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Sideways Onion

Good afternoon from a newbie, help, thoughts and opinions please.

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Posted (edited)

Good day all,

 

Our questions

1) If we need R50k a month to survive when we retire how much do we need to have invested in total ?

2) If the  South African government implemented prescribed investments would it affect any investments which are not RA's ?

 

Any input would be greatly appreciated.

 

Have a great weekend all.

 

Sideways

 

 

 

Edited by Sideways Onion
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Posted (edited)

While there is certainly merit to the argument that on average, in the long run, passive investments perform at least as well as, if not better, than actively managed investments, the funds in which Momentum has invested your money (ie. Allan Gray, Coronation, Investec etc) have had phenomenal performance since their inception, and they are certainly not just your average actively managed funds. These funds are among the best South Africa has to offer with returns beating the benchmark year after year.

 

Also remember that offshore has its (important) cons as well as its merits. While offshore investments may serve as a Rand hedge, they simply cannot keep up with our inflation. Even with the annual average 4% drop in the Rand, the 2-4% growth typical of global growth, even when combined with Rand depreciation, does not usually beat South Africa's 6.5 - 8% inflation. South African markets do tend to perform a few percent higher than inflation though, and I'm pretty sure that if you look at your Momentum fund returns, you're probably close to 11% annual return over the past 10 years after the 2% costs have been deducted, even though the market has been flat.

 

In every/any chosen period longer than 10 years (10-years, 15 years etc) South African investments have beaten the offshore average, even when compounded with Rand depreciation. I'm wary of moving too much money offshore. Consensus at the moment is that 30-40% of your money offshore presents the optimal risk to reward ratio.

 

Also bear in mind that 30 -35% of your Momentum fund is already invested offshore.

 

If it were me, I'd keep the bulk of the money with Momentum. Especially since you're 55, the actively managed approach, which switches between bonds, stocks and cash as the market fluctuates, decreases your risk significantly. The good thing about managed funds is that they limit the downside, while they may underperform passive investments slightly during strong bull markets. At 55, preserving your wealth is definitely more important than high-risk growth.

 

So yes, I personally do believe that moving your Momentum investment to passive investments would be a mistake in your case. If it were me, I'd keep the R5.5M right where it is! (The extra R2M is only a quarter of your portfolio so it seems a reasonable amount to put in the higher risk passive funds as you have done.)

 

 

Edited by SaurusDNA
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SaurusDNA,

Thanks so much for your input, its really appreciated, could I please ask for your thoughts on....

 

1) If we need R50k a month to survive when we retire how much do we need to have invested in total, as I intend to retire as soon as I reach this mythical figure and I have been given many different figures ranging from 10 mill to 17 x my final annual salary and none of it makes any sense ?

 

2) Lastly do you have any thoughts on the  South African governments possible implementation of prescribed investments and how it would it could have an affect any of the investments I listed?

 

Here is an article you and the board may find interesting.

 

https://www.biznews.com/sa-investing/2019/03/07/magnus-heystek-hogg-jse-optimism-sa-respectfully-differ

 

Have a great weekend

 

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