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Do I invest my money or store it under the mattress?

The R400 000 I invested is now worth R383 000 a year later. We are 50 years old, and don’t have a lot of time left to contribute towards our pension….

Q:  I need some advice on money that I need to invest, or just keep under my bed. The amount is R 7 million to R8 million.

I have had R5 million of the money in acsis for a while and planned to keep it there for at least five years but when they transitioned over to Old Mutual I was advised to take the money out and put it in Investec. This happened about a year ago. I paid the money back into my bank account to transfer it to the Investec opportunity fund under Clive Rossouw. 

Something made me feel uneasy, so I only opened the fund with R 400 000 to start with – luckily.

The R400 000 is worth R383 000 almost a year later. There is R5 million sitting in an non-interest bearing account for the same period, and now I am to scared to do anything.

This money was supposed to have grown with good compounding interest by now for our pension one day and nothing is happening. We are 50 years old, and don’t have a lot of time left to contribute towards our pension.

The financial institutions/advisors out there promise you good returns and all that really happens is their fees get deducted, they make their money, tax eats the rest and you are left with egg on your face and no or low returns.

What to do? I don’t know!


Mduduzi Luthuli - Luthuli Capital (Pty) Ltd

It sounds like you’ve grown disillusioned with the investment market, and those who are meant to guide you and provide some certainty in an environment that at times reacts more to sentiment and emotion, rather than facts and statistical data. We’re told consistently as investors to never time the market and to be patient. The reason for this is for the exact situation experienced above. We can all have a bad year investing but that doesn’t mean we must proceed in fear and avoid all investment related risk. We simply need to learn how to manage that risk and ensure it aligns to our long-term goal. 

You must always invest with a risk management discipline. This is critical. Never violate this rule. This rule is essential to ensuring you stand any chance to still recover over the long-term. The key to a consistently profitable investment portfolio is to control the losses for each individual investment. The way you do that is through risk management.

Controlling losses in each investment lowers the risk profile of your portfolio, reduces its volatility, and can increase its return. This is not opinion but is mathematically provable. I’ve spent years researching investment strategy and have not found an exception to this rule. That is a big statement so please read it carefully. Controlling losses when you make an investment decision should be your primary concern. We use standard deviation to measure investment risk and historic volatility. If you have an adviser who’s never discussed standard deviation with you, fire them immediately.

I don’t know the reason for the negative return in your investment over the last 12 months nor will I speak on behalf of the fund-manager. I can speculate as to the reasons for the outcome. Was it market movement or poor investment strategy? Speculating won’t help you and will only serve to waste both your time and mine. What I will say is it’s important to remind yourself that at times you will experience a dip or sub-par investment performance if you’re invested for the long-term and seek high compounded returns. It is an expected, unavoidable part of long-term investing. You may want to act? That’s fine but do remember that productive actions don’t necessarily include changing course. I wish the advice was simple and straightforward like stay calm and stay the course.

What I can say at this point is to remember why you’re investing. If you’re saving for a long-term goal, such as a retirement, your allocation already factors in a short-term market drop. A sharp fall in equity prices is usually accompanied by scary news headlines and red numbers. Modern media wants clicks and attention, and, unfortunately, fear sells. It’s hard to stay calm. We knew there would be days like this, and we planned for it. Ask yourself if your current portfolios are optimized for your time horizon. If the answer is yes, Stay that way. If you’re tempted to act, consult with a wealth-manager who’ll assist you with a tailored investment plan which is properly adjusted for risk and considers the likelihood and magnitude of a downturn or below-average returns; That is, if you still trust any adviser.

Some folks never forgive themselves for suffering capital loss (let alone forget). Some people feel so badly about what they’ve done that they never go near investments again. Others try with all their might to make up for the misstep and just repeat the same mistake repeatedly.  Both these reactions are understandable but can cost you big time when it comes to your net worth and future growth. So, like you asked…What do I do now? If you really want to prevent future train wrecks and make up for past errors, dissect the experience, isolate the mistake, create a plan on how to avoid that same error in the future, and then forgive yourself.   Let’s break this down.

What happened? 

Just because an investment didn’t work out it doesn’t mean you did anything wrong.  Sometimes things don’t work out. It still pays to ask a few questions: –

  • Why did you make this investment?
  • Were your expectations reasonable?
  • Based on what?
  • Did you make the investment purely based on another person’s recommendation or reputation or did you take a good look under the hood?
  • Did you understand the risks before going ahead?
  • What went wrong?
  • In retrospect, was this negative outcome inevitable or foreseeable?
  • If you could do it all over again, what other questions would you have asked or what would you have paid more attention to?


Once you ask yourself these questions, you’ll have a sense of whether or not this investment was a dumb move or something that just happened to work out badly.

Was the investment consistent with your long-term plan/goals?

Was this investment a solid long-term move, or was it more speculative?  There is nothing wrong with taking a little money and speculating occasionally.  But you should never speculate with your serious money. Did you convince yourself that this investment was less speculative than it really was?  The best way to avoid doing that in the future is to have an accountability partner/ financial adviser/ wealth-manager and run these ideas by that person before you do it.

Losses are a natural and normal result of making investment decisions, and the key to long term success is what you do when they occur. Losing investments can be great teachers. You will learn from every investment mistake you make. Each investment lesson learned can help you avoid a loss in the future which can turbo boost your lifetime investment performance. Use this as an opportunity to diversify.Remember that what matters is the outlook for the future, not a “correction.” It is also worth remembering that this drop is nothing compared to the gains the market has seen in the past 10 years. I only mention this as a reminder that investments do work. As an experienced investor, I always recommend that my clients “have a diversified portfolio, consisting in large part of low-cost index funds, weighted toward equities; add money as you get it, and diversify it as well; keep the cash you need; and otherwise hold steady.

Finally, legendary investor Warren Buffett gives perhaps the most concise advice about how risky markets feel, and what you should do: “The stock market is a device for transferring money from the impatient to the patient.” Stay Focused on the Future, Not the Past. We’re in an era of uncertainty; we always have been, and we always will be. Even if people say otherwise, no one knows what will happen, so there’s no use in projecting. I understand that it might feel necessary to try to correct what’s happened, but it’s just a distraction. The more important thing to do is focus on the future and staying properly invested.

What do I do now?

I think you would be well served by a Guaranteed Future Value Investment. I say this without knowing your risk profile or investment objective, so take my suggestion with a pinch of salt, and consult an investment specialist for a tailored answer, as opposed to a generic answer.

A Guaranteed Future Value Investment can offer you peace of mind, knowing that no matter what – the future value of their investment is guaranteed.  This investment vehicle assures a fixed return on investments over a five-year investment period. The investment is uniquely designed as an endowment, which ensures that the earnings received on maturity are tax free.

It is ideal for investors that:

  • are looking for a guaranteed return after five years.
  • are seeking to diversify their investment strategy.
  • are looking for a secure option to invest their money.
  • have a high marginal tax rate.
  • have previously used their interest tax exemption.
  • don’t need their capital for the next five years.
  • have discretionary savings to invest.
  • are looking to invest in a low risk product.


Remember that security is a double-edged sword. You pay for the guarantee as such vehicles tend to, but not always, have a higher cost and “lower” long-term returns. What they can offer you is surety today. They can offer you an above inflation return, full capital protection, and tax-efficiency. What more do you need?


Do you have any questions you would like answered by registered financial planners?



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I have the same problem, and has decide to do the following:
My age is 55
* I invest myself but in ETF or Unit Trusts (UT) that diversify my investments
* I invest directly so I cut the cost of the middle man out.
It depends on your risk profile but the products that I is:
ETF’s and UT – My tax free savings account is included here, also high risk products e.g. Satrixs products and RECM.
Balanced UT eg. Coronation, Allan Grey Medium risk Money market account – Low risk It may also be worthwhile to look at these product and swop some of them into RA, if you are going to continue receiving an income in the future (tax free up to 27.5%)
I believe the secret is diversification.
I use the amount that I had invested versus. the total value of my investment. If the total value of the money that I had put in is more than the total investment value, I try to avoid to worry. (Does not take the time value of money and other factors into account).
You must also compare it to the all share index, and take it into account.
I believe that with this method I will never be he top performer in the market, but I may always be in the area of the ASI or a bit higher.

Not sure why you are keeping your money in a non-interest bearing account??
You can easily invest your money in any bank’s money market accounts.
Standard bank’s MoneyMarket Select gives you currently 7.35% interest. On your R5M it works out to R370k pa risk free!
I don’t understand the rational in what the person is doing keeping that kind of cash in a 0% interest account. Weird!

imho the “question” seems made up for somemone with nearly R8mill?

Diversification. No financial planner is going to advise you to put a portion of your money into cash cos they don’t get any fees for that advice. Yes, cash is an asset class, it earns interest. Do something other than leaving 5 bar in a non-interest bearing account. Make your money work for you, whilst you figure out where to invest it. Last year top 40 returned 2.6% whilst cash gave 7.5%.
So give yourself 3 -6 months to figure it out and earn interest in the meantime. Point being figure it out for yourself.

Mduduzi, a well written commentary. Before I say anything I must state that I am, like you, a registered financial adviser.

Although I don’t have a contract with Investec I follow them and they are good fund managers.

The negative return tells me that an initial fee + Vat was deducted as well as an advise fee. Think that if the adviser knew that R5mil was at stake no initial fee would have been deducted.

The return of the fund over 6 months would have close to 6% that is inline with other fund managers. It boils down to timing of the market and the fee structure as mentioned. As we all know it is time in the market and not timing that bring the return. It is luck that make timing a success.

With regards to the guaranteed product the following. It has its place but to just see tax saving in it and the return is not an answer. Most of the time it is better to park in the money market and pay the tax due than to fix it for 5 years. The return of this fund over 5 years was 12%, but nobody know that before hand. You can go to a bank now, fix it for 5 years an get 10%, but what happens in the market over this 5 year period.

Investment in the market is risky and if risk is not for you then the banks and assurance companies is the place to be and not the fund managers.

To run away from this investment now I think will be wrong if you have some risk appetite. What happened in the past 3 years we hope is something of the past. I feel for him because it is not nice.

Yup, a heck of a lot of personal factors to be taken into account (take heed what Mduduzi discussed, also the emotional factors). There’s many of us sitting with similar despair, seeing that local equity markets generally went sideways for the past two years or so.

Unit Trust & EFT combination always good for flexibility. More importantly, have a accredited Fin.Advisor check that your underlying funds (UT or ETF) you currently have is in line with your risk-profile. Sounds like you should be in “moderate to conservative” risk profile(?), when you have anxiety over shorter-term movements. And with that, suitable asset class allocation matching your risk appetite.
Am not an investment specialist…only personal experience myself at age 47. (Was also in the Fin.Advice industry many yrs ago)

Can help with some Tax advice though: although a Money-market (or even Income Fund) is considered a safe investment (…well, taken into context, as all SA banks are now “junk-status” after all…) bear in mind that the full amount of interest earned, is taxable in your hands, with only R23,800 exempt annually. (Hindsight is the perfect master: even paying income tax on interest income these days…you would still be better off after-tax, than placing it under the mattress as inflation eats it up, or suffered capital loss on Equity-type funds. But when equity-markets recover again, you’ll say why did I keep everything in cash? Cannot stress diversification more.)
If married, you can transfer (tax-free) some capital to your spouse in her own investment, in order to utilise your partner’s R23K annual interest-exemption.
Then a more risky “odd-ball” option: if you have children with a sizable home-loan to service (assuming there’s 100% trust amongst family-members), you can “invest” in your child’s outstanding homeloan. A loan-spreadsheet needs to be set up & loan agreement signed/witnessed. Then a mid-rate can be negotiated with your child…where your child(ren) can pay you a lower % rate compared to what they pay their bank (i.e. they save some interest) & in turn you earn interest from your kid(s) at a higher rate the bank would’ve paid you on say a money-market. Effectively cutting out the bank as middle-man. Accepted, there is more risk…not for everyone…as there can be family disputes, kids default paying you, etc. Be warned. The interest arrangement you earn by “investing” in your (trustworthy) child’s bond, is normally not on any financial organisation’s “IT3b” tax certificate system, hence SARS will not be aware of such taxable interest in your hands, and you would need to apply your own honesty/ethics in order to declare the interest-income to SARS (to ensure tax-compliance).

Capital Gains Tax (CGT): per indiv / per annum, you have R40,000 CGT annual exemption, so estimate carefully the gains that you make each time you withdraw portions of your UT or EFT investments during your pension years, as to limit any CGT tax per annum. This is IMHO the single most important tax-advantage a UT or ETF fund has over a real estate rental property (as a retirement investment), as you can syphon off small enough capital-withdrawals during retirement, making best use of annual CGT R40K exemption (Real Estate is less flexible CGT-wise, as you cannot sell/transfer parts of the Deed…you’ll be hit by CGT massively once-off upon sale in a single year). In fairness, real estate as a retirement-investment still offers great inflation-prection based on rental income. Net rental profit remains taxable…bear that in mind. Real Estate costs are higher with estate agent fees, attorney, etc. More of a long-term game, but be aware of CGT if you sell rental-asset one day.

(..some political uncertainly regarding Real Estate in SA. Too many possibilities for a cash-desperate Govt to look into ways to additional tax multiple-property owners. UT or EFT’s can easier be moved direct offshore in a hurry to protect against “sovereignty risk”. People will scoff at me, but beware, like the revised Mining Charter anounced today, what will be next? Deeds listed on a register is an easy target. Sadly. Let’s hope I’m wrong!)

Have I missed anything tax wise? Hmmm…Estate Duty….a topic for another day 😉

SA is a funny place. In my view over the last 5 years, the safest of all bets would have been to buy dollars (US not Zim) and stick them “under the mattress”. Then hope your house doesn’t catch fire or the rand devaluation make you subject to CGT under the bagman Davies greed.

Indeed, Paul. Good one 😉

On a lighter note, …or having a few gold Kruger Coins hidden somewhere under floor tiles, and cemented in. Just mark it with a red cross, in case you forgot where it was hidden *lol*) And if house burned down, the coins would melt underneath the tiles, and then one can state “I owned a gold smelter”… 😉

Now that you mention it, most of the 4 largest commercial banks, offers indiv (and bus.) clients the facility of a “foreign currency account”. Usually with little or no monthly fees, but bear in mind since there’s hardly any % interest income, the longterm gain will against the ZAR exchange rate.

CGT: one major gripe I have is that the SARS law that does not take into account long-term inflation into the difference between the historic purchase cost and eventual sales proceeds. Example, a house bought in the 1980’s or 1990’s for say R100,000… and then gets sold for R2m in today’s terms. R100K back then in “real” terms, may probably be not far off the R2m in today’s real terms / buying power. So has a real “gain” (for CGT purposes) of R1,9m really been made? (ignoring deductible costs). Answer is NO. But according to SARS rules a gain has been made, and SARS argue the R40K annual CGT exemption is there to take inflation into consideration (…so the public should be “happy”)
So effectively, S’Africans have been paying CGT (on assets that were held for many years/decades) while the actual “real” gain is way less in current money terms.
Why this is not yet tested in tax court by large Tax Law firms, is beyond me.(the barrier must obviously be the way the Act has been written & applied. Needs to be lobbied against.)

Enjoy the long weekend, those who are that fortunate. Special thoughts today for our youth.

I do not believe that there is any upside in local markets.I do believe that at best markets will move sideways with a good chance for a significant downward move. If I had R5 million in cash I would put it into a vanilla Fixed Depoist with one of the banks for 1 year and get about 9% which would give me R450.000 or around at least R265.000 after tax one year hence when I would resassess the market. No fees for anyone.

If you do not need the money you can put it away for 5 years and get about 12% which will give you R3000.000 less 41% to give R1770.000 which works out about 7% pa. Scratch through some of the Fund Fact sheets for some of the equity funds of the big players and see what they have paid as returns over the past 5 years

At modest 5% in a Capitec Account R5 mil would have made at least R250 000 in a year, and possibly cost R48 per annum in administration fee. In fact over a million it is not impossible to get a higher interest rate, without even fixing the invested amount.
At Finbond the interest could be as high as 10% to 11%, at 10%, the interest paid for that year would have been R500 000 (that is nearly $39 000)! (minus modest admin fees.)I would park my money here, if I was unsure and still needed time to make a worthwhile decision, rather than just have it in a non-interest bearing account. You can be sure that the bank is lending it out at a good return to them.

End of comments.





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