Questions regarding short, medium and long term investments

[Alton Turner Blackwood]

I need some advice on an RA which I took out shortly after I started working on the advice of a financial advisor I knew at the time (thank jah!). I paid the maximum amount possible for the tax benefit for the entire duration while I had it (adjusted it annually, after my salary increase). Of course what he didn't tell me was I wouldn't have access to the funds at all until retirement age

About two years ago I was hit with financial difficulties and the thing was made "paid up". After contributing to it for 8 years its a nice amount at the moment, but unfortunately I'm not allowed to continue with it. So for all intents and purposes I just told myself to forget about it until retirement age.

The one benefit I have though is I have the ability to change the underlying funds to what I prefer, when I prefer.

I have a couple of questions:

1) Over time I've learned that RA's aren't really the best way to invest your money and I need to start saving for the medium term anyway. I'm saying "saving" because I want to be able to send my kids to university (currently 7 and 4 years old). So I won't need to access any of the funds until at least 10 years from now. Any ideas?

2) The cease date on the RA above is 2033, the only problem with that is I'll be 52 then, not 55. It must have been an oversight on my part at the time (I was young, OK ). What happens in a situation like this?

3) There's a thread on here where we're discussing how much we've got stashed away for when the brown stuff hits the fan. Currently I have nothing. So I need something which I can access within say 7 days to a month's notice. What's the best way to go about this?

I'll eventually go see a financial advisor, just need to get an idea on whats currently the best investments out there.

 

[Alton Turner Blackwood]

Nobody?

 

[Purply]

Bit OT, but I also have one of those RA's that's "paid up", I only wished someone told me that one can't continue with them after being forced to take a 1 year break of payment due to financial issues

 

[pboy]

i'm in the same boat.
its sitting at a few hundred grand, and i will just forget about it till it comes in.
and yes I am going to change the funds to the the most aggressive I can. Its not like its the end of the world for me if I lose it... but who knows what I can get with a mad aggressive approach!

 

[OrbitalDawn]

RA's are a good way to save, for their specific purpose. But it should never be the 'only' investment you have. Look at unit trusts for better returns. Allan Gray lets you access your funds with no penalty.

http://www.allangray.co.za/individualInvestors.aspx#unittrusts-learnmore

*edit*

I think you can use unit trusts for your children's education, as well.

 

[pboy]

RA's are a good way to save, for their specific purpose. But it should never be the 'only' investment you have. Look at unit trusts for better returns. Allan Gray lets you access your funds with no penalty.

http://www.allangray.co.za/individualInvestors.aspx#unittrusts-learnmore

our RA's are unit trust based- well mine is atleast..
just complies with that section 21 restriction i think on allocation of funds.

 

[Alton Turner Blackwood]

RA's are a good way to save, for their specific purpose. But it should never be the 'only' investment you have. Look at unit trusts for better returns. Allan Gray lets you access your funds with no penalty.

http://www.allangray.co.za/individualInvestors.aspx#unittrusts-learnmore

*edit*

I think you can use unit trusts for your children's education, as well.

Thanks for the heads up!

 

[Alton Turner Blackwood]

i'm in the same boat.
its sitting at a few hundred grand, and i will just forget about it till it comes in.
and yes I am going to change the funds to the the most aggressive I can. Its not like its the end of the world for me if I lose it... but who knows what I can get with a mad aggressive approach!

Ha! I'd rather have only part of my portfolio in and aggressive fund.

You know what they say about the eggs and the basket

 

[pboy]

i'm not too worried about it. I have a few other mechanisms in place already planning to THAT day, so I am not going to worry much.
(i might need the money when I'm 55, but for now I'm going to risk it!)

 

[OrbitalDawn]

our RA's are unit trust based- well mine is atleast..
just complies with that section 21 restriction i think on allocation of funds.

Regulation 28 compliant, you mean?

And yes, RA's are unit trust based. I just meant a more aggressive one for a separate investment.

 

[pboy]

yes THAT one!
LOL!!

 

[themba990]

Bit OT, but I also have one of those RA's that's "paid up", I only wished someone told me that one can't continue with them after being forced to take a 1 year break of payment due to financial issues

Why not just start another one?

 

[Purply]

I have, but it would have been better continuing with the old one as I basically have to start from 0 again, the older one was sitting on R300 000 odd at the time. Or doesn't it really make any difference?

 

[^^vampire^^]

RA's for long term/retirement savings at 15% of your salary. Next year move it to 27.5% when they new regulation kicks in.
- Got Coronation/Allan Gray for good balanced growth
- Got 10x/Sygnia for low cost margins
- All unit trust based so that I can stop/start contributions with no penalties if the need ever arises.

Unit Trusts/Exchange Traded Funds for medium term/education funds for kids, car, house, ferrari (5 years +)
- Got Satrix and the like but I don't think I'd actually touch this money ever, it's sort of the backup retirement plan

Unit Trusts/Exchange Traded Funds for short to medium term (3 - 5 years)
- Got this for growing money over the next few years so I can put a deposit on a house.

Capitec accounts with balances under R10k for max interest and most liquid savings
- Got 5 of these to keep a decent amount liquid in case of any emergencies.

Stocks
- Got this just to mess around on the market. Wouldn't call this too much of a saving but nice to put some cash into a few individual stocks and see how they perform over time.

 

[vash87]

I have, but it would have been better continuing with the old one as I basically have to start from 0 again, the older one was sitting on R300 000 odd at the time. Or doesn't it really make any difference?

It doesn't really make a difference, the old one is still earning interest regardless.

 

[Purply]

It doesn't really make a difference, the old one is still earning interest regardless.

Good to know, thanks!

I always just assumed the higher the amount invested, the higher rate of interest one gets, but then again there are so many different RA's out there, would be difficult to say I guess.

 

[vash87]

I have a couple of questions:

1) Over time I've learned that RA's aren't really the best way to invest your money and I need to start saving for the medium term anyway. I'm saying "saving" because I want to be able to send my kids to university (currently 7 and 4 years old). So I won't need to access any of the funds until at least 10 years from now. Any ideas?

2) The cease date on the RA above is 2033, the only problem with that is I'll be 52 then, not 55. It must have been an oversight on my part at the time (I was young, OK ). What happens in a situation like this?

3) There's a thread on here where we're discussing how much we've got stashed away for when the brown stuff hits the fan. Currently I have nothing. So I need something which I can access within say 7 days to a month's notice. What's the best way to go about this?

I'll eventually go see a financial advisor, just need to get an idea on whats currently the best investments out there.

1) A unit trust is a good option. An endowment fund is also worth considering, depending on which tax bracket you're in. The benefit of using an endowment as an investment vehicle for education savings, comes down to it's function in estate planning. If you nominate your kids as the lives assured on the investment then in the unlikely event of your death, it doesn't trigger a capital gains tax event with respect to those funds. There's also no chance that the funds could be cashed in by your executor, if there is an unexpected liquidity problem in your estate after the calculation of CGT, accrual, estate duty and executors fees etc.

2) It's not anything to worry about. You'll still only be able to access the money from 55 though.

3) For an emergency you need something that doesnt fluctuate, since you never know when you'll need it. I would go the unit trust route, invested into a conservative portfolio such as the Stanlib Income Fund or Coronation Strategic Income Fund. It's easy enough to get inflation beating returns with very little risk due to the asset allocation of such portfolios, and the funds are easily accessible within a couple days.

Investments are not one size fits all solutions. The best portfolio/investment vehicle options can only be determined when all factors are taken into account, such as your age, size of your estate, current utilization of tax exemptions, current or future liquidity issues etc..

 

[Freaksta]

RA's for long term/retirement savings at 15% of your salary. Next year move it to 27.5% when they new regulation kicks in.
- Got Coronation/Allan Gray for good balanced growth
- Got 10x/Sygnia for low cost margins
- All unit trust based so that I can stop/start contributions with no penalties if the need ever arises.

Unit Trusts/Exchange Traded Funds for medium term/education funds for kids, car, house, ferrari (5 years +)
- Got Satrix and the like but I don't think I'd actually touch this money ever, it's sort of the backup retirement plan

Unit Trusts/Exchange Traded Funds for short to medium term (3 - 5 years)
- Got this for growing money over the next few years so I can put a deposit on a house.

Capitec accounts with balances under R10k for max interest and most liquid savings
- Got 5 of these to keep a decent amount liquid in case of any emergencies.

Stocks
- Got this just to mess around on the market. Wouldn't call this too much of a saving but nice to put some cash into a few individual stocks and see how they perform over time.

Regarding capitec. It's changed the more money in the account the higher the interest.
https://www.capitecbank.co.za/global-one/save/rates-and-fees

 

[vash87]

You can have as many RA's as you like.
It's probably better to have more than one and at different companies.

Having it t paid up is not a bad thing, but when you start a new one you may be nailed with fees again depending on where you go.

Instead of having separate RA's with different companies, it's possible to have one RA with exposure to portfolios from multiple management companies. All your servicing can then be done in one place.

 

[HeftyCrab]

RA's for long term/retirement savings at 15% of your salary. Next year move it to 27.5% when they new regulation kicks in.
- Got Coronation/Allan Gray for good balanced growth
- Got 10x/Sygnia for low cost margins
- All unit trust based so that I can stop/start contributions with no penalties if the need ever arises.

Unit Trusts/Exchange Traded Funds for medium term/education funds for kids, car, house, ferrari (5 years +)
- Got Satrix and the like but I don't think I'd actually touch this money ever, it's sort of the backup retirement plan

Unit Trusts/Exchange Traded Funds for short to medium term (3 - 5 years)
- Got this for growing money over the next few years so I can put a deposit on a house.

Capitec accounts with balances under R10k for max interest and most liquid savings
- Got 5 of these to keep a decent amount liquid in case of any emergencies.

Stocks
- Got this just to mess around on the market. Wouldn't call this too much of a saving but nice to put some cash into a few individual stocks and see how they perform over time.

I could be wrong, but regarding the Capitec accounts, im sure there was a thread sometime back where Capitec silently changed it so that the more money you have the more interrest you earn.

Wait... got it.

http://mybroadband.co.za/vb/showthread.php/595511-Capitec-crooking-us-out-of-interest-since-interest-rates-changed