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ITE 14.00 cents - LDT: 26 Feb 2016

TDHP 18.31 cents - LDT: 19 Feb 2016

yes I'm also feeling quite smart for buying divtrx yesterday

nothing exciting, just some divtrx. unfortunately i ask bought some VWRD yesterday, should have waited till today....

Yes 7pm. I had some cash lying in my account, decided to buy this afternoon, let's see if it was a wise decision...

I've had a query from a member who wants to remain anonymous, and is looking for some advice. Obviously  we're not financial advisers, but then again many financial advisers put clients needs after their own commission cheques. I offered to post this for the member anonymously and see if we can get some good ideas from the rest of you here.

So here are the facts:

-Female age 60 retiring end March 2016
–Healthy BUT seriously financially challenged!
-It must be kept simple – see previous comment.
-She is unlikely to ever move abroad, holiday in Botswana/Namibia would probably be it.
-R2m is in a pension fund and max withdrawal is 1/3rd balance must be reinvested in an annuity.
-R1m free to invest anywhere. But for emergencies, say R100K should be immediately accessible.
-R375K is in a deferred/preservation annuity at Allan Gray.
-Unless there was a auto facility for selling equity (ie. 2%) to top up income, that would be a non-starter.
-There is no debt to speak of.
-Intention is to put R30K in TSA.

-R1m to be done in next week and a half as we are going away until March and any tax benefits (if any) should be in place before end of tax year.

The member initially wanted to do the following:

I have suggested  moving the R2mil to the Allan Gray fund on retirement. (They surely have to perform better at some stage going forward?) Take out a living annuity and splitting the investment 60/40 Stable and Balanced Funds. If at some stage in the future the performance is not meeting her needs she could convert to a life annuity with a pension, with inflationary increases, for life.

Putting the R1mil from the notice account in some sort of ETF (s) - not sure which? Maybe Property, with an overseas bias, for some sort of Rand hedge and use the income to supplement her pension drawing which I estimate will be around 8.5K per month.

Just to clarify........
-By property I meant one or two of the listed reits, not houses. Preferably “foreign/local” ones where the distribution would be considered a dividend, not interest.
-The idea of a rand hedge was partly to offset imported inflation. Also see previous comment.
-The 4% rule could be applied to her pension withdrawal, I suggested 5% to achieve her income need, assuming 10% plus return.
-My suggestion of a living annuity was because you can convert it to a life annuity at any time, but not the other way round.

So what would you advise this woman to do?

*I'm still missing a few pieces of info, such as living costs, housing situation and medical costs, so if the member would send that to me I'll update it here. Any other info you think would be worthwhile?

Yes, you'll have to take the hit, and unfortunately even inflation isn't taken in to account. My strategy is to sell when all markets are down like in a bear market. That minimizes your capital gains for instance your JSE shares aren't worth as much, but you also buy foreign shares at a lower price, so the net effect is no loss.

I did a lot of searching for something equivalent to the options Americans had just buying Vanguard. Somehow I stumbled on the term non-resident alien (NRA), which is anyone living outside of the US who isn't a US citizen. That lead to a lot of really well written wiki's and forum posts on the bogleheads forums. There are a few options for NRAs, but the one most recommended by the bogleheads, and on a number of other sites was interactive brokers. I also liked that their monthly fee is waived if you have $100 000 invested with them.

At the moment I just have new money in their account, so it's not my R1m by quite some distance, but the account is ready and waiting, and should I need to move the funds I'll be able to. I'm also fortunate to have a US bank account, but they take transfers in all major currencies, so an EU, UK or even local bank offshore account would be perfect.

I was close to moving all my cash in December after it looked like we were heading downhill fast, but I couldn't bring myself to pull the trigger. All the reading material says the dollar is overvalued, and the rand is undervalued, and I just couldn't swallow a hit that big. I even went as far as getting my tax clearance, almost. It turns out you can't get tax clearance for investment without going through a bank/broker, but the lady at SARS did confirm they would give it to me with the documents I had on hand. We'll have to wait and see which way we head.

Eventually all my investments will sit in interactive. If I decide I want to hold South African shares, I'll just buy the iShares MSCI South Africa Index Fund, or buy dual listed shares, but I think once I'm out I'll be staying out.