Please contact Namhla or Tammy in our Health and Wellness Department, email health@daberistic.com , if you have any queries about Discovery Healthn enhancements
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If you are a medical aid holder and would like an option upgrade from 1 January 2018 please note that all option upgrades have to be submitted by latest 30 November 2017 to us as your Broker. For advise on options please contact Namhla in our Health Department, email health@daberistic.com tel no: (011) 658 - 1333 Gold is long seen as a store of value. While gold's history began in 3000 B.C, when the ancient Egyptians started forming jewelry, it wasn't until 560 B.C. that gold started to act as a currency. At that time, merchants wanted to create a standardized and easily transferable form of money that would simplify trade. Because gold jewelry was already widely accepted and recognized throughout various corners of the earth, the creation of a gold coin stamped with a seal seemed to be the answer. Following the advent of gold as money, gold's importance continued to grow. History has examples of gold's influence in various empires, like the Greek and Roman empires. Great Britain developed its own metals-based currency in 1066. The British pound (symbolizing a pound of sterling silver), shillings and pence were all based on the amount of gold (or silver) that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa and the Americas. Gold is a hedge against a depreciating Rand, a declining US Dollar and rising inflation. Investors typically look at gold as a safe haven during times of political and economic uncertainty. Gold is a useful diversifying component to your portfolio. Many good balanced funds use gold as part of their diversification strategy. Over the 30-year period from 1986 to 2016, the Rand gold price has risen from R955 to R19,200, an increase of 1,909%! This represents an annualised return of 10.3%. You may invest in gold by buying:
Krugerrands Gold coins Gold ETFs such as ABSA NewGold ETF Gold Bullion Gold jewelry Investing in gold mining companies is not the same as investing in gold. Investing in a gold mining company subjects you to prospects of the gold mining industry, management, operations and financial performance of the company, which are completely different and a lot riskier compared to investing in gold. To read more about gold as an investment, read http://www.investopedia.com/articles/basics/08/invest-in-gold.asp Investors can buy and sell currencies to profit from the changes in exchange rates. The most used currencies for forex trading are US Dollars (USD), Euro (EUR), British Pound (GBP), Japanese Yen, Swiss Franc and Canadian Dollar. Investors can get exposure to foreign currencies using currency funds (unit trusts), reputable online forex dealers, or foreign currency accounts offered by local banks. In South Africa we can consider forex as a viable investment option. This is because the Rand will depreciate against the US Dollar over the long term, based on the relative purchasing power parity theory. The theory says that the Rand should depreciate against the US Dollar in line with the differential in the two countries’ inflation rates. The USD to ZAR exchange rate was R3.40 in 1994. Currently the exchange rate is R13.00 as of September 2017. This means over the last 23 or so years the Rand depreciates against the US Dollar at a rate of 5.8% per annum. Holding US Dollars will protect you against Rand depreciation over the long term. Holding US Dollars has an opportunity cost, as you will lose out on the higher interest you would otherwise earn in a bank deposit in South Africa. Investing in a bank deposit would give you an interest rate of 7%, whereas a USD account may only give you an interest rate of 1%. The opportunity cost is a loss of 6% in interest per annum.
Who is it suitable for:
A word of advice: If you would like to invest offshore over the long term, rather invest in offshore equity unit trusts than foreign currencies. It will reward you much more handsomely over the long term. An endowment is a type of investment plan that can hold a variety of underlying investment options, including unit trusts and a share portfolio. It requires an investor to invest for a minimum period of five years. It provides investors with full access to their money after five years or when the policyholder dies. In South Africa, endowment plans are taxed at reduced rates (compared to the typical tax rate of an individual in the highest income tax brackets). When you do decide to withdraw your money, you won’t have to pay any further tax on your investment.
There are two main considerations around endowments: tax and estate planning benefits. Income received in an endowment is taxed at a flat rate of 30% for individuals and trusts, while capital gains is taxed at 12%. 20% dividend withholding tax also applies. Tax on returns is deducted and administered by the product provider. The Long-term Insurance Act that regulates endowments imposes a few restrictions: During the first five years of your investment, known as the restriction period, you may only make one withdrawal. The maximum withdrawal during this period is limited to the amount invested plus interest at 5%. The balance may be withdrawn after five years However, when you are not in a restriction period, you may withdraw from your investment at any time, or schedule regular withdrawals. Your five-year restriction period may be extended if you invest more over one year than 120% of your investments over either of the past two years. Most life insurance companies and investment platforms offer endowments. In the event of your death, your beneficiaries can receive your investment immediately and there are no executor's fees. This amounts to a saving of up to 3.99% of fund value. Tax administration is taken care of on your behalf (the insurance company calculates, deducts and pays the taxman). The entire value of the endowment will be protected against creditors after three years. This protection will continue until five years after the termination of the endowment. You are not restricted to maximum levels of equities and offshore investments, as in the case of retirement annuity. You can also use an endowment to draw income upon retirement, as long as the five-year restricted period has passed. You can do this on an ad-hoc basis, without being forced to draw income at specific intervals. Return profile: It will depend on the type of unit trust you invest in. If your underlying investments are income unit trusts, you may expect a net annualised return of 4% after fees and tax. If your underlying investments are high growth unit trusts, you may expect a net annualised return of 6.5% to 9% after fees and tax. Who is it suitable for:
Property investment is high on many investors’ list. Many investors like property as it consists of land and buildings, has physical presence. Property offers capital protection, its value increases over time.
Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate can be a lot more complicated than investing in stocks and bonds. Owning your own home that you live in is not a property investment. Property investment is something that provides you with regular income over time. There are generally four ways of investing in property:
Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. The disadvantages of buy-to-let properties is firstly you need to manage tenants. You need to find a good tenant that will pay rent on time and look after your property. If you have a bad tenant that doesn’t pay or damage your property, it can be costly and stressful to the landlord. Worse still, there can be times when you end up having no tenant at all. Also you need to continuously maintain the property, fix things that are out of order, to maintain the use and value of the property. Lastly, property is not a liquid investment: you cannot sell property and get your money in a matter of days. Doing research and finding property in the right location are important in the success of buy-to-let properties. Also be aware of the costs associated with acquiring a property, such as Conveyancer’s Fee, Bond Registration Fee, Deeds Office Registry Fee and Transfer Duty. 2. Real estate trading Real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market. Pure property flippers will not put any money into a house for improvements; the investment has to have the intrinsic value to turn a profit without alteration or they won't consider it. Flipping in this manner is a short-term cash investment. If a property flipper gets caught in a situation where he or she can't offload a property, it can be devastating because these investors generally don't keep enough ready cash to pay the mortgage on a property for the long term. This can lead to continued losses for a real estate trader who is unable to offload the property in a bad market. A second class of property flipper also exists. These investors make their money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements. The limiting feature of this investment is that it is time intensive and often only allows investors to take on one property at a time. 3. Real Estate Investment Trust (REIT) A Real Estate Investment Trust - REIT (pronounced ‘reet’) - is a company that owns, and often operates, income-producing property. The REIT is the international standard. More than 25 countries in the world use a similar REIT model like the US, Australia, Belgium, France, Hong Kong, Japan, Singapore and the UK. A South African REIT - SA REIT (pronounced 'essay reet') - is a listed property investment vehicle that is similar to internationally recognised REIT structures from around the world. Listed Company REITs or Trust REITs are publicly traded on the JSE REIT board and qualify for the REIT tax dispensation. A JSE-listed SA REIT must:
If you like property but do not like the hassles of managing properties, then property unit trusts are for you. Property unit trusts are unit trusts that invest in listed property stocks and REITs, which in turn invest in office, retail and industrial properties. Property unit trusts allow investors into non-residential investments such as malls or office buildings and are highly liquid. They offer investors instant diversification benefit, by investing in a number of property companies. Property unit trusts distribute the income it receives quarterly to investors. You can also benefit from capital growth through rising unit price over time. Over the last 20 years property unit trusts have given investors an annualised return of 20%, making it one of the best investment vehicles over the long term. 5. Leverage This is probably the biggest advantage of investing in properties. With the exception of REITs and property unit trusts, you can borrow money on your property. Banks are willing to give you a home loan, as they can secure their lending with the value of the property. Most mortgages require 10% to 30% deposit, however, depending on your financial standing and credit score, some home loan providers may give you up to 100% bond, meaning you don’t have to put down a deposit. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it, but you control it the minute the property is transferred to your name. This is what emboldens real estate flippers and landlords alike. Whether they rent these out so that tenants pay the mortgage or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value. An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike unit trusts, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than unit trusts, making them an attractive alternative for individual investors.
Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a unit trust does. ETF investors are entitled to a proportion of the profits, such as earned interest or dividends paid, and they may get a residual value in case the fund is liquidated. The ownership of the fund can easily be bought, sold or transferred in much the same was as shares of stock, since ETF shares are traded on public stock exchanges. There are now over 5,000 ETFs worldwide. In South Africa there are 57 ETFs listed on the JSE. The ETFs available in South Africa can be classified into seven categories: South African Equity International Equity Bond Commodity Money Market Multi-Asset Class Property Equity You can buy ETFs listed on a stock exchange, such as JSE, through a reputable stockbroker or an ETF platform such as etfsa.co.za. Your return from owning ETFs comes from two sources: dividends or interest paid to you, and increase in share price (capital gains). Dividends received are subject to 20% Dividend Withholding Tax; capital gains are subject to Capital Gains Tax. ETF share price can go up or down. When share price goes up, you make a profit on paper. When share price goes down, you make a loss on paper. Before you invest in ETFs, you must do your research. You should identify the ETFs you would like to invest in, read the factsheets (Minimum Disclosure Documents), have a good understanding of their underlying assets, prospects and financials. After you have bought an ETF, you need to continue to monitor its performance, changes to underlying assets and future prospects, to determine whether it is appropriate to stay invested. Working with an advisor specialising in ETFs will add value to your ETF investing process. Having a good understanding of technical analysis may help buying ETFs at better prices. ETF investing is a long-term activity. It is NOT buying and selling ETF shares regularly in the hope of making quick profits. A word of advice: I consider the International Equity, Commodity and Property Equity ETFs to be the most interesting for investors to consider as part of their diversified portfolio. But remember, don’t base your investment decisions on looking at past performance figures only. You need to be forward looking, thinking about what is likely to do better going forward. |
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