Fast Fatty the First (#225)

We use my long-awaited holiday to catch up to some user questions for the next three weeks. We hope you enjoy the shorter episodes as much as I plan on enjoying my break!

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Willem 

I have an endowment in my portfolio which was a five year investment which started in July 2003 with the last payment in July 2007 which matured July 2008. 

Tax was deducted on all these investments for this endowment at ACSIS/OLD MUTUAL as per quarterly reports, as well as capital gains tax.

When inquiring at Old Mutual recently, they presented me with a figure for CGT if the investment is drawn upon. The investment was 4 payments of R30,000 and the the last one R36,000. The value as at February 2020 was R572,089.

Would you be kind enough to let me know how else can I get this investment to work for me in the light of being able to access this investment like a conventional discretionary investment without tax complications. I have a discretionary investment, as well as a living annuity in the same portfolio.

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Veronica

You guys seem to be big fans of ETFs but when I looked into buying one they all recommend an investment period of at least 5 years or more (i.e. they're high-risk and therefore long term investments). 

My husband and I are looking to potentially emigrate in about 4-5 years from now. In light of that, where would the best place be for us to invest our savings? I currently have a money market emergency fund and am putting away a bit into an Allan Gray Balanced Fund (both recommended by a financial advisor, although the more I listen to your podcast the more I'm thinking to start handling investments on my own ☺). 

ETFs sound like the best place to invest but are suited for way long term, in which case we might be out of the country before the product matures. Is the solution then to keep the savings in something like the money market? Is it still worth opening a tax-free savings account for 5 years?

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James is wondering about Zambezi preference shares.

Can you please discuss the place of this product in a portfolio for someone that is on pension.

 

Will it help with cash flow during pension?

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Pieter 

The thing people miss about the 4% rule is that the study didn’t work on the principle that your money should last forever.

Success was measured on the fact that you would have more than $0 after 30 years at a 50:50 equity:bond allocation. That might also mean you have $1 left for year 31 which accounts for the 95% success rate. Another caveat is the study was run during a high interest period in America. 

Also just on a correction how the 4% rule worked in the study. You withdraw 4% in year one. After that, you withdraw what you did the year before plus inflation, not 4% of your asset base.

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Josh

I plan to emigrate to the UK at the end of the year. 

I have been maxing out my TFSA and contributing to a Provident fund. When I maxed out my TFSA for this year, I started setting aside that cash monthly that was going to the TFSA, and reduced the amount going into my Provident fund monthly with a view of investing it when I got to the UK (after having converted it to pounds obviously).

The UK equivalent of a TFSA allows contributions of a max of £20,000 per year (with single shares allowed). I plan to liquidate my TFSA when I move, cash out my Provident fund when I resign (and take the tax hit), and chuck all of that cash into a stocks and shares ISA, probably a Vanguard all world ETF. Also, I'll be using a broker called Trading 212 if anyone is interested.

Do you think this is a silly idea? Cashing out of a TFSA and Provident fund is a big decision.

And just something separate: I wish I hadn't bought a property now that I'm immigrating. I just want to sell the stupid place but am struggling. Wish I just rented a place. 

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Conrad 

I’ve requested  information on the OUTvest investment options for a preservation fund. I am not happy with these just by looking at the top 10 holdings in most of these options. I agree with your view on simplified broad-based ETF investments and wondered if these are the only options that Outvest offers or if I can structure a more simplified ETF based combination that will be Regulation 28 compliant.

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Sean

I WAS one of those people who has religiously put monthly money away with a broker who was smiling all the way to the bank from the tender age of 15. I am now 29. In the past three years I have been paying a lot more attention to where my money goes.

Thanks to you guys, I had that awkward conversation with said broker and have taken all of my funds away from them and reinvested in a much cheaper, passive investment group.

Although this new firm is cheaper, it’s not as cheap as Easy Equities, so I have been splitting my monthly contributions for the past year with EE. Things have been going so well that I recently started looking into the TFSA on the EE platform. I have been able to max it out for the last three years. If I had known about it earlier it would have been longer but it turns out they aren’t very profitable for high rolling fund managers.

With this being said, I did some deeper research on EasyEquities, and I was shocked!

I have had a great experience with them so far, however I have not tried to withdraw any of my money yet. 

This seems to be a huge problem on the platform, if you have a look at Hello Peter. 

It’s a scary prospect to have your hard-earned money on such a platform that “doesn’t pay out withdrawals and doesn’t answer any emails or phone calls” the dreaded word “scam” is even mentioned by one of the disgruntled users.

I know Purple Group is a legitimate, listed company that has legal obligations in place but other people’s VERY poor experiences are something I cannot look past. It has been an amazing platform for me so far, but there is a big BUT in the back of my mind now. 

Is there anything from your side that could put an innocent investor's mind at ease?