We are pleased to share that Allan Gray, one of the largest linked investment service providers (LISPs) in South Africa, has reduced its adminsitration fees. Allan Gray have reduced their local administration fees for third-party funds, effective 1 October 2022. In early 2023, they will combine a client’s local and offshore platform assets for the purposes of calculating their applicable administration fees on each platform, enabling clients to benefit from lower fees. In early 2023, they will introduce a step fee for new clients investing below their lump sum minimum of R50,000. Allan Gray reducing local administration fees for third-party funds Allan Gray's new fees, which are effective 1 October 2022, are outlined below. The administration fee charged for local Allan Gray funds will remain unchanged at 0.20% per annum (excl. VAT). Combining local and offshore platform assets to calculate administration fees (from 2023)
Allan Gray will combine your local and offshore platform assets when calculating your administration fees which will result in more of your assets being subject to the lower fee tiers. Currently, your local administration fees are based on the market value of all local platform assets linked to your investor number and applied to the local administration fee tiers. Your offshore administration fees are calculated separately based on the market value of all offshore platform assets linked to your investor number and applied to the offshore administration fee tiers. The effective date of this change will be communicated ahead of implementation in early 2023. What does this all mean for you as an investor? For clients with assets more than R1 million with Allan Gray, they will enjoy reduced administration fees, so they will keep more of the investment returns. We applaud Allan Gray for reducing costs of investing for clients. For clients with assets less than R1 million with Allan Gray, the 0.5% administration fee stays the same. For new clients with less than R50,000 invested, they will have to pay a step administration fee of 1.0% per annum (excl. VAT), until their investment value has reached R50,000. So Allan Gray is not so cost effective towards smaller investors. This cost is understandable, as there is a base cost of opening and maintaining an investor account. If you have any questions or feedback, email us at service@daberistic.com
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Around January and February of every year, we would like to remind you to consider topping up your retirement annuity fund and tax-free investment.
According to the current legislation, you may contribute up to 27.5% of your taxable income to a retirement annuity fund and enjoy tax deductions, subject to a limit of R350,000. As the 28th February is the end of the tax year, you must calculate and pay the additional amount to your retirement annuity prior to this date, in order to qualify for tax deductions and tax refunds. Here is an example: Ms Rama has a monthly salary of R80,000. In December she received a bonus of R100,000. Every month she contributes R5,000 to a personal retirement annuity fund. Her annual income is then R1,060,000. The maximum tax-deductible contribution to retirement annuity is R291,500. Over the year she has contributed R60,000 to her retirement annuity fund, so the additional amount she may top up in her RA is R231,500 Tax-Free Savings Account You may contribute up to R36,000 to a tax-free savings account in a tax year. You must calculate how much you have contributed so far since 1 March last year and pay the additional amount to your tax-free savings account prior to the 28th of February, in order to make use of current tax year's allowance. You can also start a tax-free investment in the name of your children. Contact us today to top up your retirement annuity or tax-free investment - email service@daberistic.com In partnership with Morningstar: This document has been created to highlight the most important issues facing investors, share insights from our current research, and help you make better investment decisions as we enter 2022. It has been compiled by our investment leaders and draws on the work of our global team. In partnership with Morningstar: Fight or flight refers to the instinctive physiological response to a threatening situation, which readies one either to resist forcibly or to run away. When markets are turbulent, we often see investors struggle with the same physiological response. They are left to choose between staying invested amid the volatility (i.e. fight) or fleeing (i.e. flight) to safe-haven assets and cashing out their investments. More often than not, the latter path is taken. If you would like a Financial Advisor to review your investments, please email to service@daberistic.com.
Last month I talked about Step 5 - Invest 15% of your earnings. Let's continue with Step 6 - Set up an emergency fund. You should prepare for a rainy day. Things can happen and will happen. A death in the family, sickness, accident, a punctured tyre, someone in the family comes to borrow money, the phone is stolen ... unforeseen expenses, the list goes on. Or you lose your job. Or your business is negatively impacted by COVID. Having an emergency fund can help deal with these instances, cushion the blow. You should use a bank savings account, separate from your daily transactional account, to set up an emergency fund. You should have a minimum of 6 months' pay in that emergency fund, to be safe. For example, your monthly take-home pay is R40,000. Then you should have R40,000 x 6 = R240,000 in your emergency fund. If you ever lose your job or your income, then you can sustain yourself and your family for six months, while you look for another job or find the next source of income. If your business has a monthly expenses of R200,000, then you should have R200,000 x 6 = R1,2 million in the company's emergency fund. If you have not reached the ideal emergency fund amount, create a plan to top up the emergency fund every month. Maybe you have more income or receive a bonus in a month, use part of that money to top up your emergency fund. Continue with this process until you have reached the target of having 6 months' worth of income in your emergency fund. From time to time, you may have to access the emergency fund as emergencies come up. That's exactly what it's for. After you have taken money out of the emergency fund, top it up again, until you reach the ideal emergency fund amount. So what vehicle should you use to keep your emergency fund? I would recommend the following three options: 1. Bank savings account: This is an ideal vehicle for keeping your emergency fund. It is safe and liquid. You can withdraw money at any time. A savings account, call account or money market account will work. What is not recommended is fixed deposit account and notice accounts. These type of bank savings accounts tie you up for a period of time, maybe 7 days, one month or even longer. The emergency fund is there when you need it. You don't want to put the emergency fund in an account where you cannot access immediately, or with penalties if you want to access it. 2. Home loan with access bond facility. If you have a home loan, make sure you have the access bond facility. I always make sure my home loans have access bond facility. It is an excellent financial management tool for personal finance. This allows me to pay more into the home loan when I have extra money, to reduce the capital amount and interest payment. I can take out the extra money I put in at any time. Watch this to know the 7 things you should know about home loan. The segment on Access Bond starts at 20:10. The beauty of this solution is it reduces the interest and capital amount outstanding as you pay the extra money into the home loan account, but when you need it, you can take it out.
So imagine you put in extra money every month, over some time you have put in extra R240,000 in total. So you have R240,000 you can access in your Access Bond facility. There is your emergency fund! 3. Income funds. These are unit trusts, or collective investment schemes, that invest in a wide variety of assets, such as cash, credit, government and corporate bonds, inflation-linked bonds and listed property, both in South Africa and internationally. These funds focus on investing in income generating assets. In the current low-interest rate environment, they offer an attractive yield of 6% to 7%. In the short term an investor may experience temporary capital value fluctuation, but you can expect positive return over any 12 month period. Examples of good income funds are: Coronation Strategic Income Fund, Ninety One Diversified Income Fund, Nedgroup Flexible Income Fund. Any questions on emergency fund for Uncle Kevin? Email to service@daberistic.com. Dear client, I thought it would be useful to explain the way we think about inflation and your investments as I’m not sure I’ve fully elaborated on this before. So, to start, let’s talk about inflation. Inflation is a relatively simple concept, used to describe the gradual rise in the cost of goods and services. For example, a loaf of bread or the cost of petrol. Inflation is generally healthy if it’s in the 2-3% per year range, but it is considered to be unhealthy if it falls too low or rises too high (the idea is that we make steady progress over time). For this reason, the central bank will adjust interest rates to control it. Inflation is important today because it is currently rising from a very low base, but it’s perhaps rising too quickly. This is understandable, given the reopening of the economy, yet is garnering headlines and has caused some volatility among certain assets. We should also keep in mind that the job of your total portfolio is to increase your purchasing power over time. Some assets we hold will do better in a period of higher inflation and some will do better in a period of lower inflation. The key is to strike the right balance for your long-term goals and risk tolerance, which is a core part of your financial plan. On this, the return on cash (interest) typically fails to keep pace with the rising prices of goods (inflation). Therefore, as a long-term pursuit, cash is actually a very bad investment. Hence, unless we have absolute certainty that the markets are nearing the peak, which is extremely difficult, putting everything in cash is rarely a good idea. We therefore use cash selectively as an investment tool. This is already done within your portfolio, where cash is treated as any other asset class available for allocation. This means that as the attractiveness of other available assets rises relative to cash, cash allocations should fall and vice versa. Therefore, cash plays both offense and defense, by being used as ‘dry powder’ for adding undervalued assets to the portfolio and by buffering against rich valuations. This brings us to a crucial aspect of wealth creation and preservation – we need to be a step ahead of our own emotions as well as other participants emotions. So yes, cash may feel like the best place in the darkest moments (so-called “cash is king”), but it is a poor choice when considered as a long-term pursuit and only tends to work if we increase it before the market decline occurs. At heart, we remain confident that your portfolio is well positioned to navigate different inflation environments. We can’t rule out the odd setback (whether due to inflation, covid, or otherwise), but wealth creation is often about avoiding the biggest mistakes, which is why we’re diversified across different assets. We want to “be greedy when others are fearful and fearful when others are greedy”, but we also want to manage risks along the way. Bringing this together, we want to reiterate that we are aware of the current inflation discussions and your portfolio has been thoughtfully considered in this light. If you would like me to elaborate further on this, or any other matter, I’d be delighted to chat. Regards Kevin Yeh, CFP® Ninety One (formerly known as Investec Asset Management) Global Franchise Feeder Fund has a long track record (25 years), managed by veteran portfolio manager Clyde Rossouw, focused on investing in global quality companies. The fund seeks to invest in world leading companies with strong competitive advantages, superior margins and focuses on capital re-investment, with a high-conviction portfolio of 25–40 stocks of primarily investment grade companies, with high customer loyalty, strong brands and no debt. It is an equity-only fund adjusting exposure to maximise downside protection and participate meaningfully in rising market. This fund is also part of the managed portfolios developed by Morningstar for our clients. Through us you access the institutional fee class with lower fees. |
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