Is my portfolio over-exposed? (#173)

What are the implications of buying two ETFs that have similar holdings? Raesetsja is trying to figure out if they should add MSCI World to a portfolio of S&P500 holdings. In this week's episode, we show you how to figure out what doubling up would mean for your portfolio using local Satrix ETFs as an example.

Remember, you can find the minimum disclosure documents (MDDs) on each issuer's website, or find everything in one place on the etfSA.co.za website.

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Raesetja

I currently hold the Satrix S&P 500 ETF in a TFSA, into which I make R500 monthly contribution.

I have another R500 to invest monthly. Often you guys suggest the Satrix MSCI World ETF. 

I just had a glance at the MDD and the top 10 equity holdings in the S&P500 and the World are exactly the same.

Is it worth buying the World if my exposure (at least of the top 10) is the same as in the S&P 500? Should I rather invest R1000 a month into the S&P 500?

Win of the week: Javier

I discovered your Podcast and just listened to the last 40 of them — that's 40hours of questions which have been awesome and fun. Though I'm extremely lucky and I have quite a few things already lined up, your podcast has made it clear how to make it even better.

Johann 

I have a few dollars in a local USD account. If the government loses its mind and confiscates part of people's savings like the Greeks did a few years ago, will this money be safe?

Leonora

I am 59. Retired at 57. I have a living annuity with Momentum, invested in Deutsche Bank Coreshares S&P 500 at a 2.5% drawdown. I have other income for the time being and wanted to escape regulation 28.

I am looking for lower admin costs. 10X could not assist me in 2017 and on enquiry now, they still seem to be unable to do so. Any other suggestions?  Sygnia?

Ruben

I invest in the Satrix MCSI world ETF and the dividends are automatically reinvested. When the time comes and I one day reach FIRE can I change the way the dividends are paid out, or do I need to sell the ETF shares?

Jorge

I am currently investing in PTXTEN and have done so for the past three years or so. However, the PTXTEN seems to be going one way and that's down.

Is it not time to move to another property ETF and if so, what are the options and if not, why should I continue with PTXTEN.

What is the largest liquor company listed on the JSE as SA Breweries is no longer listed?

I have found Distell (DGH) on the JSE but they only registered in 2018.

Mike

Given the short/medium and longer-term risks in the SA economy, what are your thoughts about the % of offshore exposure in a portfolio (medium to high risk)?

If I backtest a portfolio of 20% Fairtree income fund and 80% Satrix MSCI world index I get 6.5% above inflation for 5 years annualised (11.5% gross) and 6.2%  above inflation (11.6% gross) for 10 years. In ZAR.

That's well ahead of my long-range target of inflation plus 4%.

Dave

My plan is to live off the cash I have saved until I am 60 or older. At that time I'll decide if I convert any of my annuities to a pension draw-down.

How do I invest my current cash savings, which I will use as income for the next couple of years? 

I will obviously be drawing from this on a monthly or quarterly basis, but would like to preserve as much as I can. My thoughts are to just transfer all the funds to a Coronation Money market account. 

What is the best vehicle to use from a tax perspective? I'm currently in the highest income tax bracket. 

Aubrey

I am building emergency fund for at least six months to a year. Which cash account or investment options I can use to grow my savings? I have a seven days notice saving account with one month salary for emergencies. I want to open another account where I can put my six months emergency account.

I was  thinking of money market account or should I open another Tax Free? Another question is safe to have all your TAX FREE with one organization?

Nico-Ben 

A few people have written you about student loans and the very low interest rates.

I had a student loan. The interest rate is low (8% in my case), but you start paying interest immediately.  By the time I finished studying, my loan capital was just short of R90,000. By that time I already paid R45,000 in interest without paying a single cent on capital.

I struggled for a while to get a stable job and was only able to pay the absolute minimum.  The loan period is so long that the cost multiple looks worse than a home loan.

It was only after four years of working that I finally managed to aggressively settle the loan.

On the upside, working through the loan, and listening to your podcasts made me learn about finances and looking at these costs. 

One expects a high salary with a degree, which I have seen in my field (engineering) is not the case.

The point is that the interest rate is not the only factor. Just as with any compounding a long-term loan is expensive, even if the interest is lower.

I had no alternative but to take a loan, but if you can avoid it I would strongly recommend it. The repayment period does put a hamper on you ability to fully utilize a TFIA and/or RA.

Jack

I started listening to your show a few months after I read the book Expat Millionaire — where cost of funds and fund damagers was highlighted. I don't mind sitting in traffic anymore.

Since then my wife complains that I have become a little obsessed with personal finance and budgets.

If a very nice family member wants to give another family member a lump sum of between R500k and R1m to assist in paying of his home loan. What are the tax implications?

What is the best way of doing this?