get for investing the money. (like bank rates on overdrafts are higher than the rate you get on a positive balance.)

So to get a higher rate than the rate of the loan you will have to invest in a higher risk investment like shares or other such risk investments.

But remember that also carries the risk that it won't deliver the required return you need to pay off the loan, especially in the current markets and you could then end up losing money and pay more than if you just paid in cash.

Someone mentioned being taxed on the profit, that is also a very important consideration.

If you invest the money in local stocks the dividends received will be tax exempt in your hands.
If you invest the money in interest bearing instruments the first 22800 will be exempt.
In foreign stocks only the first R3700 will be exempted.

And any amounts not exempt will be taxed as income in your hands.

 

[D3x!]

Woah paying off The car with the returns? Rofl

Are you referring to the poster who said like 12-15% returns? Without a very high risk I doubt you will get those kind of returns.

 

[chrisc]

Invest the money with SATRIX. Top 40 is recommended

 

[sbu22]

okay let me put it this way. What returns can i expect on minimum risk for 400k per annum.

I can make another plan on the car. Im thinking buying the car at the highest residual possible. If i can squeeze 5k per month repayment then i can afford to pay in a year of instalments in advance. This way my 400k will still be available for investing.

I guess getting enough returns to pay off my instalments is a bit optimistic but how much exactly, minus the tax that i will have to pay am i looking at per annum realistically?

 

[vash87]

It does't really matter how much you invest..

Conservatively - In bonds and money market type instruments you can expect a reliable 7% to 10%.
Aggressively - Invested in equities/property etc, short term volatility is high but long term growth is where these investments shine. The top equity funds are sitting on an average of just under 20% per year over the last 8 years.

Tax wise - It depends what instrument you invest in but as a general rule to follow.. your first R22000 interest earned per year is tax free. You will pay tax on everything earned over and above that at your normal tax rate. There will also be Capital Gains Tax when you cash out your investment. One way to get around the complicated tax is to invest in an endowment plan - good for a longer term and investments on the aggressive side. With these, you are taxed within the fund so what you get out is always tax-free. It generally works out that if you're currently sitting above to 30% tax bracket, you will benefit from the handling of tax in an endowment. Finally, although everyone goes on about Satrix, please realise that is a 100% equity based investment, and therefore high in risk by nature.. not best for everyone. Consider splitting your money up and diversifying in different asset classes.

Investing is complicated because there are so many options available and one thing that might be best for your friend may not be best for you. You should definitely speak to an adviser you trust before making any final decisions.

 

[Krypt0n1te]

AFAIK your safest/best performing investment would be RSA Retail Bonds currently yielding 8% for a fixed 5-yr term. (Personally I would not use this at the moment due to the obvious VERY low interest rate environment.)

Please don't miss the point everyone is making here.... namely....

You cannot "Safely" borrow money to make money.

You can make as many calculations as you want (I'll even through in some extra batteries) and all will show that you are better of NOT borrowing money.

To wrap up, take your money, BUY the car that you need CASH, then use the monthly savings that you would've used to pay off that loan and rather invest that through which ever vehicle you choose.