Investment Advice

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geekso

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Hi Everyone,

I have about 170k in cash with Momentum invested in 3 different types of accounts. The return over the last 5 months has been about 4k. Is this decent or is there somewhere else I should be investing the money? The fees have been about 500 got the last 5months. I opened up an easy equities and satrix account to put some other money in there as well.

Currently I have an RA, two properties, some gold coins but the above area I feel like I need to put a bit more focus on.

What sort of return are you receiving on average on Investment accounts? 10/15/20%?

I assume the markets are affecting the returns currently as I lost about 3k in the last month with momentum so nett is 4k.

I aim to have diversified portfolio, so any advice to add to what I currently have will be appreciated?
 
Something worth looking at is the basket option from EasyEquities. I personally like it. The companies are screened and the research is done for you, might be worth putting money into it monthly as added diversification for your overall investment portfolio
 
Don't put too much faith in the advice of internet strangers - they might know even less than you do.

Try to have some kind of coherent strategy - you sound like you've followed a bit of a mix & match approach. Could be worse but it does little for your diversification, adds costs and makes the whole thing ungainly.

Oh and remember to measure returns after deducting inflation (and I'd argue after ZAR depreciation, but that makes it a bit grim).
 
HavocXphere said:
Don't put too much faith in the advice of internet strangers - they might know even less than you do.

Try to have some kind of coherent strategy - you sound like you've followed a bit of a mix & match approach. Could be worse but it does little for your diversification, adds costs and makes the whole thing ungainly.

Oh and remember to measure returns after deducting inflation (and I'd argue after ZAR depreciation, but that makes it a bit grim).
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You're right that one should think twice before putting too much faith in the advice of strangers on the internet. Then again, it might be advisable to trust fund managers and advisors even less, as they intend to sell a product (with high fees) at the end of the day.

geekso said:
I aim to have diversified portfolio, so any advice to add to what I currently have will be appreciated?
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Long story short: history has shown that economists are rarely able to see recessions coming. Most fund managers fail to beat the market. At least, Warren Buffett seems to think so {quite a nice podcast to listen to}.

Simply buy the index. Better yet, as this recent blog post argues, don't limit yourself to a single market/country. And look for the lowest cost, which, according to him, sits at about 0.25%.

The only way to beat the market, or pick countries to outperform the average, would be to be able to predict the future. Otherwise, and studies have proven this, it’s all down to luck, or taking far higher risks than you intended to.

Rather than trying to chase out-performance and likely end up worse off, all you need to do is buy the average. Money is going to flow to chase performance in any case, and that will render all your predictions about where to invest utterly useless.

And that brings me back to the title of the post. What percentage of your assets should be offshore.

To simply buy the average, ie to invest in the WHOLE world, a market capitalisation weighted index is the way to go. Take a look atthe FTSE All-World Index for example. This index is a breakdown of pretty much all of the world’s markets, developed and developing.
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So here is my criteria in picking a world fund:

- It must be low cost.
- It must be based OUTSIDE of the USA, otherwise if you hold more than $60 000 and you die, the US tax man will collect far too much of your money. This rules out the US based and most recommended VT which costs just 0.14%.
- It must cover the whole world, not just developed markets but developing too. This rules out IWDA at a cost of 0.2%.
- It must be fully replicated, ie. own all the shares in the index, and not just a representation.
- It must own actual shares, and not futures or derivatives.

All this led me to a fund called VWRD, or VWRL if you’d prefer to invest in Pounds rather than Dollars. It tracks the FTSE index I linked to above fully, holds actual shares, is based in Ireland and costs just 0.25%. I’m buying this through my US brokerage account, but any international broker should have access to it. I think of it as a buy and forget holding, something I’ll never need to sell. It’s a fund managed by Vanguard too, the only investment company that acts in the best interests of it customers rather than itself.
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Personally, I'll explore these options in greater detail in the future. For now I try to exploit the opportunities presented by a volatile Bitcoin price. Somewhat risky, but very rewarding.
 
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Given the market conditions out there and the fact that you are actually in the positive, I'd stay right where you are for the time being and revisit moving investments at a later stage.
 
Hamster said:
Given the market conditions out there and the fact that you are actually in the positive, I'd stay right where you are for the time being and revisit moving investments at a later stage.
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Fully agree here. Hence why if it was not clear my suggestion is too keep everything as it is and just ad on top of it the basket from EasyEquities.

Lukcydog said:
www.justonelap.com

Numerous people other than myself will confirm Simon Brown provides a wealth of knowledge in DIY investing.
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+1 transformed my life and perspective on saving and money in general.
 
bchip said:
Thank you, appreciate the feedback.

I believe a lot of people under-estimate SA's pro's,
like high interest rate returns.
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Very true. Might be the bad rep these financial companies and over system had in the past where fund managers are paid by the products they pushed so people often got sold products that's just pure shiat. Yes RA's I am looking at you!
 
Thanks for all the feedback, I will have a look at some of the links provided.
 
Such a faff for only 30K a year.

I see FNB has a savings account with 7% or their "tax free shares" option. Which would be better to "buy and forget"?
 
bchip said:
Thank you, appreciate the feedback.

I believe a lot of people under-estimate SA's pro's,
like high interest rate returns.
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Like where? High interest rate returns are only interesting if they're high in the sense of above inflation - preferably an inflation rate more realistic than the official rate.
 
HavocXphere said:
Like where? High interest rate returns are only interesting if they're high in the sense of above inflation - preferably an inflation rate more realistic than the official rate.
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I agree with you, high interest rates in 3rd world comes with high inflation.
I just dont see how to mitigate this in any other way.

What are our options?...US -1% return with a 1% inflation currently?
( = -2% return with a falling dollar)
Germany, Switzerland, UK, Norway, Sweden....the list goes on with negative yields.

SA also has CPI + X returns which is a better return than any other country in the
world can provide at this point.

#just saying dont knock SA on everything

There are times when its wise to be invested in SA and obviously times not too.
 
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bchip said:
What are our options?
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Equity...that at least has a chance of outrunning inflation. With interest based products you've accepted surrender before the war even started. ;)

bchip said:
#just saying dont knock SA on everything
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nah...more of a general comment on interest based investments...they all kinda suck to be honest - SA or overseas.
 
Thor187 said:
Wow.

I love it.
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The approach is problematic though and it is typical of how investment marketing confuses people (big numbers after relatively long periods without adjustment for inflation). As far as I can see that calc is based on the following:

200 Monthly payments of R2 500 in arrears (giving the R500 000 total invested and a 16y 8m term) at 8% nacm.

That 8% nacm rate is a cash rate according to the site. In general, the most you can expect from cash over the long term is inflation + 1.5% p.a. So, assume inflation is level at 6.5% p.a. over the 16y 8m.

That R1 030 486 is only worth 1030486*(1.065)^-16.6666 = R360 757 in current money terms. Obviously this treats the proceeds as a lump sum. On the other hand, in 16 years time that R2 500 p.m. will only be 2500*(1.065)^-16 = R912 p.m. in current money terms and so be much less of an expense for an investor.

Hopefully treasury does increase the R30 000 current annual limit to TFSAs with some form of inflation in future, in which case, using the same assumptions as above, you should be contributing 2500*(1.065)^16 = R6 848 p.m. in year 16 to keep up with inflation.
 
Rkootknir said:
The approach is problematic though and it is typical of how investment marketing confuses people (big numbers after relatively long periods without adjustment for inflation). As far as I can see that calc is based on the following:

200 Monthly payments of R2 500 in arrears (giving the R500 000 total invested and a 16y 8m term) at 8% nacm.

That 8% nacm rate is a cash rate according to the site. In general, the most you can expect from cash over the long term is inflation + 1.5% p.a. So, assume inflation is level at 6.5% p.a. over the 16y 8m.

That R1 030 486 is only worth 1030486*(1.065)^-16.6666 = R360 757 in current money terms. Obviously this treats the proceeds as a lump sum. On the other hand, in 16 years time that R2 500 p.m. will only be 2500*(1.065)^-16 = R912 p.m. in current money terms and so be much less of an expense for an investor.

Hopefully treasury does increase the R30 000 current annual limit to TFSAs with some form of inflation in future, in which case, using the same assumptions as above, you should be contributing 2500*(1.065)^16 = R6 848 p.m. in year 16 to keep up with inflation.
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I've always said its pointless having a cash/bond (aka interest) investment in a TFSA, this article agrees:
http://www.moneyweb.co.za/mymoney/m...g-anything-from-a-tax-free-account-at-a-bank/

Much better to use the TFSAs for investing in share and property funds and keep it there for the long term. Doing the sums at CPI+5% will look way better... obviously.
 
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If I hear another person that believes theyve figured out the financial
world because "you just buy the dip and hold" and it always works.

Anybody looked before 1980?
Really?

US has shown to have several bear markets through its history (almost 1 every 15 years).
Japan has been in a bear market for over 26 years.
US had a bear market for 24 years in the 70s until they figured out this
magical word called "stimulus" in 1980 and now all the figures are skewed
because people only value past performance over the past 15 years.

Amazing how every looks at 1 chart of the past 10 years and believes
they've individually figured it out what even the greats struggle with today...
 
If you even simply just looked at something like the Dow over the past 115years
You can see how many periods there are that struggled.

https://twitter.com/mySharesCoZa/status/751389046115532800



And I would love to hear answers on how to mitigate inflation other than the "buy the dip & hold"

So far the only solution I can think of is to leave the country.
That's a hedge against SA inflation as suddenly my groceries arent in rand terms anymore.
For the rest of us still living in SA, we are open to suggestion on any instrument directly
related to inflation (ie property doesnt count as it also gets affected by factors outside pure inflation returns)
that gives a 15% plus return.

On that note: Satrix 40 Past year return = 0% - 6% inflation = -6% return
Bonds = 9% - 6% return = +3%

Stocks needs 10% returns just to catch up at this point....
 
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