What to do with a fair amount of cash

[loyaljw]

I'm a 40 year old married male, 2 young kids, wife.

I have just over R1mill worth of savings in my flexi home loan (balance currently around R700k with the savings in the account). I put it there to hopefully save on the interest I pay at 6.9%. I then have another R800k sitting at another financial institution which I can release within 2 weeks. My provident fund is worth just over R2mill (kind of disappointing that I've worked for 22 years to get it to that level). My home loan is the only debt I have.

Every FA that I've dealt with has not been competent and their movement of my money has led to losses. So for the last few years I've avoided them and try to manage my finances myself. I will freely admit that I haven't spent much time investigating what are the best options. I don't really like change but recognise that there must be better options out there than what I have now.

Would appreciate some suggestions and explanations of what would be the best way forward considering my financial situation. Thank you.

 

[faith4l]

@loyaljw The basics before we deep dive:

1. Have an emergency fund 3-6 times monthly expenses that is vested in capital preservation/income based funds.
2. Any sort of life insurance/income protection sorted? So in case of a passing, terminal ill, disability etc. etc. etc. (not going to deep dive on this, but things to consider depending on many factors like line of work, income security, spousal savings and work).
3. Do you need any sort of maintenance fund for future home expenditure? Savings for kids school? Uni? Head start in life etc.? - Get savings/investments sorted for this.
4. Lets sharpen some knowledge - Understand the different fees you are paying e.g. fund administration, performance, transaction costs, platform costs etc. etc. etc. If not already, know how to read factsheets and all the information on them including asset classes, exposures, drawdowns and benchmarks etc...
5. Have some sort of budget written and down to where what goes. Have investment debit orders setup with income.

Now, where do I put my money?

1. Calculate your risk profile and when you want (or can) retire.
2. TFSA! You already have lots of local exposure via RA/Pension - I would max TFSA with low costing global diversified index fund(s).
3. Based on your risk profile, invest the money accordingly in funds that suite your profile.

Example of this can be as follows:

1. 60% - 80% global developed markets
2. 10% - 20% Emerging Markets
3. 0% - 15% sector/area/country specific (very high risk)
4. 5% - 20% Bonds/Income funds

This all depends on your time horizon for retirement and the amount of risk you can take on your portfolio.

Example can be:

• 65% Sygnia MSCI World/S&P1200
• 15% Sygnia/Satrix Emerging Markets
• 15% Bonds/Income asset classes
• 5% Sygnia 4th Industrial (some sort of speculation)

Or something like a total world fund can also work, e.g. Vanguard Total World (VT) or the local tracker for this can be Coreshares Total Word Stock ETF which is like a one fund to rule them all (developed and emerging exposure).

Again, you already have lots of local exposure via RA/Pension as well as your residence. I would personally look at investing more towards global equity markets and other emerging markets via low costing ETF's.

Take your time with this... Don't rush. Use excel if needed and get an understand of where your money and exposure is atm e.g. Local, US, and assets classes like stock, property, bonds, cash.

Note, this is not financial advise and merely my suggestion based on my knowledge and information in the post.

Some other subs to look at

r/Bogleheads, r/portfolios, r/ETFs, r/investing, r/FluentInFinance, r/market_sentiment, r/financialindependence, r/Fire

Sites:

https://www.gofreedom.co.za/

http://www.simonbrown.co.za/portfolio

https://justonelap.com/

https://www.mymoneytree.co.za/

 

[dayisdone]

@faith4l By far the most informative as a sub-40 y.o. dude

 

[loyaljw]

@faith4l Thank you so much. Will definitely go through this in detail.

 

[bfoj1950]

@loyaljw You should build a portfolio and add some sort of structure to your money. Run through the numbers & check what sort of returns you can get on local fixed income/Government retail bonds, and then decide how much money you want to expose to SA equities vs US equities, add some global ETF’s and try to always have access to a liquid interest bearing account.

Research some of the cheapest ways to obtain $s, £s, etc. and try and understand or at least be aware of the rand’s price.
Tax awareness or understanding is also important. Use things like easy equities, sygnia’s online setup, 1 of the banks’ trading accounts. Take your money seriously!!!!!!!!!
Also look at things like RA’s, property, TFSA’s, etc.

 

[anphuchung]

@loyaljw Very informative advice from Carpe Diem. I want to add that if you want to buy individual international (quality) stocks, take a chunk of money offshore and use Interactive brokers. https://www.interactivebrokers.com/en/home.php

 

[skylaradams]

@loyaljw Welcome to chat to us at FAIRTREE. We are primarily active fund managers with unique investment tax efficient investment structures through RMB and Investec(Bank Notes) etc.
Send me a DM.