Part 2 - On my journey to Learn more on ETF, Cost, TER, Performance and size.
- Thread starter rjozen
- Start date
Not sure if there is any resources out there, that could have made my life easier... to compare all these ETF next to each other same time... But anyhow... I went and build myself a little sheet to show some key points of interest i heard lot of people mention when deciding on a right ETF.
Cost involved, Fees TER, Performance, Dividends and Size.
From this journey i learned a few things:
But now I am busy planning for long term, and future investments, where the best funds are to stash. Obviously after putting money in my RA and Home Bonds.
Part 3 will follow as i investigate more on Non equity ETF and if there is a place for those in my portfolio..
Cost involved, Fees TER, Performance, Dividends and Size.
From this journey i learned a few things:
- Sygnia in TFSA is lowest cost S&P500, Pays dividend, where Satrix performs better, but does not pay dividend, and slight higher Fees.
- Satrix ZAR ETF seems very high in Fees!! Buy does pay Dividens x4 a year.
- Sygnia pays x2 a year Divi.
- Vanguard pays x4 a year Divi, Lowest cost, but keep in mind the USD/ZAR conversion fees.
But now I am busy planning for long term, and future investments, where the best funds are to stash. Obviously after putting money in my RA and Home Bonds.
Part 3 will follow as i investigate more on Non equity ETF and if there is a place for those in my portfolio..
@rjozen Good job on digging into things, but be careful of looking at things the wrong way and under the difference between funds, especially allocations.
Paying or not paying dividends should not factor your primary decision until it comes to the taxation of things. Funds that don't distribute doesn't mean you lose the dividends, it just becomes part of the price return.
The time horizons you are referencing in your sheet is going to potentially create bias investment decisions for you. Past returns on their own are literally meaningless. You should ignore max as you can't compare investments over different time horizons or different Inceptions.
If you want to invest in XYZ, choose a low cost fund that replicates the index as best as possible. Sygnia and Satrix for example in terms of MSCI is different, one physically buys the shares while the other purchases an offshore feeder fund. So dividends in terms of distributing or accumulating might be different as well as replication accuracy.
Paying or not paying dividends should not factor your primary decision until it comes to the taxation of things. Funds that don't distribute doesn't mean you lose the dividends, it just becomes part of the price return.
The time horizons you are referencing in your sheet is going to potentially create bias investment decisions for you. Past returns on their own are literally meaningless. You should ignore max as you can't compare investments over different time horizons or different Inceptions.
If you want to invest in XYZ, choose a low cost fund that replicates the index as best as possible. Sygnia and Satrix for example in terms of MSCI is different, one physically buys the shares while the other purchases an offshore feeder fund. So dividends in terms of distributing or accumulating might be different as well as replication accuracy.
@faith4l Yeah 100% agree, I have all this data gathered, but still in the clouds when it comes to making the right decision on the best ETF to suite my needs lol... For last few weeks been reading up, but at no place confident to make a long term decision.
And I have not even started investigating non equity variants...
What would you say is the Top 3 things to keep in mind considering a ETF to invest in?
And I have not even started investigating non equity variants...
What would you say is the Top 3 things to keep in mind considering a ETF to invest in?
- Lowest Cost
- Fund size
- Ability to replicate index?
@rjozen Funds should compliment your investment strategy in the correct investment vehicle.
Rather start with...
Rather start with...
- What are my short term goals
- What are my long term goals
- Do I have debts that I need to get rid of if first
- Do I have a buffer/emergency savings
- What are my time horizons and risk tolerance for all these goals.
- Then, for whichever goals, what is the best place to park/investment my money.
- Now, the best place is a combination of funds in platforms in potentially different investment vehicles (RA, TFSA, Taxable local and offshore. Endowment etc).
Fund costs can be different since if you for example invest via asset managers like Allan Gray, Sygnia, Coronation etc. They charge less for all their in-house funds vs you investing via their platform in other fund managers funds. There is additional administration cost involved.
Lots of this has been discussed a good bit in the past if you dig, but if you have a more clear goal or question, I can give you more specific examples/recommendations.
Lots of this has been discussed a good bit in the past if you dig, but if you have a more clear goal or question, I can give you more specific examples/recommendations.
@faith4l Thanks for the feedback, appreciate the inputs as always!! Yeah i have tried to go through as many post as i could on here, and on various external sources to try educate myself more on this, sad part is thinking i missed out on all this financial education for almost 20 years... if only i started educating myself earlier, but oh well lessons learned, and hopefully some valuable stuff i can still learn now, and pass on for the next generations to come..
My summary:
- Regarding my goals - Just to some up, i think i live very frugal... I don't waste unnecessary, i don't have any or much bad debt...
To be honest Short term goals, would be to get bond down and closed sooner than later.
Long term goal, would be to have enough stashed up maybe in next 10 - 15 max 20 ( although that is stretching it) to have enough invested saved up, to be comfortable not having to grind the 9 - 5.
My summary:
- Regarding my goals - Just to some up, i think i live very frugal... I don't waste unnecessary, i don't have any or much bad debt...
- 39 years old, I am married, Got a stable job, wife got her job. we have 1 son 18 months old.
- I do have a RA been contributing for 8 years from Sanlam (that is money i got out from GEPF after 12 years in the army) and that all moving to Sygnia skeleton 70 RA now.
- No credit card debt, no car debt, just the normal stuff in the house internet, medical and insurances.
- I have x2 bonds i am paying off, 1 renting out, 1 staying in.
- Emergency funds of about 2 -3 months stashed in bond (flexi reserve) i am staying in.
- Me and my Wifes TFSA maxed out for the year ( first year we using TFSA)...
- Put in more towards the bond i am living in
- Increase what i put in RA or
- Use EE rather to give it a bit of my own touch and flexibility towards my investments, It wont be for short term, it would be long term investments
To be honest Short term goals, would be to get bond down and closed sooner than later.
Long term goal, would be to have enough stashed up maybe in next 10 - 15 max 20 ( although that is stretching it) to have enough invested saved up, to be comfortable not having to grind the 9 - 5.
@rjozen Good job on shifting the RA and being aware of the impact of fees.
Whatever you do, stay out of debt. You in a position where you can buy cash for things, do so. If you need a new car, save up in advance for it and purchase the 2nd hand vehicle cash! Your future self will thank you!
Other short term goals can perhaps be saving for kids school, uni etc. Have you any thoughts around this.
In terms of long term
What you can and should also consider, how would things be financially if you happen to be a position where you can no longer work or in worst case, pass away. Same for your wife.
Is the estates setup and insurances sorted in such a way that in the event of passing or disability, will the spouse financially be able to continue living life and provide for your child?
Not always something nice to think about, but something people sometimes miss when it comes to estate and family planning. So is things like life insurance, disability or income protection etc. needed for you or your wife etc.
Whatever you do, stay out of debt. You in a position where you can buy cash for things, do so. If you need a new car, save up in advance for it and purchase the 2nd hand vehicle cash! Your future self will thank you!
Other short term goals can perhaps be saving for kids school, uni etc. Have you any thoughts around this.
In terms of long term
- House bond: Equity should out perform bonds. I personally would not focus all my income onto paying off a bond, especially if its at a good rate. But there is a big but here. If its something that will emotionally effect you and keep you up at night, its also not an extremely bad decision either. If its a big chunk of your monthly income that is going towards bonds, perhaps build a buffer of 6-12 months repayments as an additional emergency savings sitting here.
- What happens if your tenant can no longer repay and doesn't want to move out - are able to not be financially effected too much?
- Occupancy rates won't always be 100% - if it sits vacant for 2 months - are you okay?
- Do you have a buffer for maintenance on the property(actually, both is applicable)
- More reason to build buffer depending on your scenario/financial position here
- In terms of emergency savings, depends on above as well. I would maybe increase this to 3 months expenses at least, seeing that you do have a wife and child - although if you wife has a buffer saved up as well, then perhaps you guys should be good - you also don't want all your money sitting in lower time horizon investments.
- As for the rest of the money, if you are in a very high tax bracket, say top 2, you can perhaps consider upping your RA contributions - depending on the amount of money you will withdraw from it one day. Ideally it should not be too much else tax will eat into it. But there is a bit of math here in order to determine when and how much is themost optimal and opportunity cost to consider.
- Other long term investments I would invest in USD/Euro based funds due to more competitive fund options being available at a better cost. EE USD can be a starting place although I prefer IKBR ten thousand times over more, but its not a beginner friendly platform.
What you can and should also consider, how would things be financially if you happen to be a position where you can no longer work or in worst case, pass away. Same for your wife.
Is the estates setup and insurances sorted in such a way that in the event of passing or disability, will the spouse financially be able to continue living life and provide for your child?
Not always something nice to think about, but something people sometimes miss when it comes to estate and family planning. So is things like life insurance, disability or income protection etc. needed for you or your wife etc.
@faith4l Thanks as always for the effort, and writing such an in depth and well detailed feedback.
I think i am on the same page as far as not rushing the bond for now, but no harm, in growing the EF savings in there, and same time slightly lowering the repayments, to have more available to invest elsewhere.
I need to work on the Rental property's (EF backup, rental backup fund better ) That is a very good pointer, that i will try push up on the list of importance, just as a backup, that i don't have to go creep into my investment or main EF funds for that property, but it can operate on its own. Think my plan would be to put this in my Absa 7.5% savings account ( available immediatbely) no wait.
From the Investment side of things my current plan of action would be: (I will look into IKBR and see if i am able to wrap my head around it.)
1) Carry on with Skeleton 70 RA ( standard monthly contribution)
2) Work Provident fund contributions as per normal.
3) Start EF for Rental property ( to have 3 month no risk of occupancy / Repairs ) (Absa Savings)
4) Carry on with bond payments as normal ( Maybe do like R1000 Extra each month in living bond. )
5) EE Investment plan:
30% - TFSA
15% -USD EE
10% -LOCAL EE
5% -BONDS
20% - EF / FLEXI Bond
5% - RA
15% - PROVI
I think i am on the same page as far as not rushing the bond for now, but no harm, in growing the EF savings in there, and same time slightly lowering the repayments, to have more available to invest elsewhere.
I need to work on the Rental property's (EF backup, rental backup fund better ) That is a very good pointer, that i will try push up on the list of importance, just as a backup, that i don't have to go creep into my investment or main EF funds for that property, but it can operate on its own. Think my plan would be to put this in my Absa 7.5% savings account ( available immediatbely) no wait.
From the Investment side of things my current plan of action would be: (I will look into IKBR and see if i am able to wrap my head around it.)
1) Carry on with Skeleton 70 RA ( standard monthly contribution)
2) Work Provident fund contributions as per normal.
3) Start EF for Rental property ( to have 3 month no risk of occupancy / Repairs ) (Absa Savings)
4) Carry on with bond payments as normal ( Maybe do like R1000 Extra each month in living bond. )
5) EE Investment plan:
- TFSA: Max out each year 10x Total world (50% of yearly EE plan)
- USD EE: Ishares S&P500 and Vanguard International (25% of yearly EE plan)
- ZAR EE: Capped All shares (15% of yearly EE plan)
- Bonds: Satrix SA and 1nvest ICE USD short treasary (10% of yearly EE plan)
30% - TFSA
15% -USD EE
10% -LOCAL EE
5% -BONDS
20% - EF / FLEXI Bond
5% - RA
15% - PROVI