TFSA (2016)

[Hamster]

Copy of a thread on the ShareForum: http://shareforum.co.za/shares/tfsa-(2016)/

So it's been a year, I learnt a lot (fully aware of my n00b status still) and I'd like to get some ideas on what you guys think is the best make up for my TFSA. There was a JSE talk last night on the topic and the video will be posted later today apparently.

So initially I started of with DBXWD and STXIND in my TFSA. But further reading indicated to me that DBXWD in a TFSA is probably not optimal. Reason being that if I invest in DBXWD it is for the long term (I still have another 25-30 years to go before I retire) and all I'll be scoring on one day is not paying capital gains on my earnings (dividends on the it is almost non-existent plus foreign tax etc). Given that we don't know what capital gains will be in 30 years time I'm really seeing no benefit in having it in my TFSA vs having it in my normal long term investment account.

So, my current thinking is this:
GIVFIN - 25%
PTXSPY - 25%
STXIND/GIVIND - 50%

These give reasonable growth vs. dividends. The reason for combining STXIND and GIVIND is to offset the biggish weightings of companies like NPN (maybe split it 65% STXIND, 35% GIVIND).

I really want to come up with a weighting and stick with it for a long time. What do you guys think?


PS: Other considerations include Top40 type ETFs like NFEMOM, MAPPSG, MAPPSP and your regular RMBT40 types. MAPPSP gives better dividends but at the expense of growth. In fact it feels like a waste having a top40 in your TFSA although people like Simon Brown are gaga over the equally weighted one and have it in their TFSAs apparently.

 

[supersunbird]

So where is your international exposure?

 

[Hamster]

So where is your international exposure?

Outside the TFSA in other investments. A lot of the companies in those ETFs have offshore exposure anyway, take these companies in STXIND for example:

SABMILLER PLC | 18.90
NASPERS LTD | 17.40
CIE FINANCIERE RICHEMONT SA | 13.31
MTN GROUP LTD | 7.71
BRITISH AMERICAN TOBACCO PLC | 5.70
STEINHOFF INTERNATIONAL HOLDIN | 5.12

That's almost 70% of the the STXIND right there (6 of the 25...scary?) with offshore exposure already. This is not even taking into account property shares like NEF.

Another problem with offshore dividends which I found out the other day is that you still pay foreign tax on them even if they are in the TFSA.

 

[supersunbird]

OK cool. As long as you know all that.

If one is only putting 20% to 27.5% in retirement funding, RF, (and thus 25% international exposure limit) and then above that into TFSA, then I'd say half the TFSA should be international (even with the negatives regarding dividends tax).

But if above and then still putting in more (outside of RF and TFSA), then the local focused TFSA and the outside TFSA international might make sense.

But then one also has to consider that one is not too heavy into just a handful of companies (as listed) overall in your RF and TFSA.

 

[Hamster]

My thinking is that if you can find a diversified balance between growth and dividends that you'll be saving more on tax in the long run.

I keen to hear what others are planning to do (or are doing) with their TFSA's though.

 

[semblance]

Hopefully you can teach me something.

So for the TFSA, I've always thought since you can't put more than 30k/year in - why not use the TFSA as a pure dividends portfolio.

My reasoning is that although the dividends stocks don't grow as fast, they give back more in terms of dividends which you can use to buy more funds within the TFSA.

In essence, your portfolio is funding itself every time dividends come on through, in addition to the 30k you put in every year.

Sure you could do the same with the non-dividend related funds, but this could be a way to diversify your entire portfolio with the TFSA being your 'dividend' diversification?

Please someone who has better knowledge on this, advise on the above strategy...

 

[Hamster]

Found the video:

[video=youtube_share;rd6HHnf_5jY]https://youtu.be/rd6HHnf_5jY[/video]

 

[supersunbird]

My thinking is that if you can find a diversified balance between growth and dividends that you'll be saving more on tax in the long run.

I keen to hear what others are planning to do (or are doing) with their TFSA's though.

Will be going into Satrix Unit Trusts for my TFSA:

50% - Satrix MSCI World Equity Index Feeder Fund
30% - Satrix Equally Weighted Top 40
20% - Satrix Property Index Fund

 

[Hamster]

So what Simon is proposing (bearing in mind I think this is for people who only save in a TFSA):

In retirement:
BBET40: 10%
NFGOVI: 40%
DIVTRX: 10%
PTXTEN: 20%
DBXWD: 20%

Within 10 years of retirement:
BBET40: 20%
NFGOVI: 20%
DIVTRX: 15%
PTXTEN: 15%
DBXWD: 30%

More than 10 years to retirement:
BBET40: 20%
NFGOVI: 10%
DIVTRX: 15%
PTXTEN: 15%
DBXWD: 40%
Modify message

 

[Hamster]

Will be going into Satrix Unit Trusts for my TFSA:

50% - Satrix MSCI World Equity Index Feeder Fund
30% - Satrix Equally Weighted Top 40
20% - Satrix Property Index Fund

Makes sense especially if you compare it to Simon's stuff.

So if one should consider going through ETFs (keeping his weightings in mind) you can probably replace the BBET40 and NFGOVI with MAPPSG and switch to MAPPSP closer to retirement.

If you look at how he has weighted it looks like a well diversified portfolio for all your savings. So if you have more than R30k per year do you split it up and keep some of it in the TFSA or just reproduce a similar weighting outside of it.

Decisions decisions...

 

[InTheWild]

my tfsa allocation this year will largely (if not all) go towards offshore, I'll be making use of the 27.5% RA contributions (I'm self employed and have no other provident funds), so I have to increase the offshore portion heavily in my tfsa. So foreign tax or not - I'll be going for dbxwd this year. Otherwise my total investment portfolio are way to concentrated to SA equities.

 

[supersunbird]

my tfsa allocation this year will largely (if not all) go towards offshore, I'll be making use of the 27.5% RA contributions (I'm self employed and have no other provident funds), so I have to increase the offshore portion heavily in my tfsa. So foreign tax or not - I'll be going for dbxwd this year. Otherwise my total investment portfolio are way to concentrated to SA equities.

I approve of this post*

*if my approval is of any worth that is

 

[Hamster]

Think the Rand is too weak for full offshore. I'll phase it in or hold off a bit to see if it strengthens.

 

[supersunbird]

Think the Rand is too weak for full offshore. I'll phase it in or hold off a bit to see if it strengthens.

Or it might go weaker, but yes, I'd do the R2500pm thing, not lump sums. Only bad thing about the Satrix Unit Trusts, R10 000 minimum for lumpsums.

 

[strego]

When exactly are you allowed to top up the tfsa with the next 30k? Maybe a silly question since I can't seem to find a definite answer.
1st of Jan every year or start of new FY?

 

[Hamster]

When exactly are you allowed to top up the tfsa with the next 30k? Maybe a silly question since I can't seem to find a definite answer.
1st of Jan every year or start of new FY?

Financial year to financial year. 1st of March

 

[SauRoNZA]

When exactly are you allowed to top up the tfsa with the next 30k? Maybe a silly question since I can't seem to find a definite answer.
1st of Jan every year or start of new FY?

Well if you do it only once a year it shouldn't really matter.

As long as you do it the same time you did it the very first time.

 

[strego]

For others that may also need a definite answer to this, just called my investment firm and the answer is at the start of the new tax calendar year, i.e. 1st of March

 

[strego]

Thanks Hamster