Q: Lucas Schuman asks:
I have never invested on the stock market, but would like to do it now and I am very interested in Satrix. Do you think it would be worthwhile to invest a lump sum of R2 000 now and later a lump sum of R1 000, whenever I can afford it, say every three months? If I do need money, how quickly will I be able to sell my shares? I have in the same way thought of buying shares in Absa every month. Is that possible and what is the minimum amount I will be looking at to buy Absa shares?
A: Part one: Mike Brown of Satrix Managers replies:
It is possible to invest sums such as R2 000 through the Satrix Investment Plan, which can accept lump sum investments from as little as R1 000. The Investment Plan also offers the facility to do regular debit orders, either monthly, quarterly, half yearly, and so on.
You could then either invest additional lump-sum investments of R1 000 every three months or set up a debit to facilitate this type of regular investment, which is less admin hassle for the investor.
Sales of Satrix in the Investment Plan can occur at any stage of all or part of the securities held by the investor. They need to fill in a one-page repurchase (sale) form and fax it to the administrators.
To establish an Investment Plan account, contact our call centre at 086 110 0670, which will send the necessary application forms. Alternatively, you can download the application form from the Satrix website.
A: Part two: Maya Fisher-French replies:
With regard to building up a position in a certain share over a period of time, the best option is Standard Bank’s Auto Share Invest. You have to open a bank account with Standard Bank, but you are able to buy shares for a minimum of R500 and only pay R25 in brokerage (1% plus R20), which is substantially lower than the usual R100 minimum brokerage fee charged by most brokerages. But you can invest only in about 27 stocks, which are well traded and household names. Absa is included in this list. Shares are bought and sold in bulk every Friday.
TAX CLARITY ON RETIREMENT
Q: Jacqueline Machabeis asks:
I read in Money (August 3) about the implementation from October 2007 of a tax concession on the first R300 000 of a cash lump sum at retirement. When I consulted my financial adviser recently (I’m retiring at the end of the year) he referred to such a concession, but said that it was not yet confirmed to be effective in October this year. Could you clarify the matter? Also are there any user-friendly sites you can recommend to someone like me, trying to gain access to unbiased information of investments?
A: Denver Keswell of Metropolitan Odyssey replies:
The Taxation Laws Amendment Act 8 of 2007 was finally promulgated on August 8 2007. On retirement from a retirement fund, a member will receive the first R300 000 of his or her lump sum tax-free. Where the member has any contributions to a retirement fund that were previously not allowed as tax deductions, these amounts can be added to the tax-free portion, thus increasing the R300 000 tax-free portion.
But if the member has previously received a portion of a retirement lump sum tax-free, then such an amount must now be deducted from the current tax-free portion, thus reducing the R300 000 tax-free portion. The remainder of the lump sum will be taxed as follows: the second R300 000 will be taxed at 18%; the third R300 000 will be taxed at 27%; and the remainder will be taxed at 36%.
These changes, which will be effective from October 1 2007, will provide members of a retirement fund with tax concessions on the first R900 000 of their lump sum.
It is difficult to find a website that is both user-friendly and unbiased. Most websites promote their own products. A good starting point is probably the M&G Online and www.persfin.co.za (Personal Finance).
Hit your bond on the head
Anthea McGaili-Manuel is this month’s winner. She recommends that people invest their annual increase into their home loan “as they have been doing without that money all the time”. Do you know that at current interest rates you will pay 150% of your purchase price in interest over the 20-year period? By paying just R200 extra a month into a R500 000 home loan you will save a massive R168 950.
More Christmas cheer
Janey Khan suggests putting away R200 a month for the Christmas period. “When I need the cash for groceries I can at least shop where I want and where the stores have lots of bargains at that time of year. I have done it for years and I have only benefited from it.”
Veronica Mathebula suggests buying expensive, but good, clothing only on sale. “For work buy suits or pairs in basic colours, which you can mix and match.”
Send your tips to [email protected]. Next month’s winner will receive a wireless mouse valued at R250
Questions and answers sponsored by Metropolitan Odyssey