Hi All
Trying to plan what to do with my savings when my debt emergency(car loan) is gone.
SA Notes
Inflation is currently around 4% - 6%
Stockmarket 10y returns average 9%
Stockmarket 15y returns was 12%
House prices in our area grows between 8 - 10% y
Average rental increase contractually is 10%
Pension funds are required by law to be save and balanced to it averages 8%
My choices
* Pay of my mortgage I've currently got 26 years left on a mortgage with 9.80% interest
* Increase my pension fund to reach the 27.5% tax detuctable (pre tax calc) so it saves me about 39% of each Rand I put in
* Tax free investment (No capital gain tax) but allows for 100% equity funds
* Buy a rental property. but where I live you'll be generaly cashflow negative for 5 years before thanks rental increasing 10 % per year. rent income here is generaly 0.5% - 0.7% the purchase price of the house
So my question is what would be the best option or combination.
I do not live in SA, but I am very familiar with the country and visit frequently. I would put at least some of your money in *international* stocks/bonds. SA is a small and volatile economy, and you probably want to diversify your assets beyond what is possible within the country.
The tax savings of the pension fund are compelling, so that would probably be my first choice, but beyond that I would be looking for overseas investments. Rental property I would do only if you live somewhere with a strong tourist market and are willing to do AirBnb, etc - there are attractive returns for that in some parts of Cape Town. And I would only do that *after* getting some diversification.
