The Fat Wallet Show with Kristia van Heerden

Podcast: The right time to buy and sell

In Latest, The Fat Wallet by Kristia van Heerden

This community is all about not leaving money on the table. Buying and selling shares at the right time can have a long-term impact on the performance of your portfolio. This week we discuss two questions relating to timing buying and selling shares and ETFs.


Win of the week: Mukhtaar, for solving the tax on REIT issue.

In the latest podcast there was a question whether listed property distributions are treated as interest income or taxed as normal income.

I can confirm that it is taxed as normal income and the interest exemption does not apply.

You can see that an exemption only applied to interest income. The REIT income was just added to my other income without exemption. There is no deduction for this.

For this reason, I try to keep all my listed property exposure in a TFIA!


Clean swearing bleeped out show is below.


Warren responded to Nadia’s question about learning how to trade Forex from last week:

There’s a great site called Babypips where she can learn everything. Also there’s a company called Oanda based in the UK which I’ve been trading on for 6 years and all is legit. No minimums or admin fees.

Paul also had some feedback.

Best thing I heard this week, “if you want to know if forex trading is for you, withdraw R2000 from an ATM, and burn it. If you can’t, then you can’t do forex trading either” – courtesy of Simon Pateman Brown.

I wish I heard this phrase a few years ago, when I was also sold the yacht and bubbles lie and ‘burned’ a couple of thousands trying my hand at forex trading.


Stephen

I’m toying with the idea of moving all of my ETFs across both my normal and tax-free portfolios into a Bond ETF (Newfunds Govi ETF).

The idea would be to leave my investment in a more stable environment and then move them back into my original portfolio when the market is low.

My current portfolio across both my normal and tax-free accounts holds:

  • Ashburton Global 1200 (20% of normal)
  • Coreshares Global Divtrax (20% of normal)
  • Satrix Nasdaq 100 (in both – 20% of normal and 33% of tax-free)
  • Satrix MSCI Emerging Markets (33% of tax-free)
  • Satrix S&P 500 (33% of tax-free)

On my normal accounts, I haven’t made enough to warrant Capital Gains – I moved from single shares to ETFs in my normal account after Steinhoff and also not realising I should have sold Dis-Chem in the high 30’s!

It was then that I realised that I was like a gambler – talking about the gains but not about the losses! At the moment the only single shares I have are Naspers and Steinhoff (only because I can’t bare to accept defeat along with my own single concentration stupidity).

Is this an advisable approach? I want to be fluid for when the recession opportunities arise. Or, should I be looking elsewhere for a stable return during market downturns?


Morné

I decided to convert my portfolio from single company shares to ETFs, mostly to avoid risks and not to have to follow shares religiously for opportunities.

My approach is to slowly sell my single company shares as they move into the green or break even and then use the money to buy ETFs. This is only for my SA account since I already decided to focus on ETFs before I opened my US EE account.

I was delighted to see that the ETFs I thus far chose are also rated highly in your podcasts. As I am selling my single stocks, the cash I have available for ETFs is growing. However, the cash in both my SA and US accounts are earning basically zero interest. This irritates me greatly.

My dilemma now is when to buy an ETF? Do I wait for a price drop or do I buy at any price when I find an ETF that I like, since I am investing for the long term? The same goes for the ETFs that I already own. Should I wait for price drops or keep on adding to them from month to month regardless of the price?


Gerard is also taking control of his finances in a big way.

Four years ago we had a lot of credit card debt, month to month living, always “broke”. I discovered MMM and FIRE, took control of my expenses and now have multiple savings and investment accounts and no more debt. It took about tw years to get rid of the most debt (house almost done) – and since then just building investment accounts.

Last year I decided to start adding extra monies to the EasyEquities taxable account, and bought about 40 shares to simulate my own index, based on Coreshares TOP50.

One morning I logged into EE and decided this is just too much admin, for such little long term reward – just pay the TER, buy ETFs and stop stressing about this (Re-balancing and buying 40 shares every month gets annoying quickly) . I then sold everything not really understanding the tax consequences.

Now I’m sitting with my first ever TAX event – +-R300 in realised gains, not big money. Would I be able to put this through as a CGT, as my intent is for this account it to be long term holdings – or is it just better to declare the small profit I made as income?  

I can’t yet prove it as long term, other than showing SARS my retirement planning spreadsheet  – so on such a small amount of profit, I just think I’ll do it as income declaration.

My one major worry is, is that if I declare this as income this year will SARS always see this account as a trading account, or is it a per tax event thing ?


Our Tax Elf De Wet has decided to give up a cushy corporate to take his Tax Elving more seriously. He’s also significantly downscaling his life. He has some big questions about what to do with his money now that he’s in the wild. He sent a monster email so we’ll be dealing with each topic separately over the next few weeks.

I’m looking to save a percentage of all income per month (both me and my wife) for tax purposes. Anywhere between 25% and 31%. What is the best use of this money during the period I have access to it? This normally sat in my bond / home loan.


André, our new minimalist contributor, had a great insight.

  1. The lower your savings rate is, the higher rate of return you’ll need to get.
  2. The lower your savings rate is, the more important time horizon becomes.

Wayne has some legacy active funds and wants to know what to do.

I am invested in The Allan Gray Orbis Global Equity Feeder A with a TER of 2.16% ( I just threw up in my mouth).

I have a large amount going to this monthly.

It was a great idea before ETFs came along that could give me access to world stocks.

I am also now invested in Sygnia MSCI world in my TFSA with a TER of .68%.

Should I be looking to disinvest or stop the monthly payments in Orbis ( they had a shocking year 2018) and put the funds into my EE account and invest in the Satrix or Sygnia world ETFs?

I am struggling to see the difference in investment strategy between the two options, The etf option definitely has a lower TER, and I do not know who to call for advice.


Mary is 42 and discovered the FIRE idea last year.

I started saving for my emergency fund. I was a bit uncertain whether that expense amount should cover the medical aid as well. If so, I should rethink mine because as of now I have about four months of expenses saved up.

She holds:

  1. Satrix 40
  2. The All bond index
  3. The S&P 500 and
  4. The property ETF

My tax-free is in a bank account in cash up to now.

I also have the Allan Gray equity unit trust.

I was thinking of starting a tax free portfolio in ETFs and did not want a lot of extra individual ETFs. Is it better to put 100 % of the tax free allowance in the high equity balanced index fund from Satrix or to spread it around in different ones?


We got a mail for Jorge!

Can you please advise what is the best bond ETF (to reduce risk) to buy in a TFIA which will give the best return. What % of the TFIA should it be as I mainly have equity ETFs in the account at the moment?


Karabo has investment properties for her kids.

I have three properties that I bought in my early 20s as investments for my yet to be born children (I am 30yrs old this year). I bought the properties in my name but would like to move them to a trust. Is it possible to do so? Would it be wise to do so or should I rather register a company that will own the properties on behalf of my children?

I still owe the bank on the properties.


Always Abundant is starting to understand the impact of the exchange rate on their investments.

50% of my portfolio is invested in the Vanguard World ETF (VT) in USD.

The other 50% is Local: Top 40 ETF (Satrix and Sygnia), Satrix indi, Sygnia local property index fund, some local unit trust funds (may include max 25% offshore from time to time), some individual SA shares.

Recently, I realised that the exchange rate plays a bigger role than performance when it comes to the profitability of my offshore investments when converted back to ZAR. This is a scary thought as I have no plans to emigrate and have always needed to sell at an inopportune time (wrt the forex rate)

So, I thought to find a suitable local ETF to counteract that risk. Unfortunately, it seems to me that, apart from mid-caps and local property perhaps, everything is impacted by the ZAR-USD exchange rate.

Is this a logical concern or am I overlooking something at a time when everyone around me is investing offshore? If my concern is logical, what is a good investment for South Africans who do not wish to be exposed to currency risk? I would still like an equity-related return and low cost.


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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