Managing your Investment Portfolio

How do I make the most of the high interest rate situation?

A press office feature released by Mazars Moores Rowland has given some valuable advice on how to make the most of the high interest rates. The current situation can benefit you if you do a reshuffle of your current investment portfolio, making adjustments with “an eye on tax efficiency, cost effectiveness and wealth enhancement”.

Marius Fenwick, a financial advisor with Mazars Moores Rowland says that depending on your age and current portfolio mix, the improved yields that result from higher interest rates may produce greater tax liability. The key to avoiding this is knowing where to start shuffling your portfolio.

The advisor suggests, “Take a look first at your retirement annuities and consider moving some underlying investments into a money market fund where yields are now close to 12%. The interest earned within the annuity won’t be taxed”. This doesn’t mean that all the underlying investments should go into a money market fund though.

According to Fenwick, for long-term growth you need to invest in equities, which is an asset class that has outperformed bonds and property over time. “And remember too, that once the interest rate cycle peaks and turns down, the stock market will start to run,” he adds. This approach is said to make sense particularly for living annuitants in a somewhat volatile market.

Say that you’re drawing down 8% of your annual investment value as a pension. Putting some of the underlying investment into a money market fund at a yield of about 11.5% will mean that fewer equity units within the annuity will have to be sold to produce the desired income from the drawdown of 8%.

“It may be worth considering shuffling the portfolio to ensure two years’ worth of income will be generated from an allocation to a money market fund while the rest is invested in a balanced portfolio and allowed to produce an inflation-beating real return over time,” believes Fenwick.

Of course, there will be those whose tax rates are such that an interest-bearing investment in their own individual rights will not be efficient. Individuals and trusts of a high net worth (including a 40% flat tax rate) would benefit from considering an investment in dividend income funds, which are yielding up to 9,4% tax-free after fees – and preserving capital at the same time, this according to the financial advisor.

For those who are willing to put money away for a period of 5 years, a lump sum investment in an endowment product built on an interest-bearing instrument will produce around 9.3% return, which is tax-free and guaranteed for the full term.

The pressure exerted on our currency by high interest rates may make offshore investment a sensible option. Part of your portfolio shuffle should include a look at offshore-linked funds and an additional investment outside of the country, either directly or through an asset swap.

Fenwick also stresses that while prices in the listed property sector have dipped significantly in an environment of high interest rates, property fundamentals still remain sound. This option is particularly popular as an income producer for retirees.

Those who invest in property should remember that it is a long-term investment that produces a steadily rising income and that they should continue through the period of volatility, rather than secure a loss on their investment by selling shares prematurely.

Also, given that the performance of listed property tends to track that of bonds, “the time for bonds to shine will come again” and consequently, so will the opportunity for investors to consider income funds with bond exposure.

The trick is not to try and time the market and to get your selection of asset classes right, rather than your choice of asset managers. A solid-performing and balanced portfolio is said to be the solution and it is advised to let your advisor make the calls on asset classes over the long term.

The information in this article is courtesy of Claire Densham (“Making the most of high interest rates”, Mazars Moores Rowland, Itinews, 16 May 2008).

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

Insuring Property in South Africa

What do I need to know when insuring my property?

What do I do when property has been lost or stolen?

• Make a police report, providing a statement and list of all the stolen articles. Remember to keep the case number.
• If you have had a pre-loss assessment or valuation done then your task will much easier, as you’ll be able to do a “stock-take”.
• Report the claim to your insurer.
• You will need a quote for the lost or stolen items. An assessor is usually appointed to deal with larger claims.
• Insurers may decide either to replace the goods or to pay you out for them.
• If you are underinsured then average may apply: you will be paid out only for the amount insured and if the insurer does apply the average then this payment has to be in cash.

What do I do if I have a car accident?

• Stop immediately and turn off the engine.
• Phone an emergency number and report your location and any injuries.
• Render any assistance to the injured persons while waiting for an ambulance to arrive.
• Do not move the vehicles if there are no injuries. If they are obstructing traffic then mark the positions of the vehicles and move them off the road, if this possible and not dangerous.
• Even if you are at fault, do not make any statement.
• If police are at the scene, try to obtain a reference number and the name of the officer, otherwise report the accident at your nearest police station within 24 hours and make a statement.
• You are obliged to give your name and address, as well as your insurance details to the other party.
• You will need to provide your insurers with information about the other party, witnesses and the accident, so make sure you gather as much information as possible before leaving the scene of the accident.

How much should I insure my home for?

• Always insure your home and its contents for their replacement value.

There are various insurance options available at different brokers, so it’s important that you shop around for the deal that is best suited to your personal situation.

The information in this article is courtesy of www.nedbank.co.za (Property Insurance Frequently Asked Questions, 8 May 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

Selling Property Privately

How do I go about selling my property privately?

Important things I should know:

More and more people are discovering the benefits of selling their property privately. It’s not nearly as daunting a prospect as it might initially seem. After all, who else is more informed, more inspired and more committed than you are when it comes to making that sale? One of the main benefits is that selling property privately promotes a much more open and healthy buyer/seller relationship – apart from the obvious fact that you’ll both save a lot of money.

Can I list property privately if I’ve given a mandate to an estate agent?

Yes, but if you’ve given the estate agent a sole mandate (which must, by law, be in writing) and you have not reserved the right to sell privately in such an agreement then you cannot sell privately until the mandate has expired.

What are the 4 golden rules that I should keep in mind when selling privately?

• Ensure that the selling price is market-related and remember that there is no agent’s commission associated with the sale, so don’t pitch too high.
• List your property on a website that sells property privately and market your property effectively.
• Consider initiating your sale campaign with additional newspaper advertising.
• Conduct show houses.

The information in this article is courtesy of www.privateproperty.co.za (FAQ, 8 May 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

Wills and Estate Planning

YOUR WILL

I am sure that you are familiar with the saying that nothing is certain in life,
other than death and taxes.

For this reason, if for no other, it is important to ensure that one’s Will is up to date.

Experience indicates that one should review one’s Will every two to three years, as almost invariably changes in circumstances will be encountered that necessitate either a Codicil, or even a fresh Will.

In addition, there have been changes to the estate duty legislation over the past few years, which could also make it advantageous to revise your Will.

The estate duty exemption was increased in 2007 to R3 500 000.00 per person. It is important that one’s affairs are structured in such a way as to take advantage of this concession, as well as other changes to the tax laws, to ensure that one’s estate is not saddled with unnecessary estate duty and capital gains tax. The cost of reviewing your Will and discussing these changes is small in relation to the savings that can be achieved.

We hope that this information will be useful to you and should you require any further assistance please do not hesitate to contact us!

Disclaimer: The material contained herein is purely for information purposes and does not constitute legal advice and we therefore accept no responsibility for loss or damage which may be incurred from relying on information supplied herein.

All rights reserved

Copyright C&A Friedlander 2006.

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.