The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Fawkes85 on September 01, 2015, 01:41:20 pm
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So I am working overseas and I find myself in the very fortunate position of saving roughly R10,000 a month(all depending on the exchange rate). So my question to you all are how would you invest R10,000 a month? Should I even invest the full amount every month? What are your thoughts?
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a) How old are you?
b) Are you planning to touch this money in the next 5 years or so (house deposit)?
c) Do you need any income from this in the next few years?
d) Do you enjoy reading about companies? Or do you chuck that part of the newspaper away?
e) Do you already have an RA or company retirement policy?
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A) Turned 30 little more than a week ago. Still dealing with that.
B) Depends on some factors but if all goes well no I do not plan to touch 80% of it in the next 5 years.
C) Do not need the income but will be nice if it can provide me with some. Mostly for reinvestment purposes in the short to medium term.
D) Won't say I enjoy reading about companies but do not mind it either. I do however prefer investing in ETFs over individual companies. Except for REITs. I am very interested in them.
E) I do not have an RA or company retirement policy
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Do you have a SA banking account and if so, with which bank?
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I do. Cheque and trading account both with FNB. Should also probably add that I do not send the R10,000 back to SA every month. It costs me R280 on this side plus fees on the SA side to send the money every time. Couple that with waiting for the best exchange rate and I only send whatever I have saved up to SA once or twice a year.
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I presume you have a SA resident trading account so you pay R49 pm and 0.6% per trade or R80 minimum. If you have a non resident account, you will not pay any VAT but your monthly fee will be higher.
Brokerage fees varies between 0.4 and 0.75% per trade so your 0.6% is not too bad.
So it seems you good to go. Download the trading App and get to know how it works first. If you have money in cash, it should show up. If not, transfer it from your cheque account and in future do all your transfers directly from overseas to the trading account.
Now all you need is to find the ETF that suits you.
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The FNB fees aren't very bad but what they don't make so clear, and I ended up finding out the hard way, is that you only get the 0.6% charge if your trade goes through before 3:30. If it goes through after 3:30 the commission goes up to 2%.
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If you place a buy order, you can cancel it at 3 pm if it has not executed yet. As you are in it for the ling term, you can just buy the cheapest available immediately. The DIVTRX has a spread of 8c and I managed to buy 4 tranches at the same price as the robot keeps refiling it with 5000 shares when used up.
I am not advising you to buy DIVTRX at all. It just suits some of us here that don't want to watch stocks all the time or cannot pick stocks and still get great returns.
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A) Turned 30 little more than a week ago. Still dealing with that.
B) Depends on some factors but if all goes well no I do not plan to touch 80% of it in the next 5 years.
C) Do not need the income but will be nice if it can provide me with some. Mostly for reinvestment purposes in the short to medium term.
D) Won't say I enjoy reading about companies but do not mind it either. I do however prefer investing in ETFs over individual companies. Except for REITs. I am very interested in them.
E) I do not have an RA or company retirement policy
Ok, so this account will be your retirement fund. Personally, I would target growth - that's not to say you will not get dividends, but it should not be the only factor when choosing your shares. First thing I would do is open a TFSA - ether with ABSA or EE. You might as well start filling that up. I would not JUST buy ETF's - unless you really are not interested. Give yourself a percentage to spend on individual shares - personally, I think it's more fun. And if it's fun, you will save more - always a good thing. REITS have been a great investment for the last few years - not as boring as some say - that said, all in moderation.
Read Patrick's great article http://investorchallenge.co.za/can-you-retire-by-40/ :: look at the big picture, make a plan, then start filling in the blocks.
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Funny you should say that. I actually bought 1000 shares of it just today. As I mentioned when we were talking about the NFGOVI, I was looking for something to invest in that could provide me with good income and the DIVTRX seemed like a good choice. Think I will be making that my core investment and the STXIND, STXFIN, PTXSPY, RMBMID, DBXUS, DBXEU, DBXUK and DBXJP my satellites.
But that plan is definitely not written in stone. I am still open to other suggestions. It the reason why I started this thread in the first place.
@Mr_Dividend as I was writing that reply you posted yours. Thanks for the advice. I definitely won't stay in ETFs forever. Just right now I am still very new to investing and I do not feel confident in my abilities to start picking individual stocks. ETFs are easier to understand and as I have been told many times, never invest in something if you do not understand it. But am spending time on forums and YouTube and podcasts and other websites to grow my knowledge. Once I feel confident enough I will start investing directly in companies.
Must admit I do have Discovery and SABMiller on my radar though. Just my personal ignorant opinion, but I feel it is good to invest in companies where people will still spend money even during a recession. And let's be honest, even during a recession people need healthcare and alcohol (not sure what that says about humanity). As for REITS I have Growthpoint and Redefine I am looking at. Growthpoint because it is such a Goliath of the industry and Redefine for growth purposes. Won't invest in both so still deciding which way to go.
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The TFSA has a limit and is off bounds for non residents. I would certainly use it but cannot. I think you have to be resident in SA for at least 91 days a year to be considered tax resident.
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Having 5 different ETF's is a total waste. May as well invest in the ALSI. I think there are 150 stocks in the ALSI.
The DIVTRX is well diversified in many sectors and is the best performing ETF.
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Yeah I was wondering about the TFSA. Is it tax-free from all taxes including Dividend Tax and Capital Gains Tax or only Income Tax? If it is only for Income Tax it does not serve me much purpose. As I am paying income tax where I currently live I am exempt from SA income tax anyway.
You really think investing in 5-8 different ETFs is not worth it? Thought I would do it for a bit of diversification. With the STXIND, STXFIN, PTXSPY(will only be invested in this one until I decide which REIT I want to invest in) I would cover all the sectors I want to be invested in and with the RMBMID I can be invested in some smaller companies with growth potential. As for the DBXUS, DBXUK, DBXEU and DBXJP I can get some diverse exposure to different geographical regions.
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Strange why South Africans want to diversify into developed markets and investors in developed markets want to invest in emerging markets like SA for the extra growth.
I posted a chart somewhere here of the STXIND vs Japan, China, UK and US markets and the STXIND is almost double the growth. To top it, the DIVTRX beats the STXIND so far as well.
Also bear in mind that DIVTRX holds about 15 stocks that have consistently increased their dividends and they dump those that have not. It is a known fact that a company that keeps increasing it's dividend has good fundamentals in place. This alone is good enough for me as I no longer have to do research myself.
Read Patrick's thread on Core Shares (DIVTRX) just below here. You have peeked my interest in the ETF's you mentioned and I will see if I can get a comparison chart posted here.
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I did read the thread on the DIVTRX and that's what piqued (I checked. That's the correct spelling. Thought it was 'peaked' myself;) my interest and made me read up on it more and eventually caused me to by those 1000 shares today. And you make a good argument for it so you reckon it would be a investment to have as the core of a portfolio?
And I fully understand that emerging markets hold the best posibilities for growth as the developed economies have developed as far as they can go and from here on out it's just small, sustainable growth for them. I know how won't get the same kind of growth with them as I will with the JSE. The thing that irks me though is the political situation in SA. With Eskom, the EFF, the trade unions and their power trips hell bent on destroying the SA economy, Zuma, and the ANC in general, I do not want to have all my eggs in the SA basket.
I am not an all doom and gloom kinda guy but it is hard to look at SA and not see the writing on the wall if something does not change and quick.
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Yeah I was wondering about the TFSA. Is it tax-free from all taxes including Dividend Tax and Capital Gains Tax or only Income Tax?
TFSA provide a wrapper that exempts any tax in respect of income tax (i.e. interest), capital gains tax and dividends withholding tax.
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I understand your grievances but corruption is rife everywhere and parliament sessions are a circus even in the UK and Japan is the worst of the lot yet they did well until recently.
Here is a chart of the STXIND vs world markets. This is a 5 year chart and I could not use DIVTRX as it has no 5 year track record but it will outdo the STXIND.
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Welcome back XXXXX. Our in house tax adviser. :TU:
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And that chart is why an SA ETF will be my core along with a couple of the satellites. But I still want some international exposure for some peace-of-mind. Plus they can serve as Rand hedge. Thanx for all the insight though.
BTW to anyone else following this thread. Still open to other ideas as to what you would do with R10,000 a month.
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I could not find 2 of your ETF's but here is a 5 year chart of the others vs STXIND. I would scratch out the bottom 4. Once again, I could not use DIVTRX but it will outperform STXIND.
Thanks for the "peeked". You are correct as I was not peeking.
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As you can see the DBXUS is not a bad choice. You mind if I ask what website you are using to get those charts?
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The DIVTRX would be on par with the DBXUS as it has outperformed the STXIND.
You can get the charts here for free. Just add j.j after the stock name. DIVTRX would be divtrxj.j then click on the shaded name and then click on "charts" above.
http://www.reuters.com/finance/stocks
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Welcome back XXXXX. Our in house tax adviser. :TU:
Always lurking around....
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BTW to anyone else following this thread. Still open to other ideas as to what you would do with R10,000 a month.
I'd find out if there's a tax advantaged account where you are similar to an RA. If you're paying 30% tax, putting the money into something like a RA or 401k etc would give you those returns straight away. If you're in the states or UK you should be able to go with a Vanguard fund, which has some of the lowest fees around. I wish they'd open up an office locally, but I don't think there's much chance of that.
If you don't have access to any of those and do want the money in SA then I'd do a split between DIVTRX and STXIND personally. One of the reasons I still like the indi is that it's a great rand hedge: http://www.biznews.com/etfs/2014/10/09/best-satrix-options-youre-wanting-profit-rand-weakness/
The index the DIVTRX follows has had an outstanding 5 year period, and at the current prices, the dividend yield is pretty attractive too if you like income. I already own a chunk of both, more indi than DIVTRX, so currently I buy the DIVTRX every month just after payday.
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I am in Asia so unfortunately I do not have access to the Vanguard. But I am not being taxed all that much. Currently I am being taxed 3.5% of income.
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I understand your grievances but corruption is rife everywhere and parliament sessions are a circus even in the UK and Japan is the worst of the lot yet they did well until recently.
Here is a chart of the STXIND vs world markets. This is a 5 year chart and I could not use DIVTRX as it has no 5 year track record but it will outdo the STXIND.
Orca, would it be possible to bring up the same chart - but converting them so that they all report in dollars or rands?
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Seems a safe bet to spend 50% on ETF, and the balance on individual shares.
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@Mr_Divi. Unfortunately those charts cannot do that.
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Actually, was wondering the best way to compare - working out how much R1000 could buy 5 years ago ect ect. But of course, the easiest is just to compare JSe:DBXUS vs STXIND - over 5 years, 236% vs 177%
I would hazard a guess too, that out the country, there are better ETF's to go into than the rather high fee DB funds. Not only that - trading fees are a lot lower as a bonus.
Personally, if I was out the country and needed to live on Euro/Dollars, the bulk of my money would have followed me - but probably would have left some behind to try get some of the African growth.
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Well the reason why I send my money home to trade in SA is because, as Orca has pointed out many times, you can just get a lot more growth on the JSE as compared to the more developed countries. In his retirement blog he pointed out how on a UK blog he asked about gettin 25% per annum returns and they laughed at him. They just can't fathom getting those kind of returns on their exchanges. I have also read a couple of for dummies books and regularly listen to an investors podcast run by a guy from America and another guy from Denmark. In the books and on the podcast they continuously say that anyone that claims they can make a return of above 8% a year is full of it. Again because they come from a developed market perspective where great returns just don't happen. So that is why I send my cash back to SA.
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Well the reason why I send my money home to trade in SA is because, as Orca has pointed out many times, you can just get a lot more growth on the JSE as compared to the more developed countries. In his retirement blog he pointed out how on a UK blog he asked about gettin 25% per annum returns and they laughed at him. They just can't fathom getting those kind of returns on their exchanges. I have also read a couple of for dummies books and regularly listen to an investors podcast run by a guy from America and another guy from Denmark. In the books and on the podcast they continuously say that anyone that claims they can make a return of above 8% a year is full of it. Again because they come from a developed market perspective where great returns just don't happen. So that is why I send my cash back to SA.
True, if you ignore the rand. But for me, it's very much part of the equation as shown in the example I have given. Living in SA where everything is rand denominated is one thing, living out side of it is another. IMO.
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Well the reason why I send my money home to trade in SA is because, as Orca has pointed out many times, you can just get a lot more growth on the JSE as compared to the more developed countries. In his retirement blog he pointed out how on a UK blog he asked about gettin 25% per annum returns and they laughed at him. They just can't fathom getting those kind of returns on their exchanges. I have also read a couple of for dummies books and regularly listen to an investors podcast run by a guy from America and another guy from Denmark. In the books and on the podcast they continuously say that anyone that claims they can make a return of above 8% a year is full of it. Again because they come from a developed market perspective where great returns just don't happen. So that is why I send my cash back to SA.
I must warn u, at ground level it is not looking good here at the moment. i.e. retrenchments etc. In the engineering side in any case. My current buy is only shares that has a larger income from outside good old RSA. :), except for my fishies, but they are also swimming into US waters. Hence the OCEN shares
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I understand that living outside SA the Rand does not have a lot of meaning but I earn enough money where I am so that I do not have to worry about needing the Rands back in SA. My Rands are for purely inestment purposes as they can get me the best returns. For everything else I keep the local currency.
And yes, jaDEB, I am very much worried about the situation in SA. I may not be living there but it does seem to me that the government has lost complete and utter control of country. Crime has spun out of control, the trade unions are running rampant with the economy, the masses are getting more militant by the day...but I am still hopeful. But being hopeful is not always enough I saw FNB has an offshore banking service in Guernsey. Trying to find out how it works. If I can still trade on the JSE through FNB Investor while having all my money in the Guernsey account as opposed to having it an SA account then I might make the move. But right now I know too little about it to say anything more.
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Sorry, do not wanna put u under wrong impression. I do not mean crime, trade unions, militant etc. I mean my opinion there is not much happening in the economy i.e. big projects, new investments etc.
but I might be wrong, but as far as I can see there is lot of people not doing well financially.
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Ah, I misunderstood. Did not know the financial situation wasn't good back home. But maybe it just a global trend? Chinese manufacturing is down. Western Australia is in a recession. I think I read less people were hired in the US for the month of August. Brazil's economy is not finding itself in a good place. So don't think it is a situation unique to SA.
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I have posted many charts of SA markets vs International markets here but some investors still insist on investing in developed markets. There is no great gains to be made as they are already developed.
The OP is correct in saying that I got laughed at in the UK forum for asking about ETF's that consistently have 25% gains,
The ZAR did weaken lately but it will rebound back to it's normal 3% depreciation soon enough.
Now what is 3% less pa on the ZAR weakening compared to the better performance of emerging markets like SA.