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Everything posted by SaurusDNA

  1. Problem is, in a TFIA, there are no tax savings in offshore ETFs except capital gains...
  2. Here are the main differences between a TFIA and an RA: Tax savings: TFIA - pay tax now (TFIA savings is paid for out of after-tax income) - save a ton of tax later. RA - All tax gets refunded now, but you pay tax on your income when you retire. (You should use the annual tax refund for retirement savings too.) Availability of money: TFIA - Can be withdrawn without penalties, but then you can't put the money back. RA - Practically, you can't withdraw anything until retirement without severe consequences. TFIA - Gives a lump sum on withdrawal. RA - Pays a monthly income after retirement. TFIA - You manage your own money. RA - Your money is managed by a fund manager. So all in all - it's best to have both an RA and a TFIA. As Bandit says, it's nice to have the government fund a huge chunk of your retirement now, but then you also want to reap the benefits of a tax-free income after retirement too.
  3. For RA's, I'd go for a company like Allan Gray or Alexander Forbes. Companies like Old Mutual , Sanlam and Liberty Life are also reputable, but their fees tend to be higher and their returns lower in my experience (although you should do some research first to verify the facts.) I think Bandit has hit on something very, very important. If you see a financial adviser, the first thing they will try and do is sell you life insurance, because the commission on that is huge compared to the commission on an RA. Don't give in - tell them you want an RA and nothing else at this stage.
  4. Oh, another thing - with RA's, starting young is huge, due to the power of compound interest. A 21-year old who invests R1000 into an RA for 10 years (until age 31) and then never contributes another cent again, will earn more at retirement than someone who starts at age 31 and pays R1000 for 34 years until age 65. Such is the power of compound interest. Thus, start as soon as possible with your RA!!!
  5. Yes, it is definitely worth getting an RA! An RA works as follows: - You pay a monthly investment premium not exceeding 15% of your income (or you lose some tax benefits). -The premium is invested in actively managed funds (similar to units trusts) on your behalf by the finance house. - When you do your tax return each year, SARS refunds all the tax paid on the amount you invested during the tax year for your RA. (In other words, since you will not be relying on a state pension later, SARS will waive the tax now of any money earned that you invest in an RA as an incentive). - You cannot withdraw the money until retirement age. (Well, theoretically you can draw the money before retirement but there are extremely heavy penalties plus you have to pay back all the tax you ever got refunded, leaving you with very little). - The money is untouchable by anyone, even if you go insolvent - it will be there when you retire. On retirement, you have two choices (or you can split your money into these two options according to the percentage you choose): 1) You can buy a life annuity from the insurance company with your money (or part of your money). This means you pay a once-off premium (a percentage of your RA savings) for a guaranteed salary (plus inflation-related annual increases) for the rest of your life. You will receive a guaranteed salary until the day you die, irrespective of the age that you die. After you die, you don't get any of your capital back from the money spent on this option. 2) You can invest in a living annuity with your money (or part of your money). This means that the capital is invested and you take a certain earnings from the investment each month. Your salary is not guaranteed, but varies according to the market. This option pays a higher monthly retirement salary, but at some age, if you live longer than estimated, the money may run out (since you draw a little of the capital each month). If you die earlier than expected, the remaining capital forms part of your estate. Most people do a mix of the two - for example, use half their RA to make sure they are supported until death, and the other half to live the good life until, say 80 years old.
  6. SaurusDNA

    Local ETFs

    It's hard to know which local ETFs are best to invest in. At least with the offshore ones, ASHGEQ or STXWDM are no-brainers and either of them serves as excellent all-rounders. But locally, we don't get "All-rounders" of the same quality. Your Top40 and Top50 ETFs are market capped and you end up having 70% of your money in four or five shares, which is certainly not great. Then, there are the myriad of smart beta ETFs, each claiming to have a better methodology than the rest, but all untested. So for now, with my local ETFs, I have one third of my local portion of my TFIA in the new multi-factor SMART, one third in the momentum methodology NFEMOM and a third in quality shares with great fundamentals (STXQUA). But if you had to choose just one (or two) local ETFs, what would it be and why?
  7. I'm maintaining 24% of my TFIA in PTXTEN. Sometimes I feel it might be a bit much and that I should reduce it to 20%, but since the other 76% of my TFIA is all equities, I think it should be okay.
  8. I was happily surprised by SMART's distribution. It's the first time SMART has distributed (being a new ETF) and it was way better than I expected at 44c per share.
  9. I don't think I'd sell my CTOP50 or STXDIV if I were you. Property is a different asset class and its behaviour is (theoretically) uncorrelated to equities, and ideally you should have both equities and property. If I were you, I'd keep what you have and buy PTXTEN from scratch. Also, like Bandit suggested, you should throw some offshore equities into the mix as well.
  10. SInce the first few years' repayments is mainly all interest and no capital, the difference in monthly repayments between a 20 year loan and a 30 year loan is only around 8.3% difference. It would be better to buy a house that is 8.3% cheaper and pay the same payment you would over 20 years.
  11. From personal experience and the experiences of several of my friends, SA Home Loans tends to be much more flexible and willing to negotiate interest rates than the banks. Recently, a friend of mine called them and offered to move her Nedbank home loan to them if they offered a better interest rate. She was paying 12% at Nedbank and they dropped her interest rate to 10.2% and covered the bond costs. And when I was buying, SA Home loans made me an offer of prime rate. I asked them if they would drop the lending rate by 0.25% and they said they would do so if I increased my deposit by a certain amount, which I did. So, after approval in principle, they certainly are willing to negotiate interest rates depending of your, and the property's, risk profile, as well as the deposit you're prepared to put down. Also, I've had my bond with them for almost seven years and I'm very happy with their service. You really should give them a call...
  12. I've currently got: Inside TFIA: SMART: 12% NFEMOM: 12% STXQUA: 12% PTXTEN: 24% ASHGEQ: 20% STXEMG: 10% SYG4IR: 10% Outside TFIA: GLODIV: 33% GLPROP: 33% STXNDQ: 33%
  13. That is an unusual but interesting mix!!!
  14. Every month for the past few years, I have looked forward to Nerina Visser and Simon Brown doing their two episodes per month of "ETF investor" that can be watched on YouTube. And then in September, suddenly nothing! Does anyone know what happened?
  15. Yes, and to be more precise: 7% STXEMG (excluding Africa) + 93% STXWDM = ASHGEQ Except that the split of securities is also slightly different. STXWDM has 25% financials and 18% Tech, whereas ASHGEQ has 15% Tech and 14% financials. ASHGEQ is more diversified across sectors as well as countries.
  16. I don't know if "bad idea" would describe investing in both, but it is certainly not the most efficient. Firstly, your fees will be duplicated, and secondly, basically ASHGEQ is almost the same as STXWDM plus additional exposure to emerging markets (ie. China, Japan, Asia, South America and Australia). Doing both kind of defeats the object as you are basically then simply cutting the emerging market exposure portion of ASHGEQ in half, which defeats the whole point of going ASHGEQ in the first place. There is an excellent article on Simon Brown's JustOneLap that I would highly recommend that you read carefully before making your choice: https://justonelap.com/etf-understanding-the-ashburton-1200-etf/ P.S. I have ASHGEQ in my TFIA and my wife has STXWDM in hers. I think you should decide whether you would like emerging markets exposure in your ETF of if you only want developed markets. Then choose the appropriate one and buy that one only, else you will be wasting money on extra fees every month. Both are excellent, and whichever way you choose, you won't be making a mistake.
  17. If I were to choose just one ETF to invest in, without a doubt in my mind, it would be the Ashburton Global 1200 Equity ETF (ASHGEQ). If I had to choose just one, I would never go country specific like US or Japan - this just has too much concentration risk - get a bad president or a war in that country and might just lose all your money - I'd definitely go for a world index. Therefore, from your list, I'd immediately disqualify SYGJP and SYGUS. From the two world ETFs on your list, both STXWDM and SYGWD track the same index but Sygnia charges double the fees. Therefore it gets disqualified too. So we are left with STXWDM, which is an excellent ETF and would be my second choice after ASHGEQ. There are two reasons why I prefer ASHGEQ over STXWDM: 1) ASHGEQ has some emerging market exposure, which traditionally provides better growth than developed markets over long periods, whereas STXWDM is only developed markets (safer, but less growth). 2) ASHGEQ is more diversified than STXWDM, lowering the downside risk. ASHGEQ is slightly more expensive than STXWDM in terms of fees, but I still think the possibility of better returns from ASHGEQ, as well as the better diversification, do justify the fees and will be worth it in the long run. So for your second question - what would be a good first ETF? Either Satrix MSCI World (STXWDM) or Ashburton Global 1200 (ASHGEQ) would be excellent choices, in my opinion.
  18. Yes, it's not as great as usual... Here are the dividends for the past five years for PTXTEN:
  19. Your timing is impeccable! PTXTEN usually declares their 3rd quarter dividend on or around 4 October, to be paid out in the middle of the month. So you can expect a nice bonus from the ETF later in the month! In fact, I've received over R1000 dividends from PTXTEN already in my TFIA this year,. It's a lovely feeling seeing that much money just suddenly appear in your account out of nowhere!
  20. I love my PTXTEN ETF! The dividends are fantastic at 9.4% per annum (currently), and with the new changes, I'm hoping for excellent growth as well. I wouldn't be surprised in this one gives the best total return of all over the next few years. Plus, it has never been this cheap to invest in property! On top of that, the massive dividends are completely tax free, making this particular ETF one of the best ETFs on the market in terms of tax savings. GLODIV is a really nice ETF too, but i think it is better outside of a TFIA as the foreign dividends are not tax exempt. If it were up to me me, I'd stick with STXWDM.
  21. Hi janvdwest I'm not a tax expert, but the way I understand the tax on trading is as follows: When buying or selling a share, you first pay brokerage and Strate fees (which are not taxes), and VAT is levied on these costs. The first direct tax you pay is the securities transfer tax of 0.25% which is levied on every transfer of a security. When you sell a share at a higher price that you bought it for, only the profit is considered to be capital gains (not the whole proceeds of the sale). The first R40,000 of capital gains you make per year is exempt from tax. Any capital gains above R40,000 is taxed at 18% p.a. for individuals and 22.4% p.a. for companies. When a South African company pays a dividend, it withholds tax of 20% on the dividend that it pays (not 15% as you mentioned in your post - that was increased in 2017). When an individual receives the dividend from a South African company, it is exempt from tax, because the tax has already been withheld and paid over to SARS by the company paying the dividend. There is no VAT on dividend income. Income earned from REITs (Real Estate Investment Trusts) is not considered as dividends and there is no withholding tax on these. However, this income should be declared as income on your annual income tax return and will be taxed along with your overall assessment according to your normal tax bracket in the same way as if you rented a property out yourself. When you finally dispose of your REITs, then any profit made from the difference between the selling and buying price of the REITs is considered a capital gain, taxed at 18% p.a. for individuals and 22.4% p.a. for companies (also subject to the R40,000 exemption for total capital gains per year). Then, finally, dividends, income and capital gains earned within a tax free investment account are exempt from all of the above taxes (except for VAT on brokerage and strate fees, of course).
  22. Even though it's only until 20 September, most of them on that list will probably do it for you for free anytime. It's how many conveyancers get new clients
  23. Coincidentally, this week is National Wills Week (or "Free will" week) at many participating attorneys in South Africa. A list of participating attorneys who will do your will for free can be found on the website of the "Law Society of South Africa" https://www.lssa.org.za/our-initiatives/advocacy/national-wills-week But many other attorneys who didn't send their names through will still do it for you.
  24. No - basically the executor will consolidate your estate (ie. he/she will get an attorney to search for all your accounts and policies using your ID number) and will combine these into a trust account. Then your will will say how to divide the total. No need to specify details. You can usually just say "30% to X and 70% to Y" unless, of course, you have personal items that you want to go to someone in particular, then you can specify those. Many attorneys (conveyancers in particular) will actually do a will for free without expecting anything in return. They may just suggest that " One day if you sell your house you can nominate me as the transferring attorney" or something along those lines. Most people will feel loyalty towards that particular attorney because they do/regularly update your will for free. In essence, you can actually do your will yourself, but it will only be valid at the Masters office (when it is executed) if it complies to all the procedural rules. These include stuff like that the witnesses must be identified in the will and be traceable and other technicalities like this, since there is a lot of scope for fraud with wills (because there are usually many versions of a will and only the most recent one applies, so the Master has to verify that you actually did the will.) If anybody contests the will, the witnesses must be traceable and swear that they signed the will etc. This is to protect the rights of the deceased. Thus it is in your best interest to contact an attorney.Tell them you want to appoint family members as executors. It should usually cost you anything between free (minimum) and R1000 maximum.
  25. The problem with banks or professionals is that they do your will for free, but then they make themselves the executor of the estate and take a hefty chunk of your estate after you die. Much better to pay an attorney a once-off fee for doing the will (it's usually about R1000 at most) and then make two trusted family members the executors. Then everything goes to the beneficiaries - the way it should be, with no fees for administering the will.
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