The Fat Wallet Show is a show about questions. It’s about admitting that we don’t know everything, but that we’re willing to learn. Most of all, it’s about understanding as much as we can to make us all better investors.
Phrases like, “I’m not sure” or, “Let me look that up and get back to you” or, “I don’t know” don’t exist in the financial services industry. If you ever had a financial question you were too embarrassed to ask, you know what we’re talking about. In this business, appearances matter, and nobody wants to seem like they don’t know how things work or what the outlook is for the buchu industry. It’s easy to excuse that little vanity, except that people in the investment industry are meant to service investors - people like you and me who need to figure out what to do with our money.
There’s no such thing as a stupid question in this show. If you have unanswered financial questions, this is your opportunity to have them answered in a way that even I can understand. Pop them to us at firstname.lastname@example.org.
The 100-year investment (#223)
You might not be thinking about where your family will be in 2120, but Greg is. This week he shares a mad plan to make a 100-year investment.
I thought about starting an investment with a 100- year time horizon.
A lot can happen in 100 years. Maybe we don't use money anymore. Maybe earth explodes. Who knows? But if things still kind of resemble the way they are now and there's still a stock market then once off R10,000 invested in equities could be worth around R30m in 100 years (in today's money). So I think it's worth taking the risk.
I'd have to get my offspring onboard when it came to that point and then their offspring, to keep it invested and change the investment vehicle if and when needed. Worst-case scenario, a greedy grandchild decides to cash it all in and blow it on bubbles and a house with a sea view, which is also not a bad outcome.
I started with R10,000 in my EasyEquities USD account and bought the Vanguard S&P500.
Ultimate goal - I'm not sure yet, but hopefully it would get used wisely, to help supplement income for a few families, not get depleted and continue to grow.
Just curious if you have thought about doing this?
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Nokuthula and
Thank you very much for your thorough answers to my questions. Kristia, I love how you answer questions from the perspective of all - you do not assume that everyone knows all the financial keywords. I appreciate your guidance and the presence of JOL in our lives. Being new to all of this, both yourself and Simon's ongoing presence is a comfort to me and so many others - I am sure.
Simon’s answer to my furniture and storage question was classic and was taken to heart. ' Burn it!' This got my attention since family have said things along the same lines. Both of you also seem to understand life situations, in my case the hold that belongings have and how they really own you. The grim reality is that, like Simon says, these things that we attached so much worth to...end being worth so little - in monetary terms...years later.
My brother lives in SA and I’m in the UK. He advised me to listen to some of your podcasts - I think they are truly brilliant!
Could you recommend anything similar in the UK that I can listen to in regards to advise as I really need some tips on the UK market?
Get in touch with Garth McKenzie.
I listened to your podcast which I enjoyed a lot.
Someone asked what to do with a large amount of money- a windfall, obviously keeping tax efficiency in mind. I noticed that buying gold and specifically Krugerrands was not mentioned.
Could you explain why not especially with the current Bull phase of gold.
I have a life insurance policy that has age-rated premiums. Looking ahead even just 10 years, these monthly premiums become shocking.
My policy is tied to a dread disease benefit, so maybe that's why. But as I get older, that's when I'll need this benefit, right? Especially with a family history of breast cancer. But how will I afford it? I don't want to pay all this money in and then have to cancel my policy.
Are there alternatives to age-rated premiums, and if so what are they? Could you be insured for a specific amount that doesn't grow each year. But then, what about inflation? Urgh!
Please help. I'm so confused!
A few years before I retired I became aware that I should take responsibility to inform myself about financial issues. At work in a secure enjoyable technical environment I did not have any exposure to financial issues.
I was unprepared to manage the expected pending inadequate pension which I accepted with-out seeking informed advice from anyone. During that time I was introduced to Red Hot Penny shares material.
I was also fortunate enough to have a small amount of capital to ope
Getting out of investments (#222)
We spend a lot of time thinking about building an asset base and which assets we should be buying.
As you approach financial independence, getting rid of assets starts to present problems. Which assets should you get rid of first? How do you manage your capital gains liability? How many of your assets should you get rid of and when? How can you use a capital loss to offset your capital gains liability?
This week we consider the challenges in living off your investments. If you’ve spent your whole life accumulating assets, getting rid of them is bound to feel like sacrilege.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Gert
Was listening to your show about the confusing jargon, synonyms and abbreviations/acronyms we use, especially the term “coupon” used in describing the return on a bond.
I seem to remember reading about the etymology years ago and looked it up on Investopedia, but found a better explanation on Wikipedia:
The origin of the term "coupon" is that bonds were historically issued in the form of bearer certificates. Physical possession of the certificate was proof of ownership. Several coupons, one for each scheduled interest payment, were printed on the certificate. At the date the coupon was due, the owner would detach the coupon and present it for payment (an act called "clipping the coupon").
The certificate often also contained a document called a talon, which (when the original block of coupons had been used up) could be detached and presented in exchange for a block of further coupons.
For equity investments, I've read that it's important that there is a "CSDP account" for each user of the platform. central securities depository participant
"First World Trader Nominees holds a Securities Account with an authorised central securities depository participant (CSDP) admitted to Strate, in the name of FWT Nominees into which Clients’ Securities are deposited or stand to be credited."
So it sounds like some rights are seeded to EE here. Should I be concerned?
I have an RA with work which is invested in Momentum Focus 7 fund of funds which I believe has a TIC of 2.08%. Work contribute 5% and I match that – I have come to the realisation that while they will continue to contribute into that, I can choose not to and rather put my portion into something that works better for me.
I do have an RA with etfSA which I have been contributing to and wondered what your thoughts were on topping up into this or whether I should rather put it into ASHGEQ type investment?
I am also looking to help my sister start her own additional RA and wondered what your thoughts were on the etfSA RA or Sygnia Skeleton 70 fund? (will be starting fresh so not beneficial to do OUTvest)
My sister and I will likely not retire in SA and I wondered what advice you would offer on how to safeguard our future, specifically with the value of the rand (in 15-20 years) when our RA’s begin paying and we are in another country? Are we being silly contributing into personal RA’s now for the tax benefits and should we rather be buying investment ETFs like ASHGEQ it STXWDM with those monthly contributions (+-R5000)?
We do not have offshore investment accounts (do have a UK bank account) and am assuming for now the best route is through EasyEquities USD account until we have a more substantial amount – would you agree?
I want to make sure that we are putting our money to work in the right places and can then let that compounding go wild.
How to spot a con (#221)
I find it odd that so many people fear the stock market and then get lured into financial scams. Inspired by James, who is trying to keep his clan from being conned, we help you figure out when something is just not right.
Here are some tips to get you going:
Find out if the company or product is registered with the Financial Services Conduct Authority (FSCA). This is not foolproof, but it takes a diligent kind of con artist to steal money in this way. It does filter out a lot of the scum. Run the opportunity through the Just One Lap five concepts filter: At the end of this experience, will you own an asset? Will you earn income on that asset and will that income compound? Will the returns beat inflation? Compared to what your index of choice did over the same investment period, do the returns seem too good to be true? The promised returns are a huge red flag. If you’re new to financial matters, it’s hard to know what’s a lot and what’s a little. As a rule of thumb, when an “investment opportunity” offers monthly returns, be very suspicious. It’s industry practice to quote returns for a year. Google not just the company or product (that’s usually fairly easy to control), but also every individual’s name associated with the product. Scammers love getting away with scams, so they tend to circle back. If you find media articles about the legitimacy of the product and the person you’re dealing with tells you they’re taking legal action against the media house, be very suspicious. This is an old trick to put potential investors at ease. Remember, you don’t have to be in the right to bring legal action. We also spend a little time on helping you think about alternative, unlisted investments and the place they should have in your portfolio.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. James
How do you know you are investing with a fraud? More importantly, how do you convince your friends or family that they are going to get f****d?
A friend of mine invited me to listen to a guy that is willing to invest your money through his company. The returns are absolutely amazing! 77.64% for the year in 2017!
To the untrained ear, this guy sounds lekker. He explained that they move the money to America and use a computer program (that his son developed) to predict the market. The level of risk is then adjusted by the amount of gold (held at the bank of England) in a portfolio. They do all of this at a fee of 1%.
I asked him a few questions about custodian accounts, insurance, brokerage, total investment cost, TAX and all kinds of clever shit you and Simon spoke about on the show. I could see this guy has no idea what I am talking about and then he referred to an ETF as an "Electronic Traded Fund" then I knew this is a fucking keeper! He told me that he is not here to convince or force anyone to invest with him. But there he was, trying to convince people to invest with him.
I am convinced this guy is a fraud, but my friends are not and eating up every word this guy is saying. My friends have family invested with him and have seen returns so now they are true believers.
What do I do?
Win of the week: Martie
I enjoy your writing and podcasts. Think the fact that you do not come with a background in finances makes it easier for the ordinary person to relate to you. And the fact that you have learned so much about finances gives us hope that we can do it too. Definitely an inspiration.
You and Simon are a mean team and I am really glad I discovered you.
I have an option to take a pension backed loan. Each month, the payment will be deducted from my salary. Should I default, they will take the money from my pension.
The interest rate for the loan is prime minus 1%, and there are no registration costs (which would be a minimum of R35000 a
The jargon buster episode (#220)
Much of what makes investing confusing is that we use different terms to talk about the same thing. This is so frustrating for beginners. This week, we tackle jargon head-on. Not only do we tell you which terms are used interchangeably, but also what they mean. Here are the terms we discussed:
Stocks, equities, shares. Stock market vs stock exchange Coupons and interest. Debt instruments, preference shares and bonds. Index-tracking products, index funds, ETFs and UTs, collective investment schemes, hedge funds Real return, future value. Retirement, financial independence. Brokers, investment platforms. Property, fixed property, REITs Tax-free savings, TFSA, tax-free investments. Tax on income, tax on interest. Listed, on the stock market MDD, fact sheet And then some stuff that’s used interchangeably (sometimes by us) that’s not.
Marginal tax vs effective tax Pension, provident, RA, retirement fund Subscribe to our RSS feed here. Subscribe or rate us in iTunes. André
My initial plan was to have more off-shore equity, of which I put mostly into a global equity ETF. I chose the Satrix MSCI world ETF purely due to its lower cost.
I was wondering why you chose the Ashburton 1200 global ETF for this purpose. However, now that I got my first dividends from my property ETFs, I noticed the meaning of distributions was dividends, and then realized that the Ashburton ETF pays dividends and the Satrix ETF doesn't.
In my mind, I'm thinking that if the dividends of the Ashburton cover the difference in costs between the 2 ETFs, then the Ashburton ETF will outperform Satrix MSCI world in total returns to me. Is this due to a difference in the type of ETF (feeder ETFs) that the one pays dividends or not, or is that simply a choice of the ETF creator to pass on dividends or not?
My question is if you could elaborate a bit in your thoughts comparing the Satrix MSCI world ETF vs the Ashburton 1200 global ETF regarding the dividends.
Win of the week: Leonora
I have it that Reg 28 doesn’t apply to Living Annuities. I have mine with Momentum in Coreshares S&P500 and a small percentage in their money market.
(After asking, my EAC is now down to 0.77%. Still too bloody much. I take a minimum 2.5% drawdown. The fee was +/- R2000 per month, now R1700! For what?)
I wanted to open a tax free savings account but a friend told me that after 15 years I or my Son who is 5 years old will not be able to contribute because a person is only given 15 years to utilise the tax free account. I have researched this and I got no information on the time limit, please assist if this is true or not.
I am currently investing anything from R200 to R500 a month which is what I can afford.
What should I do with all my cash? (#219)
When you’ve gotten your debt and spending under control, it can be comforting to hold on to your free cash for a while. Taking the leap from that safe pile of money to the Big Bad Market is not easy.
However, as we’ve discussed before, cash is not a risk-free investment. The longer you sit on a lump sum of cash, the more risky it becomes. This is because of inflation. The effects of inflation are difficult to internalise because the rand value of your money stays the same.
Let’s say you put R100,000 in a low interest cash account today. The interest you earn is enough to cover the annual cost of the account, but nothing more. At an inflation rate of 5.5%, in 10 years you’d only be able to buy what R58,543 can buy you today. The rand amount is still R100,000 so it seems like you haven’t lost anything, but you can afford half of what R100,000 can buy you today. In 20 years your bank statement would still reflect R100,000, but you’d be able to buy what R34,272 can buy today. As you can see, the inflation risk increases every year.
This week we help three listeners figure out how to put their cash lump sums to use. The checklist we managed to come up with for a cash lump sum is as follows:
Fund your tax-free investment vehicle: Commonly referred to as tax-free savings accounts or TFSAs, these products should be every South African’s first investment. As an investor you are liable for dividend withholding tax, tax on interest and capital gains tax outside of a tax-free account. As we discuss in this week’s episode, these accounts are not meant for cash savings. Don’t speculate unless you can afford to lose the money: While cash makes it easier to capitalise on investment opportunities as they present themselves, cash can also make it easier to hop on a bandwagon that’s not suitable. Don’t invest your cash into a speculative investment (think alternative asset classes, sub-indices or individual companies) unless you can afford to lose that money. Lump sum vs average: While the math shows us investing an entire lump sum in one go makes more financial sense in terms of potential future earnings, going into the market one small investment at a time is a legitimate option if you’re scared. If this is your first investment, think of it as a teaching tool initially. Once you feel more confident, you can add the rest. Work out the future value: If cash is giving you a feeling of safety, find an online calculator to work out the future value of your lump sum using a 5.5% inflation rate. Now play around with higher or lower inflation rates. Hopefully seeing the value of your investment deplete will be the motivation you need to get going. Diversify: If you’re holding on to a large amount of cash, you are not diversified. Make sure to put your money to work. Subscribe to our RSS feed here. Subscribe or rate us in iTunes Win of the week: Matt:
If I earn a salary from a foreign company and then decide to do the nomad thing and travel around low cost of living countries for, say, a year but remain a tax resident in SA. My understanding is the first R1m earned will be tax exempt- is that the case?
“Tax residents in South Africa will be taxed on their worldwide income. But that is dependent that they’re still SA tax residents. Offshore salary earned is taken into account. R1.25m ito the latest tax amendments will be exempt from tax in SA.”
This was mainly due to the fact that I did not know what the best option was, and my new employer only offered a provident fund.. I've been maximizing my tax benefit with my new employer provident fund. I'm also sitting on cash in a savings vehicle with my bank, currently returning around 3-3.5% interest.
I'm living rather small (renting only, no debt of any sort) and have quite a bit of money to invest/save every month.
What would you advi
How to correct an investing mistake (#218)
Often the fear of making a mistake keeps us from starting our investment journey. It feels like everything is on the line when we make our first investment, but missteps can be corrected fairly easily. Even the mistake of waiting too long and starting too late can be corrected. This week we think through some of the mistakes new investors fear most and how they can be corrected. Hopefully this episode will give you the courage you need to take the plunge.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Rory
I started learning about the investing world about two months ago and stumbled upon your website within the first week.
Most of the things you discussed in your podcast just flew over my head, but it did direct me to the things I had to go read up about. Two months later I realized I am able to follow your podcasts without any problems. I want to thank you both for that. If I didn't stumble upon your website it would have taken me much longer to actually understand the investing world.
I have a friend, he is 25 and about to get married. His plan is to move to New Zealand in the next ten years. I told him he should look at starting to put money away in his TFSA, then the question came up about what happens to that money when he emigrates?
I see EasyEquities opened a properties platform, where you can buy shares in buildings and earn your share of the rent. What are your opinions on this? Do you think it would be a good idea to invest some money there and what would the tax implications be?
I recently made my first attempt to begin investing using my TFSA. I have been listening to the Fat Wallet show whenever I can.
I decided to invest in the Satrix NASDAQ 100 and the Satrix S&P 500 hoping to acquire some international exposure. I did not realise the NASDAQ has some S&P 500 companies. Now I am wondering whether I have begun on the wrong note, making a mistake and overinvesting or spreading myself too thin in some of these companies in the indices.
Is there any way that way that I can correct this "imbalance" in my TFSA or should I even bother? Have I made a blunder in choosing both the NASDAQ and S&P 500?
Like many of my colleagues, I was hopeless with my finances for most of my working life. I had 2 RAs with my insurance broker that were fee- and penalty-laced products that underperformed my cash savings account. Four years ago, I started a tax-free and a discretionary investment with my bank which were both heavy on fees (2-3%) and did not perform as expected (annualized return of
A year later, I took a two-year private scholarship, which meant leaving my government job after 10 years and my pension fund (GEPF) paying out. The scholarship only paid about 60% of my usual salary & I would have had a hard time keeping up with my bond repayments, instead of moving the pension payout into a preservation fund or my RA, I used it to settle most of my bond and reduce my monthly payments. Needless to say, this 2 year gap left a big dent in my finances overall as I had no other source of income & relied heavily on my savings.
Earlier this year, when I was looking at investment options for my toddler’s education, I started reading up on personal finance & investing, discovered your blog and podcast, and realized all my missteps along the way.
This set off a series of changes in rapid succession:
I switched banks to a bank with a single, lower fee, and better cash investment options. This meant closing my access bond. With my biggest debts paid off, I cut down aggressively on unnecessary expenses, brought my expense:income ratio to about 40% and focused on saving and investing the balance. I started 2 new money market accounts with the new bank - 1 immediate access for my emergency fund (now have 3x monthly expenses covered), and a 90-day notice account with a