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Good investment in the short term

Q: I’ve decided to sell my house, and I expect to realise just under R1 million. I would like to use this money to pay off our debts like our credit cards and possibly our cars. That will leave me with approximately R500 000.

My plan is not to buy another house just yet as we are not sure if we may move to a different province or even different country in the next couple of years. With all that is going on in the markets and considering that all of my other money is either in exchange-traded funds (ETFs), unit trusts, retirement annuities and another property that I own, would it be wise to invest my money in physical gold? Or would it be better to invest in a money market account where I can get 6.4%?

I want something safe, as it is not often in life you get a lump sum like this. We are also sacrificing having a nice big house in order to live in a smaller dwelling for the sake of being prudent and using this opportunity wisely.

As with many similar questions that I have been asked over the years, it is vital that you meet with a financial planner. A full understanding of your financial situation is required. It is not wise to give recommendations based on only a portion of your investment information.

However, that said, let’s assume that I have understood your risk profile accurately, and that a ‘couple of years’ refers to two years. I would consider the following to be wise counsel:

It is unlikely that allocating the full amount to gold would be appropriate as the price of gold can be volatile over short-term periods. I would also assume that the lump sum of R500 000 is unlikely to be a small portion (i.e. less than 5%) of your overall portfolio, and this makes it even less appropriate to allocate the full amount to gold.

In addition, you specifically ask about physical gold, which in most cases is Krugerrands. When investing in Krugerrands there are fees of about R3 000 per ounce (you can buy for R21 000 versus selling for R18 000 as per the Cape Gold Coin Exchange), which need to be taken into account. Over a short-term horizon, these costs could be really punitive.

The gold price would therefore have to increase substantially over your two year period to beat the 6.4% per annum offered by your money market option. Remember you will also have to take into account the storage and insurance costs of holding physical gold. Therefore, taking all things into consideration, I would consider gold to be a relatively high risk investment for you.

Business with bonus money

Q: A lucky investment some years ago is bearing fruit. Last year, I effectively got a 13th cheque from dividends, and I expect similar this year.

Instead of blowing it again, I was hoping to put it somewhere that will pay me a monthly income, maybe over two years. What is available out there that can serve this purpose?

 

A lot of people who get a bonus or once off additional income for whatever reason, tend to ‘blow it’ as you have pointed out. It is therefore a very good idea to try to think of better things to do with the money. I would, however, suggest that you consider not only your immediate or short term needs but also the long term potential of any extra income you receive – no matter how small.

If you have a need for extra monthly income, which might be the case if you are currently using a credit card or overdraft because your expenses are close to or more than your current monthly income, then I support your idea of putting the money in a vehicle that will allow you to supplement your income for the next two years.

A two year term, however, is a very short time horizon for an investment and I assume you intend to be drawing the full amount over the two years. In other words, you will be left with nothing at the end.

If so, you will need access to the money and very little, if any, risk. With these constraints in mind, I would suggest either multi-asset income unit trusts – the top funds produce between 8% and 10% per annum historically – or a bank savings, call or money market account with cash immediately available. These bank accounts produce between 5.5% and 7.5% per annum, depending on the amount.

Let’s use an example and say the amount is R50 000. If you can achieve returns of 10% per annum for the next two years, this will produce an income of R2 307 per month for 24 months before being depleted. At 7% per annum, the monthly amount will be R2 194 per month, so there is only a small difference, which means it is probably not worth taking the extra risk.

The question is whether you actually need additional income or if you are just going to be spending it over 24 months instead of one month. If you don’t really have a requirement for the additional income, you may want to consider investing the amount for a longer term so that it can produce even more for you.

You could consider putting the money into a tax-free savings account or retirement annuity (RA). By contributing to an RA, you would be reducing your taxable income. This means you could get something more back from the South African Revenue Service next year, depending on what retirement contributions you are already making.

Let’s use the same R50 000 we used for the example above and assume that you are below the maximum deductible contributions to your retirement funding. This is currently 27.5% of your remuneration or taxable income, or R350 000 per annum, whichever is lower.

Save for a new car

Q: I would like to start saving for a second motor vehicle. My current car is paid off and still in very good condition, so I don’t think I will need to replace it within the next five years.

I would therefore like to save the money that I was paying towards my monthly instalments to eventually buy a second motor vehicle for cash. Therefore, my savings term would be at least five years.

I have a money market fund with Allan Gray at the moment, but I find it difficult not to use these savings for other larger expenses. I would therefore prefer to use something that does not allow immediate and easy access to my savings. What would be best for this purpose?

The first step one should take is to identify the investment objective. In this case that is a car, with an assumed cost of R300 000 at the end of a five-year term horizon. It is important to understand this time horizon as well as your appetite for risk to decide on the most suitable investment vehicle.

Some of the most popular after-tax investment vehicles include endowments, unit trusts and the tax free savings accounts. These vary in terms of accessibility and tax implications and we would need to know the clients full financial situation before recommending a suitable product.

For a client who wants to lock their investment for a five-year period, an endowment would be a vehicle to consider. We do, however, have to take into account their marginal tax rate when making this decision.

This is because endowments are taxed within the fund at a set rate of 30%. This benefits investors who have a marginal tax rate greater than that, but can be prejudicial if their tax rate is lower.

Because the money in an endowment is taxed within the fund, your withdrawals are tax free. In order to get this benefit, however, endowments have a minimum investment time horizon of five years. At that point the money can be accessed or the investor can choose to extend the policy term.

You would be able to choose different underlying investments within the endowment, and given your time horizon, a moderate-to-balanced portfolio will most likely be appropriate. It is, however, important to take your risk appetite into account.

To know whether this would really be the best option for you, however, it is important to get an understanding of the tax implications from your financial advisor.

Strong Advice To Help You By way of Cash Advance Credit

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Monetary difficulties will often demand fast interest. If perhaps there was some kind of bank loan that individuals could easily get that made it possible for them to get funds swiftly. Fortunately, this kind of loan does can be found, and it’s referred to as the cash advance. The next write-up features all sorts of suggestions and suggestions about pay day loans which you might require.

Enquire about any secret service fees. It is recommended to be magnificent on anything that the financial institution costs you, so ensure you find out about all of the charges before agreeing towards the financial loan. Some people may possibly find that their fees are greater than predicted after they’ve previously approved the payday advance. Steer clear of this situation by studying all of the fine print and inquire questions when you are not clear.

Online payday loans will be helpful in desperate situations, but comprehend that you might be incurred financing costs that can equate to virtually 50 percent curiosity. This massive rate of interest can make paying back these lending options difficult. The amount of money will likely be deducted from your income and may power you proper back into the pay day loan business office for more money.

When you are getting the first payday advance, request a discount. Most cash advance offices offer a cost or level discounted for initial-time debtors. In the event the position you wish to acquire from fails to give a discounted, contact close to. If you find a price reduction in other places, the financing spot, you want to pay a visit to will probably match it to have your company.

Prior to committing to a payday advance lender, assess organizations. Loan companies be different in relation to how high their interest rates are, and a few have fewer costs than others. Some solutions will give you the money immediately, while some need you to hang on a couple of days. The greater number of you’re happy to investigate, the higher your chances are of finding a far better loan.

Be on the lookout for fraudsters when buying pay day loan businesses. You will even find people who will claim to provide payday loans, only to run off with your hard earned money. If you have located financing enterprise, seek advice from the greater Enterprise Bureau on the internet and look for their reputation.

Understand that payday loan amounts needs to be repaid speedy. Discover when you need to pay back the money and make sure you could have the funds by then. When your income is originating in less than a 7 days once the bank loan, it comes with an different. It won’t be expected until the next payday.

If your cash advance is necessary, it will basically be employed when there is not any other choice. Payday cash loans have very high rates of interest which actually have you having to pay near 25 percent from the first quantity of the financing. Take into account all of the other options before you select getting a payday advance.

If you require a pay day loan, but use a bad credit background, you may want to look at a no-fax loan. These kinds of financial loan is the same as any other cash advance, although you simply will not be asked to fax in any documents for authorization. Financing where by no paperwork are participating means no credit examine, and better chances that you may be accepted.

When you are developing a difficult experience deciding whether or not to use a payday advance, phone a consumer credit history specialist. These pros usually help no-income companies that provide totally free credit history and financial assistance to shoppers. They can assist you find the right payday loan provider, or possibly help you rework your funds so that you do not require the borrowed funds.

Learn the laws and regulations in your state relating to payday cash loans. Some lenders attempt to pull off increased rates, charges, or a variety of costs they they are certainly not legitimately allowed to charge. Many people are just thankful for that bank loan, and do not question these matters, which makes it easy for creditors to continuing receiving aside along with them.

You know the pros and cons of entering into a payday loan purchase, you might be far better educated about what certain points is highly recommended prior to signing at the base line. When employed smartly, this center may be used to your advantage, consequently, tend not to be so swift to discount the opportunity if crisis cash will be required.

Earn More Money Along With Web Based Promoting Now

When you are serious about generating cash, education market research is actually something to take into account. Many people don’t understand what kind of money can be made by merely making use of the web as a way to promote your item. Technologies is actually going to continue to progressing. It really is your decision to keep up with competitors. Usually, clients are about to bring their business somewhere else.

It is vital to be able to advertise the product online regularly. Men and women are using the world wide web as being a location to receive their information, talk with buddies and coworkers as well as a location to learn more about different items. It is your choice to make sure shoppers could easily locate you. A consumer is not going to search in the phone guide for the contact information. Rather, they are going to look for a web page or possibly a Facebook site.

In case your website requires a remodel, arrange a scheduled appointment with someone concerning education marketing now. They’ll answer any queries and also enable you to learn more in what must be performed to match competing firms. Sometimes, it could be helpful to provide your own internet site an extensive makeover. In either case, consumers can’t do business along with a person if they don’t know how to find you actually. The Online World is a very beneficial resource regarding business people for example your self. Take advantage of the usefulness now.

Be Sure You Are Going To Hire The Appropriate Personnel For Your Company

While numerous large companies have recruiting companies, this is simply not achievable for smaller organizations. However, they are going to want to ensure they are going to retain the correct employee to be able to work with the company. This means considering potential individuals and also seeking out practical experience, expertise, and a suitable fit for the company setting. There are two major ways a business owner might work along with executive recruiters tampa to be able to ensure they will hire the proper individual for the job.

One of the ways to hire the correct individual is to have the recruiting firms tampa help them to find the worker they’re going to need to have. The recruiting company understands exactly what to seek out in a worker and will take the time to become familiar with much more regarding the business to ensure they’re going to locate a professional who’ll be a good fit for the organization. This permits the small business owner to make sure they are employing the right man or woman without worrying about going through the choosing and also instruction process only to have to start over again quickly because the individual they hired wasn’t suitable for the position or even did not last so long as they would have wanted.

As opposed to letting a recruiting company handle just about everything, a company owner may wish to consult with one of the recruiting agencies tampa in order to discover much more about precisely how to revamp their particular hiring process. They can find out much more regarding exactly what to search for in potential workers or precisely what to undertake during the interviews to be able to make sure they are going to find the appropriate person for the position. This is especially helpful in case they’re probably going to be extending and therefore have numerous positions they will have to bring in help for. Moreover, this gives the business proprietor the tools they’re going to require down the road when they do expand or perhaps want to employ more personnel.

In case you would like to make certain you’ll discover the right man or woman for the job, work along with one of the executive search firms tampa. Make contact with them today to discover far more concerning how advantageous those two solutions can be and go over what kind you could be interested in with them. They will ensure you have just about everything you will need to have to be able to uncover the proper man or woman for the position you have available right now.

Data burning a deeper hole in the pockets of South Africans

In the wake of the #DataMustFall campaign, it seems that the data revolution might have a valid and legitimate plea. The campaign founders made a presentation before the Parliamentary Communications and Postal Committee on September 21 on the costs of data in the country. According to the soon-to-be launched findings of the FinScope South Africa 2016 consumer survey, the results show that the average South African spends about 9% of their purse on airtime and data recharge, cellphone contracts, telephone lines and internet payments. The average person spends approximately R700 a month for communication-related expenses.

Parallel to the #DataMustFall campaign, which is gaining traction, is the #FeesMustFall (reloaded) campaign, which is also resurfacing in light of the announcement of an up to 8% fee increase made by the Higher Education Minister Blade Nzimande. While university students would like to see a 0% increase, universities are requesting increases to sustain operations and fund research.

Therefore, in light of these developments and expenses, how does the purse of the South African consumer fair? The preliminary results of the FinScope 2016 survey shows that South Africans spend R688 per month on average on education.

The FinScope findings further show that South Africa’s total personal monthly consumption (PMC) expenditure in 2016 is estimated at R220 billion (monthly). On a monthly basis, the average individual spent approximately R5 400 during the period of conducting the FinScope 2016 survey. The results show that the main components of expenditure are on food (21%), transport (11%), utilities (11%) and communication, which amount to 9% of the spending purse.

Overall, individuals’ spending on education is 6% of their purse (estimated monthly spend of R12.2 billion). Further demographic analysis of the data per race showed that black communities still bear the greatest brunt of the education costs. For the average black South African, education expenses constitute 7% of their purse – this is higher compared to other races for which the purse composition for coloured, Asian, Indian and whites are at an average of 4.3% of their purse.

Furthermore, as one analyses the data further, it shows that nearly 12 million black South Africans spend more than 10% of their purse on education-related expenses. This is further exacerbated when noting that the average income per month is R4 723, R6 294, R12 265 and R17 123 for black, coloured, Indian and white South Africans respectively. As such, the cost of education places a heavier burden on black South Africans.

Property and bonds

Old Mutual Investment Group sees domestic equities, property and bonds delivering higher returns in 2017, on the back of improving economic prospects.

It expects peaking interest rates and inflation in South Africa to create a positive environment for interest rate sensitive assets such as domestic property and bonds.  It sees inflation averaging at 5.4% in 2017 compared with 6.3% in 2016 and the benchmark repurchase rates falling to 6.5% by the end of 2017, down from 7% currently.

According to Peter Brooke, head of Old Mutual Investment Group’s MacroSolutions Boutique the 13.5% return on domestic bonds year-to-date as at November 24 2016 is artificially high due to an oversold bond market.

Instead, he said SA cash – with a 6.8% return in rand terms – is the best performing local asset class thus far. SA listed property delivered returns of 4% and the FTSE-JSE Share Weighted Index (SWIX) returned 2.5% over the same period.

After starting the year with the highest level of cash in its fund ever, the group is seeing more opportunities in equities as the domestic equity market de-rates.

“We’re not at the stage where the JSE is cheap yet. It is on a 13x forward but it does offer a real return in the region of 5%. We’re not back to levels that we have enjoyed for the last 100 years of around 6.5% but value is starting to incrementally rebuild,” he said.

As a result, the group upped its long term expected real returns on SA equities from 4.5% to 5% and SA property from 5% to 5.5%.

The unemployable become employable

NASTASSIA ARENDSE:  Luthuli Capital was founded and structured as a Pan-African multi specialist company that offers a global approach to wealth management portfolios. The company offers investment advisory services to local and foreign individuals and multinationals, among others. I’m joined in the studio by one of the co-founders, Mduduzi Luthuli. Thank you so much for your time.

MDUDUZI LUTHULI:  Thank you for the invitation. Glad to be here.

NASTASSIA ARENDSE:  Let’s take it back to the beginning and start off with how Luthuli Capital came together.

MDUDUZI LUTHULI:  I think if you are going to start a company it’s always something that’s there. It’s just a matter of acquiring the skills for you to be confident to run the company and wait for the circumstances to be there.

I’ve been in the corporate sector now – from banking into the financial advisory industry – for about seven years. My previous employer gave me a great opportunity in management and it’s really there where I got to cut my teeth and get to the point where I realised I think it’s time for me to go out there and do this on my own.

We’ve got two offices here in Sandton and one in Durban. It really was the Durban office that was also the big motivator because we’ve got a project going on down there which involves the internship, and that also just got to that point where, if ever you are going to do this, this is the time.

NASTASSIA ARENDSE:  And I know that you work with Trudy as well. How did the two of you decide that it’s our synergies and both our characteristics and everything we’ve learned from our own sort of corporate size that can work together – and let’s do this?

MDUDUZI LUTHULI:  We both come from the same industry. So from a product knowledge side, services, the competency was there. I think really where the synergy comes from is they say I’m the driving force, I’m the bully, I’m the hard-core one. My real talent is bringing the clients into the business, going out there and selling the dream and convincing them that this is something you should back.

And Trudy, as head of client services, is the mother of the business, if I can put it that way. And really her strength is in client retention. You play a fine balance between finding new clients and also looking after your existing clients. And that’s really where we work with each other’s strengths and work very well together, because she heads up the client retention. I bring them and she looks after them.

NASTASSIA ARENDSE:  How competitive is the industry that you are in right now?

MDUDUZI LUTHULI:  It’s extremely competitive. I don’t think I have the words to truly describe how competitive an industry it is. One of the fantastic things and one of the shining lights about South Africa is that we have a very good financial system. Or let me say that the governance and the legislation here is very good and that really translates into the financial advisory system with the initiatives that the FSB puts out there – the financial planning institution, to make sure that as financial advisors or wealth managers we move away from a culture of just selling for the sake of selling, and seeing ourselves and conducting ourselves as professionals and as a professional field.