The Fat Wallet Show with Kristia van Heerden

Podcast: Can I lose all my money when I invest?

In Latest, The Fat Wallet by Kristia van Heerden

Clean swearing bleeped out show is below.


The phrase “all their money” gives me the creeps. Throughout my life I’ve heard that line followed by something completely ridiculous. Some examples:

  • “He made all his money from property.”
  • “They made all their money from GNLD.”
  • “He made all his money from farming.”

The phrase also goes the other way, except this time it’s true.

  • “They lost all their money when their business failed.”
  • “He lost all his money in property.”
  • “They lost everything in an investment.”

The key message I got from Simon’s recent conversation with Charles Savage is that users remain uninvested because they are afraid of losing all their money. The bigger problem is that people misunderstand what the stock market is and how you make money from it.

In this episode, we attempt to explain how you make and lose money in the stock market. We follow that with why it’s very unlikely that you’ll make, or lose, ALL your money by investing.


Win of the week is Shane, for sending my favourite email of the week.

Just wanted to say – this morning’s podcast was terrific! Busy researching into a shared Credit Card for myself and the missus.

Whilst we have been VERY good at mindful spending and savings, we just found out we’re (unexpectedly) expecting an addition to the family 😊

Time to step it up a notch… BIG TIME.

Thanks for all you do!


Margaret wants to diversify for counter-party risk. She has investments with Sygnia and Allan Gray.

Is it better to have more money in fewer funds (to increase the power of compound interest) or have the money split over more funds/management companies to decrease the risk? Sally had a similar question this week.

Is there a rule of thumb for how many funds you should be invested in to manage this risk reward? How do you resist trying out several funds given the abundance of options?

In America they talk about investing all their money with Vanguard or in a S&P 500 fund. Here in South Africa with scandals like KPMG and Africa Bank I’m not sure I’m comfortable with having all my money managed by one company and/or one service provider.

How big is the risk of fraud/mismanagement given the regulation of the industry? I.e is it fine if I stop the debit orders to the managed funds and put them back with Sygnia?  Or should I go with another index tracking company such as Satrix?


Derek is about to retire and unsure how to choose a living annuity. He says he won’t take what we say as financial advice because he doesn’t trust people who don’t like to braai.

I need to decide in which Living Annuity product to invest.  

I naturally would favour an index-based LA for low fees and comparative net returns.   

I have convinced myself that a Medium Equity Living Annuity (CPI+5%) would best suit my personal risk profile; and allow a sustainable 3% draw-down while keeping pace with inflation and costs.

I notice that there are substantial differences in the net returns of the Living Annuity portfolios that are currently on offer.  

Direct comparison is complicated by the fact that the performance numbers are sometimes based on theoretical (back-tested) data as opposed to actual results.


Mbasa wants to know if it’s cheaper to buy ETFs at your ETF provider like CoreShares or Satrix.

When you buy shares directly via Computershare you only pay broker fees when you buy or sell, unlike having an account with a broker where you pay monthly fees e.g. Standard Bank online share trading.

I think my question is, is it better to own ETFs directly from the provider such as Satrix or Coreshares instead of buying via platforms such as Easy Equities?

TER

https://justonelap.com/etf-understanding-ter/


Danie has some feedback on Capital Legacy that Sephatisile wrote about.

Just a correction on the Capital Legacy information.

We use them a lot, but, they do NOT pay your Estate Duty upfront.

They offer an Indemnity Plan that “effectively indemnifies the costs of the Executor & Trustee services as well as Conveyancing Attorney fees that are necessary to wind up the deceased Estate.”

This is a very unique and cost effective solution to estate planning, especially when kids are involved, or complex wills need to be drafted.


Patrick is earning dollars. He wants to know if he should keep them or bring them home.

I am earning US Dollars. I’ve already invested some of the dollars into an Allan Gray unit trust account and was wondering if I should keep in dollars or send money back to South Africa and invest in a unit trust there.


Anthony almost dethroned Shane for the win of the week

While listening to the radio one morning I came across an advert about a company called VeriFi. It’s an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies. It does this by sourcing information from all the major life insurance companies – including Old Mutual, Sanlam, Liberty and others. The information is presented in a comprehensive report.

https://www.verifi.co.za

I did all the formalities and wanted to see if there was a better RA with low fees that they could offer.

They offered me a Liberty Retirement Annuity Builder for R1000 p.m

Thanks to you guys I SCRUTINISED this policy to see if I was getting ripped beyond repair.

They even threw in a compound interest table (with an assumed growth rate p.a of 10%) to see where I would end up in 35 years’ time. How fucking kind of them.

This compound table didn’t take into account admin fees and performance fees and advice fees and service fees and ongoing guarantee fucking fees and management fees and ongoing commission recovery fees.

ALL I SAW WAS FEES FEES AND MORE FEES

So, the quote from a fellow listener came to mind:

“It blew my mind that if I get 10% growth and inflation is 6%, there is only 4% left for growth (compounding) and if I pay 3% of 4% in fees, I will only get back what I put in (adjusted for inflation).”

The fees totalled close to 6%

Not to mention the ongoing fees, performance fees AND the service fees which are excluded.

I had to read this policy with a  bottle of whisky to numb the pain.

I’ll stick to my current RA with Discovery, for the time being as my life policy is linked and all – not happy about all the boosters and links etc…

But it made me feel happy that I’m not going to get ripped by these ridiculous fees presented to me.


The Fat Wallet Show with Kristia van HeerdenThe Fat Wallet Show is a no-nonsense personal finance and investment podcast hosted by Kristia van Heerden and Simon Brown. Every week we answer questions by a growing audience of finance enthusiasts. Submit your pressing money and investment questions to ask@justonelap.com.

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