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What could a South African do with R500k in a money market account?

Until the interest rate situation changes in South Africa, I would strongly reconsider any cash exposure.

What could a South African do with R500 000 in a money market account (I know – get it out ASAP)? I have a small amount invested in Easy Equities (local), I have a tax-free savings account (used annual limit), no retirement annuity (RA), and an Easy Equities USD account. It’s not a great time to buy equities (locally or USD), or is it? Shall I put a lump sum in an Easy Equities RA? I need some money available for my daughter’s studies.

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Dear reader,

Thank you for your question. Firstly, regarding the money market comment, yes, I agree with you. Cash is currently yielding around 4%, and with current inflation at 5.2%, you are losing money in real terms. Until the interest rate situation changes in South Africa, I would strongly reconsider any cash exposure.

I am happy to hear you have a tax-free investment structure, as this is an excellent vehicle for any portfolio.

I would advise considering including a retirement annuity in your portfolio as this vehicle does offer excellent annual tax benefits, and can also provide a focused strategy for your personal retirement goals. You are allowed to deduct from your income for tax purposes up to 27.5% of the greater of your taxable income or remuneration, limited to R350 000 per year. This is a huge tax benefit if optimised annually.

Should you however require access to these funds as mentioned for your daughter’s studies, a retirement annuity is not the right vehicle as the funds will firstly not be accessible until age 55, and then only one third can be taken as a lump sum, while the remaining two thirds must be utilised to purchase a compulsory annuity that will provide you with a monthly annuity.

Specifically focusing on the funds for your daughter, I would advise considering a voluntary investment (this vehicle is accessible) and you can also add additional funds at any point in time. Here I would advise following a diversified approach, definitely including equity exposure both locally and offshore, but also diversifying slightly with cash and bonds.

I am not sure what your timeline is until your daughter starts studying – but the cash and bond components can provide immediate cash for the first withdrawals when they are required.

Diversifying sufficiently across asset classes also provides more consistent returns over the longer term, as you are protecting yourself against some market fluctuations you will experience with equity exposure.

We can’t time the market, although the ideal would always be to buy low and sell high. However, waiting for the right time could also mean missing many good days in the market. I would advise following a well-diversified approach.

More of the funds could potentially be kept in the cash and bond exposure (here I would advise also making use of multi-asset income funds, which invest in a combination of equity, bond, money market, property or derivative instruments with the primary objective of maximising income; the current yields are closer to 7% to 8%, significantly more than cash at this time) with the intention of moving more into equities in future, should that align with your investment timelines and goals.

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Just buy a polo lol

Just buy a polo lol

Wow, you still upset? Winning. Time to move on from high school.

Wow, you still upset? Winning. Time to move on from high school.

This article is about small discretionary savings money – not your little bob save junior accounts. Wow, who knew someone would get upset about such a thing.

This article is about small discretionary savings money – not your little bob save junior accounts. Wow, who knew someone would get upset about such a thing.

What! And to get hijacked?

Rather that than the old student car that you managed with your life time of work

Rather that than the old student car that you managed with your life time of work

I thought of the same before even looking at the comments.

Buy a small car and treat the family to a hamburger and chips.

All thanks to inflation and looting.

Some NAspers and Prosus shares… But I would wait till they become cheaper!

Buy R500,000 of CoreShares S&P 500 ETF on the JSE, Code CSP500. If you did this one year ago you would have made a gain of 21,8%. It is the top 500 shares in the USA. What could go wrong?

I might come across as pessimistic but the only choice I see you having to get a worthwhile return on investment is getting your daughter out of SA.

My cousin’s who is in his 50s has a 10 year old son, has been begging me to take his boy out of SA to live with us so that he can have fair chance at life.

Before I agreed, he told me that he is willing to sell everything in SA and stay alone in a small bachelor flat so that his wife and son can start go. He would also be able get out about R650,000 in investment funds which in reality is very very little money.

To give you an idea how little R500,000 is one needs to look at the price of freedom and where you would be able to enjoy this basic human right.

In 1752 the cost of a slave and upkeep over 40 years would be about $205,000 in 2018, we can roughly add about 20% additional inflation to that figure so the round number would be $246,000 (R3,690,000). That translates $512.50 (R7,687) a month.

Your cousin is not to clever.. Could stay is SA (he can’t afford the US) and his son can study basically anything from SA (CFA, CIMA and many other worldwide recognised qualifications) or he can still study at a SA university which still provides quality education.

I’m really not following the whole slave analogy? The burger one I get …

What is the minimum price of freedom?
For me that would be to live one better than a slave. If you are not living better than slave well then you are not really living decent life are you?

Then one needs to ask what is the cost of owning a slaving? (my reference has recently updated their website, and it more or less takes the inflationary figure which i mentioned into consideration)

For me there are various ways in measuring someone’s freedom using the slave cost as a pivot point.
a) if you earn less than R7,687 a month, you are worse off than slave
b) if you earn R7,687, you are living like a slave
c) if you earn twice the cost of a slave, then in theory you should be living two times better.
Et Cetera

South Africa has become enclave society with only medium wealthy people, those earning 4 times the cost of a slave, able to enjoy a decent life.

50% Bitcoin
50% US equities – Nasdaq (can do this via easy equities)
Your kids will thank you.

US always a good long term bet – not so sure about the short term potential of equities – way to pricey…

People advocating putting it on the S&P, must be smoking something very strong. The S&P is is currently in the top four percentile most expensive in its history. SA market is a good value.

Good value is not the only variable one should consider when investing. Take properties as an analogy. Hillbrow “good value” for property as it is below median, doesn’t mean I would want to stay there though.

Until the forthcoming bubble situation bursts in South Africa, I would strongly reconsider any equity exposure.

Some current options:

RSA Retail bonds offers 8.5% on 5-years
Capitec offers 8.15 on 49 to 60 month FD

RSA retail bonds=ANC funding : forget !

The market has gone sideways for 10 years

If there were an ETF tracking the rise of corruption or public sector pay in SA, I’d put it on that.

Use some of the R500,000 to purchase a nice Trafalgar coach tour holiday package for the whole family. Pick a European tour.

And the end of the tour, prior to returning to SA, burn your passports and declare yourself as “refugees” looking for asylum.

Just utter the words “..from South Africa. Please Help” and many will understand your predicament.

Wait till the stock market crashes, then invest in stock market.

One can revert to the Oracle of Omaha. Warren Buffet said that most investors would be much better off by just buying the S&P500 index than trying to beat inflation by selecting stocks.
Plus, you get a lot of spare time and peace of mind.

End of comments.



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