Live from Cape Town (#172)

This is our very first live recording in Cape Town, and what a pleasure it was. Our conversations with you change the way we think about our money. Also, seeing people laugh at your stupid jokes instead of hoping to goodness that someone finds you funny is a wonderful ego boost. 

This week we help Antony figure out if it's time for his family to self-insure their medical aid. While the consensus seems to be that it's not worth the risk, I enjoy playing Devil's Advocate. There's more than one way to skin a cat. I still maintain it can be done, albeit with a fair degree of footwork. 

From our live audience, we field questions about family and money, fear and optimism regarding the future of the country and fees. We also get to answer some listener questions.

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Antony

Over the last 30 years I have contributed R2m in today's money to a medical insurance fund, but have only claimed R100k for the birth of three children.

I realise that insurance is a sunk cost, but I classify myself and family as above average healthy and medically low risk.  I retired this year at 50 and have a sizeable investment portfolio.

I have discussed with my three children if we should start our own "medical insurance", and they are very keen. I plan on starting off the fund with a lump sum and having each child contribute per month to the fund.

Both my wife's and my parents are deep into their 70s and are spending an annual amount of R40,000 but are contributing R60,000 to their medical aids.

At what stage of financial independence do I (or others) medically self-insure if I believe my family to be low risk?

Audience questions

• If we get downgraded to junk, is there an opportunity to be had if we're young and can ride out the volatility ? Or should we just keep on with our current strategy ...
• What are your suggestions for saving for someone unable to work or manage their own money due to a mental illness?
• How do you talk about financial planning to a partner or a parent who doesn't like thinking/talking about money ?
• When do you draw the line on moving for lower fees? I've moved once from old-school policy to 10X, but 1% is still a lot these days. Now tempted to move to Sygnia. But at some point a new player will offer even lower fees, or 10X will drop, or Magda will increase. Would be expensive to keep moving.

Richard

Is there any reason to invest locally?

The JSE offers very traditional sectors - finance, resources and retail. Is there any room for significant growth, particularly in a stagnant economy?

There's no tech (bar Naspers), no bio-tech, no AI, I would even settle for marijuana stocks at this point or any sector which could provide some sort of upward momentum.

If you are 20+ years away from retirement, wouldn't the fact that the Rand structurally weakens vs US$ over the long-term benefit your investment?

Mike

I have TFSAs for myself and my two kids, with four ETFs and one balanced fund in each of them.

As you know every quarter those generate dividends, which I re-invest.

My question is what is the best way to distribute the reinvestment?

1. Split the available cash evenly across the funds so the purchase values remain equal.
2. Distribute according to which fund generated which dividend.
3. Use cash to rebalance the funds so current values get closer to being equal.

Nick 

I've listened to your show for some time now, but I can't make up my mind about how to handle my current situation. 

I have a big bond on my home as a result of a foolish impulse to keep up with the Joneses.

If I liquidated all my other investments I could settle half, maybe more, of the bond. If I included other long-term investments like pension and RAs, I can cover more than 100% of the bond. 

More than 50% of my equity investments are fully offshore.

More than 50% of my local equity investments are also invested in Rands in offshore ETFs and unit trusts, the rest in Sygnia and 10X RAs. 

I have a decent percentage of hard currency and local currency equity investments. But the interest on my bond alone is R22k/month. Should I reduce the amount of the bond to reduce interest payments to a more manageable level?

I can't sell the house (unless I get divorced). I am trying to cut other expenses down to fund bigger bond payments but it's been tough and our expenses are stretched. I can't bear the thought of selling equities to repay debt and then watch the debt become nearly worthless anyway and the equities increase in value.