Short to Medium term investment

[Ianvn]

We recently sold our house and have some cash left over after paying off all cars and card debt. We are banking with fnb and are considering putting the money into a 32day notice savings account. We also want to do monthly payments into this account. TFSA for both of us are already maxed out for the year.

This money will in a best case scenario not be touched for the next 3 years. But want it available for emergencies.

Is a 32 day notice (6.85%) account the best option for this?
I know there is a money maximizer available with a min deposit of 100000 at 7.10‰. But what happens when the invested amount drops below 100000?

Any recommendations would be appreciated.

 

[raeesdawood]

Im a financial advisor with discovery...i could help you with a flexi investment with about a 9-10% return depending on your risk profile...i will take a 100% commision sacrifice...since u on the forum...

 

[DrJohnZoidberg]

Im a financial advisor with discovery...i could help you with a flexi investment with about a 9-10% return depending on your risk profile...i will take a 100% commision sacrifice...since u on the forum...

Not a very professional first impression.

I wouldn't trust anyone that introduced themselves with grammar and spelling like this.

 

[DrJohnZoidberg]

OP, Money Maximiser is a good choice but as you mention you need at least R100k in there all the time - you will not earn any interest if it drops below this: https://www.fnb.co.za/downloads/sal...AndConditions/MoneyMaximiser_AccountRules.pdf

 

[backstreetboy]

Sygnia Money Market fund or Skeleton Balanced 40 fund.

 

[silkenphoenixx]

Sygnia Money Market fund or Skeleton Balanced 40 fund.

+1. This is probably your best bet, fees are pretty low on Sygnia.

 

[RedViking]

Not a very professional first impression.

I wouldn't trust anyone that introduced themselves with grammar and spelling like this.

South Africa. The fact that the sentence was readable is all that counts.

 

[mogiletsiZA]

Is a 32 day notice (6.85%) account the best option for this?
I know there is a money maximizer available with a min deposit of 100000 at 7.10‰. But what happens when the invested amount drops below 100000?

Any recommendations would be appreciated.

At an interest rate of 6.85% from FNB's 32 Day Notice, your capital is at least R1m.
For convenience and accessibility, I would suggest that you put it into FNB Money Maximiser (MM), but would consider that you keep the balance above the R100k to ensure interest being earned. This MM account can then be your emergency account, earning you not the best, but a competitive interest rate that is easy for transfers to and from your FNB accounts immediately.

Unless you're considering a deposit on a house or a large purchase after the 3 years, this R1m should be more than sufficient as an emergency fund and is probably too much to keep in cash in any case. Therefore, aim to stick with the R100k minimum.

 

[silkenphoenixx]

At an interest rate of 6.85% from FNB's 32 Day Notice, your capital is at least R1m.
For convenience and accessibility, I would suggest that you put it into FNB Money Maximiser (MM), but would consider that you keep the balance above the R100k to ensure interest being earned. This MM account can then be your emergency account, earning you not the best, but a competitive interest rate that is easy for transfers to and from your FNB accounts immediately.

Unless you're considering a deposit on a house or a large purchase after the 3 years, this R1m should be more than sufficient as an emergency fund and is probably too much to keep in cash in any case. Therefore, aim to stick with the R100k minimum.

If you're talking about that amount of cash then the interest becomes taxable pretty quickly - just something to note.

 

[mogiletsiZA]

If you're talking about that amount of cash then the interest becomes taxable pretty quickly - just something to note.

Yes, true, but that amount of capital will produce taxable gains no matter what savings vehicle he chooses. It would make sense to split the money between a interest generating MM account and an ETF that can hold the capital gains, gradually selling them off for a profit.

 

[silkenphoenixx]

Yes, true, but that amount of capital will produce taxable gains no matter what savings vehicle he chooses. It would make sense to split the money between a interest generating MM account and an ETF that can hold the capital gains, gradually selling them off for a profit.

Fair point - CGT is usually at a lower rate though, as interest will be taxed at whatever marginal rate the OP is at. If he's got that amount of money waiting to do something, it's probably one of the higher ones.

 

[mogiletsiZA]

Fair point - CGT is usually at a lower rate though, as interest will be taxed at whatever marginal rate the OP is at. If he's got that amount of money waiting to do something, it's probably one of the higher ones.

Agreed, CGT is lower (for now:erm, but accessibility becomes an issue with ETF shares. I'd say Max out MM within 24k exclusion annual rate (300k to be safe for three years with compounding) and the rest (700k+) he should purchase ETF vehicle.

 

[silkenphoenixx]

Agreed, CGT is lower (for now:erm, but accessibility becomes an issue with ETF shares. I'd say Max out MM within 24k exclusion annual rate (300k to be safe for three years with compounding) and the rest (700k+) he should purchase ETF vehicle.

It does kind of depend on how liquid the cash needs to be. ETFs can be volatile and you typically only want to put your money there if you are planning to leave it there for 3-5 years at least.

If OTOH you're planning to buy another house in 6 months' time, then a money market is probably okay, but you will get a small income tax bill.

 

[Ianvn]

At an interest rate of 6.85% from FNB's 32 Day Notice, your capital is at least R1m.
For convenience and accessibility, I would suggest that you put it into FNB Money Maximiser (MM), but would consider that you keep the balance above the R100k to ensure interest being earned. This MM account can then be your emergency account, earning you not the best, but a competitive interest rate that is easy for transfers to and from your FNB accounts immediately.

Unless you're considering a deposit on a house or a large purchase after the 3 years, this R1m should be more than sufficient as an emergency fund and is probably too much to keep in cash in any case. Therefore, aim to stick with the R100k minimum.

I really wish it was close to or over R1m
The reason I have been considering keeping it at FNB is the ease of access to the funds if needed. Up until now my emergency fund was my house bond which does not exist anymore.

We want to relocate in about 2 years from now and then keep that fund for about another 2-3 years before using it for a deposit. So the fund should really just be there for emergencies.

 

[Ianvn]

Sygnia Money Market fund or Skeleton Balanced 40 fund.

Thanks, I will have a look at those options as well.

 

[mogiletsiZA]

I really wish it was close to or over R1m
The reason I have been considering keeping it at FNB is the ease of access to the funds if needed. Up until now my emergency fund was my house bond which does not exist anymore.

We want to relocate in about 2 years from now and then keep that fund for about another 2-3 years before using it for a deposit. So the fund should really just be there for emergencies.

Because of small, yet significant exposure to equities in the Sygnia Balanced 40 Fund, you will likely get a slightly better return than FNB MM in a "decent" year., but who knows what the market will do:erm: However, accessibility is an issue and so is uncertainty with performance - the fund only grew 3.0% in 2016, but the year before did around 10% - you would have no guaranteed 7.15% growth each year (excl R65 p/m fee) as in MM.

You're saving for a bond, therefore a guaranteed MM account is safest to ensure at least keeping up with inflation. This account can also double as your emergency account as you will have immediate access. Perhaps aim to use the initial capital amount as your deposit on the house, leaving behind the interest earned to keep account actively earning interest - above 100k.

 

[supersunbird]

I'd put it in the Coronation Money Market fund initially.

Yes, you'd pay interest as per your income tax level rate on the interest above R23 800 per year.

 

[silkenphoenixx]

I'd put it in the Coronation Money Market fund initially.

Yes, you'd pay interest as per your income tax level rate on the interest above R23 800 per year.

Though to be fair you'd pay tax on interest income if you put it in any balanced fund, because they usually have some exposure to cash / bonds and a tiny fraction of listed property. Depending on the proportions though it may be lower than the exemption amount.

 

[supersunbird]

Though to be fair you'd pay tax on interest income if you put it in any balanced fund, because they usually have some exposure to cash / bonds and a tiny fraction of listed property. Depending on the proportions though it may be lower than the exemption amount.

To hit R23 800 tax exemption on interest the balanced fund investment would have to be very very big.

 

[bchip]

To hit R23 800 tax exemption on interest the balanced fund investment would have to be very very big.

23,800 / 6% / 40% = R 991k @ 100% income return