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Hi guys

Lots of friendly folk on here (Orca included ), and i would like to see if someone can bite the bullet and help some of us out.
I am still very green on this, and would like someone to explain in plain English (if thats possible ), what am i to do.

the obvious question - where best to invest my money .

What i try to understand, is if i should choose a bank do do my investments ( lets say R1k per month with inflation), or should i directly buy shares with that.

At a bank, they will pay me annual interest monthly at a small % rate, but the interest is straight back into my account, and thus next month its interest on top of interest. thus after a few years this could really work.

but if i should go with a shares platform ( lets go with the satrix INDI), what will the end result be? eg if i use dividents to buy shares again each 3months, for  about five years, what will the resulting fee be?
eg month 1 , R1k shares, month 2 R1k shares, Month 3 R1k shares, month 4, R1k shares + dividents, and so on


Complicating the question more is obviously how does tax affect both scenario's? i don't remember ever submitting my interest gained via bank account to SARS, but it seems to be a very strict thing when looking at shares...


Also the next thing that comes to mind, is which platform to use to go for the long term ( ie i wont be buying and selling - just a constant monthly "investment"). Is the usual FNB/ Standerbank platforms too expensive in terms of monthly costs and brokerage fee's? what other options does a guy on the street have ( without having to shell out R100's of thousands). Brokerage fee's is something i don't usually pay in the bank scenario, which could affect the comparison i guess..



hope this discussion will help other people in the future too


thx guys

Ja nee. P is quite right. On the long term cash is not king. Had you invested in stocks before the devastating 2007/8 markets crash, you would still be better off now than if you had cash in fixed deposit or the like.
When to buy is a whole new topic. Monthly subs as you intend to do is great but you would do very much better to not buy at expensive levels. This you need to learn by looking at a simple chart of the stock or index.
Bear in mind that you cannot time stocks but you can see if it is overpriced or cheap.
Had I listened to me now years ago, I would be quite wealthy by now. To be exact, I would have been 9 fold better off and my wife is still kicking my ass.

As to your tax remark. SARS has become very strict since efilling got itself invented. My rough guess is that 90% of efilling is computed and does not need human intervention. The ones that do are the self employed/traders/investors that book profits without an IRP5. SARS now has more time to investigate the 10%. Most now will be audited but the audit is simple. They ask for supporting documents. If they don't understand them, you will get mail stating that they accept your result but they reserve the right to redo the audit at a latter time but by then it would prescribe and you off the hook like me.

Also forgot to mention that interest is taxed as income (after the small exemption), dividends are traced before they get to you and if you sell shares you only pay capital gains tax after R30k and is a third of income tax.

The CGT only applies if you hold shares for 3 years or more - less than that and SARS could treat you as a trader and profits/losses will be treated as income for tax purposes, and if you are on a high tax threshold it could be painful

SARS can undertake an audit of your affairs at anytime - you will be required to produce documentation, failing to supply adequate documentation could result in them treating you as a trader until you prove otherwise, there can be severe penalties as well.
There is a thread somewhere on this site where Orca went through all the tax issues some time before he left for Portugal - makes interesting reading

Erwin, you will need to use the first in, first out method (fifo) and not the weighted average in your case. In other words, you can start selling your shares monthly after 3 years. Only the amount of shares you bought 36 months back at earliest.
This takes some work as you need to file each purchase monthly with the cost price (not share price). Plus management fees and other charges.
If you want to buy/sell shares, you must do your bookkeeping and filing religiously otherwise you will get into the mess I was in. It will also save you some coronary events or infarctions.

Very very good advice - even if i am currently thinking investment (ie constant buying shares) is the way to go, i could consider trading on a future date - and thus records of all transactions is a good way to go.

next challenge in my mind - where to buy - safest bet being SATRIX EFT's ( Indi about 60% with the rest divided between FINI / RAF and SWIX), it seems the cheapest at the time to buy directly via satrix.
Going through a online stockbroker like Absa/FNB i will have an account fee plus about R100 per transaction(eg for the above about R400), which will go to about R4800  per anum.
Satrix is states 0.65% , which at R400,000 is R2600 per anum (will only reach that level in 5 years time), which seems to be lots cheaper(first year will be R318)

i however see most of you guys prefer a stock broker. am i missing something? (yes a stock broker gives you access to many other shares - eg trader options)

thx

Erwin

Satrix charges fees every single year on the full amount invested. The brokersonly charge when you buy or sell. ABSA has a 0.4% or R120 minimum charge, so it make the most sense if your transactions are R30k or more at a time.

yes thought as much (can only reach 5K currently). I think when the yearly fees reach  big enough level i will consider switching. is it possible to transfer shares bought via the Satrix platform to another broker?

I'd consider this instead of the SATRIX INDI:  http://etf.absacapital.com/Products/Exchange%20Traded%20Funds/Equity/eRAFI%20Industrial%2025/Pages/default.aspx

TER of about 0.12%.  SATRIX is less efficient.  It seems silly to pay big fees to a fund manager who is simply matching an index.