Savings strategy

[Galactica]

Starting from this month I'm thinking of saving at least R3000 monthly for the next 9 to 12 months. I'm considering dividing this into two Money market account then withdrawing it as a lump sum (+- R30 000 to R40 000) having gained a decent amount of interest. With the lump sum I will judiciously buy shares in 3 to 4 companies on the JSE, these shares will be viewed as a long term investment.

I'm wondering, would it be better to put these monthly savings into a fixed term account(s) rather than money market? (In terms of interest rate and protection of my capital). It is important that wichever account I choose allow me to transfer ad-hoc amounts (ranging from R500 to R1500) anytime.

As an alternative to the above (and keeping in mind the end goal of buying shares) would it be wiser to rather put this R3000 to R4500 straight into shares in monthly installments instead of waiting for a lump sum? (I already put R500 into Satrix 40 every month).

Would waiting 9 to 12 months to buy shares miss out on the current recession-hit and therefore low-priced equities?

 

[HavocXphere]

You need more than 4 shares to get any diversification effect, which you kinda need.

R3k isn't good on share tx. The fees will kill the profit unless its very long term.

 

[BigAl-sa]

1. Lance will reply to this thread, listen to what he says.
2. The moneymarket is a really vrot investment at the mo.
3. To make money on the stock exchange you need to monitor it on at least a 1/2 daily basis (2-hourly my gut feel).

My take: get a good advisor and push your money into unit trusts.

 

[wizdumb]

try saitrix40 for shares, maybe 1/2 of your savings, and the rest in a moneymarket acc

 

[Billy]

Satrix 40 And forget the shares

 

[alt146]

Not 100% an answer to the question posed, but the best advice I've gotten from a financial adviser is to split your extra money into three parts -

Put the first third into a vanilla savings account, to cover any emergencies and unexpected costs. It doesnt help you invest but then struggle to get money out when your car breaks down or something. Try build the amount in the account to about twice your monthly expenses, so that worst case you can survive long enough to find a new job should you suddenly be retrenched.

Put the second third into long term investments. Unfortunately I can't really help with advice on this bit - I dump all my long term stuff into my bond. To me reducing my guaranteed to be 10% debt is a better investment than >10% interest that isnt guaranteed, but I dont like risking my money. I would say that unless you have a fair amount of time and a good idea of how the markets work, either going with a financial advicer or vanilla unit trusts is probably the best way to go.

And then spend the last third on yourself as a reward for investing and so that you dont feel like being wise with your money is a pain in the ass.

Anyway, it's more of a general way to handle your money than a specific investment option, but it works pretty well and investing shouldn't be something you just do for a couple of months every now and again.

 

[Galactica]

You need more than 4 shares to get any diversification effect, which you kinda need.

I already have some shares on three companies although not much (worth about R10 000 in total) but I see what you mean.

R3k isn't good on share tx. The fees will kill the profit unless its very long term.

This to tends supports my original idea of putting together a lump sum, thanks for that tip.

 

[Galactica]

try saitrix40 for shares, maybe 1/2 of your savings, and the rest in a moneymarket acc

I already have shares about R9 500 on Satrix40 (and I add R500 to this every month), won't putting half my savings there be putting too many eggs on one basket, defeating the diversification imperative? I had thought that if I do invest on a JSE index tracker again it would be on Saftrix DIVI or Satrix RAFI.

 

[Galactica]

1. Lance will reply to this thread, listen to what he says.
2. The moneymarket is a really vrot investment at the mo.

What is a better place to put cash for 9-12 months?

3. To make money on the stock exchange you need to monitor it on at least a 1/2 daily basis (2-hourly my gut feel).

This would be a long term investment (5 years+) as I said on the OP, why would I need to monitor it daily?

My take: get a good advisor and push your money into unit trusts.

But equities outperform unit trusts in the long term moes?

 

[Ecco]

I would say just go monthly into additional satrix shares. You already have some Satrix40, now diversify by tracking different indices.

Maybe use some portion to go to a money market account just to have some cash for emergencies. Money market accounts are very liquid.

 

[Galactica]

Satrix 40 And forget the shares

If you check the Sunday Times Top 100 companies 2008, specific shares yielded a greater return over 5 years than any index tracker (I'm talking compound growth of 80%+). Yes it's high risk but the rewards can be fantastic, there are people out there who benefitted from those returns and I also want make myself a candidate.

Just as an example R10 000 invested into Grindrod in 2003 had grown to R130 000 after five years and they didn't even make the top 5 for performance.

 

[Galactica]

Not 100% an answer to the question posed, but the best advice I've gotten from a financial adviser is to split your extra money into three parts -

Put the first third into a vanilla savings account, to cover any emergencies and unexpected costs. It doesnt help you invest but then struggle to get money out when your car breaks down or something. Try build the amount in the account to about twice your monthly expenses, so that worst case you can survive long enough to find a new job should you suddenly be retrenched.

Put the second third into long term investments. Unfortunately I can't really help with advice on this bit - I dump all my long term stuff into my bond. To me reducing my guaranteed to be 10% debt is a better investment than >10% interest that isnt guaranteed, but I dont like risking my money. I would say that unless you have a fair amount of time and a good idea of how the markets work, either going with a financial advicer or vanilla unit trusts is probably the best way to go.

And then spend the last third on yourself as a reward for investing and so that you dont feel like being wise with your money is a pain in the ass.

Anyway, it's more of a general way to handle your money than a specific investment option, but it works pretty well and investing shouldn't be something you just do for a couple of months every now and again.

Sounds reasonable, thanks.

 

[Ecco]

If you check the Sunday Times Top 100 companies 2009, specific shares yielded a greater return over 5 years than any index tracker (I'm talking compound growth of 80%+). Yes it's high risk but the rewards are fantastic, there are people out there who benefitted from those returns and I also want make myself a candidate.

Just as an example R10 000 invested into Grindrod in 2003 had grown to R130 000 after years and they didn't even make the top 5 for performance.

Trouble is picking those shares. Will probably need to research a lot.

 

[Galactica]

Trouble is picking those shares. Will probably need to research a lot.

You are right and everyday I'm reading business publications and learning. The Sunday Times also published a I-net Bridge Concensus Forecast with 71 companies.

 

[ksweb]

You should start by determining your appetite for risk. From there you can start looking at investments which suit your needs.

 

[Hosehead]

You should start by determining your appetite for risk. .

Can't be overstated
If you can't afford to loose all the money then stick with conservative investments

 

[Sly21C]

I like what you are doing Galactica. I have 30% of my total moola in a unit trust, 40% in JSE listed company shares ( I bought shares from 2 companies), 15% as an emergency fund and the rest I use to buy stuff in cash. Like for example I'm planning to purchase a new all-in-one desktop computer as well as a new cellphone, all in cash, i hate contracts (I wish I can buy a car in cash ). I wanna save more though, in the not too distant future, I wanna start doing forex trading and single stock futures/CFD. I'm learning about that that stuff at the moment.

 

[fastesthamster]

You are right and everyday I'm reading business publications and learning. The Sunday Times also published a I-net Bridge Concensus Forecast with 71 companies.

Ah well, watch out for those black swans.