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Monday, 29 April 2013

10 reasons to invest in a Retirement Annuity (RA)

It is clear that South Africans need to make additional provisions for retirement if they are to enjoy a standard of living that they have become accustomed to during their working years. 

Retirement annuities remain a popular investment vehicle with many South Africans for good reason. 
A retirement annuity is a long-term savings vehicle aimed primarily at people providing for their retirement. To prevent people from relying on the government to provide for them in their old age, there are legal restrictions on withdrawing funds from RAs. But there are also tax advantages to offset the lack of access to funds. Tax benefits are just one of the ten reasons that you should consider a retirement annuity:

1. Preparing for retirement
An RA helps you to build up capital during your working years so that you have enough income to
enjoy the same standard of living when you retire.

2. Ensuring sufficient savings
The rule of thumb is that if you save 15% of your salary over 35 years, you will receive 75% of your salary as a pension, given reasonable returns.
The problem is that your pensionable salary (the amount that your 15% pension contributions are calculated on) is usually about only 70% of your total salary benefits which include, for example, a bonus, car allowance, medical aid and other benefits. This means that you could retire on 75% of 70% of your salary!
It is important to save for these ‘extras’ as they do help us meet our current living expenses.
For example: if your monthly package is R20 000, you would need to retire on the equivalent of R15 000 (75%). But your pensionable salary is significantly less at R10 500 (75% X R20 000 X 70%). By investing 15% of your non-pensionable income into a retirement annuity, you can make up the savings gap. A starting point is to always invest 15% of your bonus tax-free into an RA.

3. Tax benefits
You can invest up to 15% of your total income (less any amount that may be used for other pension fund contributions) tax-free. Not only can you invest with before-tax money, but you do not have to pay capital gains tax or income tax on your retirement investment. Your investment growth will be higher over the long-term as the growth remains in the policy and will usually offer you a better after-tax return than other types of saving.
When you retire, you can take one-third of your investment as a lump sum. Of this the first R300 000 is tax-free with a favourable tax-rate for higher amounts. The remaining two-thirds of the retirement annuity is invested in an annuity to provide you with income during your retirement.

You can reduce your income tax by contributing towards an RA before the end of the tax year in February. For those who have started planning ahead and have a Retirement Annuity (RA) in place,you may have been entitled to a tax deductible top up on your RA, as an opportunity to enhance your savings. To illustrate, using an example of a professional earning R600 000 p.a. in the top tax bracket of 40%. 

He does not contribute to a pension scheme but can contribute towards a Retirement Annuity.
Exercising his right to top up on his RA could see him save R36 000 in taxes and allows him to increase future retirement earnings. This year is the last year to take advantage of the uncapped tax deductions from retirement savings as the government plans to cap tax deductions from March 2014. 

 4. The power of compound growth
Because you are saving over a long period, your money starts to work for you as you earn interest on the interest. If you save consistently over 30 years, less than 35 cents of each Rand of income you receive will come from the contribution you paid in. The balance will come from the growth earned on your contributions and savings in retirement.

5. Disciplined savings
You do not have access to your retirement annuity savings until the age of 55. This may sound like a disadvantage but it removes the temptation to dip into or deplete your savings while you are working. A 25-year old needs about 15% of his/her salary through their working lifetime to secure an adequate pension. If they cashed in their savings at 35, they would need to save 25% to get to the same benefit. Starting from a zero base at 45 requires an incredible 47%! The only remedy here would be to retire later.

6. Long-term growth
As markets fluctuate during different economic cycles, your consistent contributions will average out this variability. You also draw your pension over a (hopefully) prolonged period. Therefore, what happens in a turbulent investment market is of less concern to you. The average investment manager has delivered returns which are 11% above inflation over the last 5 years, despite the recent global economic crisis.

7. Supporting your dependants
If your dependents are left to cope without you, your retirement annuity can provide a source of income for those you leave behind, especially if you buy death cover on your policy. The cash benefit from a retirement annuity falls outside your estate, so if you die and are insolvent, your benefit is paid to your family rather than your creditors.

8. Room to grow your savings
While pension funds generally require a contribution that is a fixed percentage of your salary, RAs offer more flexibility. Many people recognise the need to save but struggle in the short term to meet financial obligations.
A retirement annuity allows you to slowly increase your contributions over time. For example, you could take 3% from each of your next five years’ salary increases to get to the full 15% contribution.
You can also invest a portion of your bonus each year as a lump sum contribution.

9. Diversified portfolio
You have access to different asset classes in a retirement annuity. You can invest 25% of your savings offshore without needing Reserve Bank clearance. You can also invest in other types of portfolios through your RA, such as direct property, private equity and fund of funds.

10. Freedom of choice
With many retirement annuities, you can choose your underlying investment giving you some flexibility in how your contributions are invested and therefore how they grow.

If you would like more information regarding Retirement Annuities or any other investment products kindly contact MOJAFF FINANCIAL SERVICES on the contact details below: 

Tel:  (021) 638 7786
Fax: (021) 638 3399
Cell: (082) 824 4400
Website: www.mojaff.co.za
Authorised Financial Services Provider FSB#3650

Sunday, 21 April 2013

The pot of Gold at the end of the rainbow...my perspective.

Simply put, the Gold sell off recently in the markets was pure Panic. Fear has clearly taken the driver’s seat, pushing greed completely aside for some of the nonsensical reasons given by most analysts. I see bear markets as buyers’ markets. I’ve long said that the best time to buy is when there’s blood in the streets, and that’s what its shaping up to be.

The dramatic plunge in gold prices over the last few days does not mean the bull market is over, but this may be a long-awaited mid-cycle correction. In my view, the fundamentals are still very positive for gold .

There’s still a very strong physical demand. Physical demand for gold will start to pick up after the recent price decline…it’s inevitable…trust me.

It’s possible we have already seen the low.  It’s hard to see how gold sentiment can deteriorate any further. Should gold fall further, I see some support at $1,225-$1,250 and very strong support just above $1,000. 
If we do go that low, I don’t see how it can be for long. Here’s why.
The average all-in cost to produce gold – ie the cost per ounce of finding, developing and building a mine as well as actual production – is widely believed to be somewhere in the $1,200-$1,400 range. On this basis, some 15% of gold producers would now be underwater on an all-in cost basis. With all the mining strikes after the past couple months hindering gold mining production has haltered supply. With less supply and rising direct costs to produce Gold, you can be guaranteed that Gold prices WILL rise in the future.

In 2012, the average price for the sale of mined gold was $1,650. With Gold trading below $1400 per ounce,  companies would, at $1,650 per ounce, have their gold now sell below $1,400 at major losses!
Companies can’t afford price Gold to fall below productions costs. There is only so long it can trade at a price below its annual cost of production.

Fear has clearly taken the driver’s seat, pushing greed completely aside... at least for now. Why? The reasons given by most analysts are nonsensical:
  • Gold is selling off because those ever-so-ethical and smart guys at Goldman Sachs say it’s heading lower. That this is patently silly hasn’t stopped it from becoming a self-fulfilling prophecy, for a time.
  • Gold is selling off because some technical analysts says that’s what should happen when certain support levels are breached. To the degree people believed this, regarding $1550, 0r $1450.

  • Gold is selling off with broader markets because surprisingly weak retail sales and consumer confidence numbers from the US, as well as weaker-than-expected numbers from China, have whacked stocks and commodities alike – but that should have been bullish for the safe-haven metal. That some economic data coming in weaker than expected is given as a reason for gold to drop just shows how few people understand gold at all.
  • Gold is selling off because of the now-denied news about Cyprus selling gold holdings to help bail itself out. Even if this were true, it would have no bearing on the fundamentals of the gold market.
  • Gold is selling off because of manipulation. If that were so, it would not change the underlying realities and would eventually have to be unwound.
  • Gold is selling because more and more people fear the peak was $1,900 in 2011, and it’s all downhill from here. That – again – is momentum.
        What this is all saying is that gold is selling off for the wrong reasons, mostly amounting to speculative momentum-chasing. Simply put: this is panic.
I’ve yet to see any convincing argument as to why gold had to drop or should go lower. I’ve yet to be convinced that the governments of the world have cured what ails the global economy with their virtual printing presses, and the next boom is a done deal.

The current drop may not be the bottom yet, but a very significant near term gain for those that see it as a buyers market. I see bear markets as buyers markets. Expect Kruger Rand demand to increase dramatically and an increase in prices to follow.

I plan to bid under market over the course of this week and get the best prices possible. Then I’ll wait and see what comes next. I encourage all contrarians with courage to join me in taking advantage of this opportunity.

Saturday, 20 April 2013

The basics of understanding Currency pairs

Forex trading is the simultaneous buying of one currency and the selling of another and is always done in currency pairs, such as GBP/USD or USD/CAD. A currency pair represents the exchange rate between the two currencies.

The first currency in a currency pair is always dominant and called the Base Currency. It is also the currency that remains constant when determining a currency pair's price. The Counter Currency or pricing currency is the second currency in a currency pair notation.
For example, a transaction of buying the EUR/USD at 1.3000 is actually buying the Euro and selling the Dollar at 1.3000 cent. If the Euro increases in value in relation to the dollar, the price will increase and the currency trader will make money on his transaction. 

Base and Counter Currency
How is forex quoted? 
Like equities, foreign exchange has a bid price and an ask price.  The bid price is where the market maker is willing to buy. The ask price, is where the market maker is willing to sell. For traders, the reverse is true. The bid price is where a trader can sell, while the ask price is where a trader can buy. The bid price is always less than the ask price. This makes logical sense, as a market maker, like any investor, wants to buy low and sell high. The spread between the bid and the ask price is called the bid/ask spread or dealing spread.
Like equities, foreign exchange has a bid price and an ask price.  The bid price is where the market maker is willing to buy. The ask price, is where the market maker is willing to sell. For traders, the reverse is true. The bid price is where a trader can sell, while the ask price is where a trader can buy. The bid price is always less than the ask price. This makes logical sense, as a market maker, like any investor, wants to buy low and sell high. The spread between the bid and the ask price is called the bid/ask spread or dealing spread. 

Dealing Spread

USDUnited States DollarBuck
GBPGreat Britain PoundCable
JPYJapanese YenYen
CADCanadian DollarLoonie
NZDNew Zealand DollarKiwi
AUDAustralian DollarAussie

Three main types of currency pairs are: 

  • The majors: EUR/USD, USD/JPY, USD/CHF and GBP/USD.
  • The commodity pairs: USD/CAD, AUD/USD and NZD/USD. 
  • The currency crosses: most popular are the EUR/GBP, EUR/JPY and EUR/CHF.

The "Major" currency pairs 
Currencies, like equities and bonds, have pairs that are very liquid and those that are not so liquid.  The liquid currencies can be characterized as those that are the most stable economically, and politically. They include the countries that form the Group of 7 or G7 - the United States, Japan, Great Britain, France, Germany, Italy, and Canada.
Often you will hear on CNBC or read in the financial press that the "dollar was stronger today".  When that is said, it usually implies that the dollar got stronger vs. the major currencies or what is often referred to as the“Majors”. Since the unification of the European currencies into the Euro, the currencies that are most liquid now include the US Dollar, the Japanese Yen, the British Pound, and the Euro, known as the “major pairs”. It is estimated that activity in these currencies comprises of more that 85% of the daily foreign exchange volume.
The following are examples of situations that might lead you to choose a particular currency pair to trade: 


Foreign currency symbols
Foreign Currencies like equities have their own symbols that distinguish one from another.  Since foreign currencies are quoted in terms of the value of one currency against the value of another, a currency pair includes the "name" for both currencies, separated by a "/".  The "name" is a three-letter acronym. The first two letters are in most cases reserved for identification of the country. The last letter is the first letter of the unit of currency for that country.     
• Dollar weakness drives EUR/USD higher • US recovery and strong influx of foreign demand will send EUR/USD lower 
   • Japanese government intervention to weaken their currency sends USD/JPY higher • Gains in Nikkei and demand for Japanese assets drive USD/JPY down.
• High yield and attractive growth in the UK drives GBP/USD higher • Speculation about UK adopting the euro will send the GBP/USD lower.
 • Global stability and global recovery will send USD/CHF higher • USD/CHF rallies on geopolitical instability.

Thursday, 11 April 2013

Bitcoin, Hype or Reality?

Is virtual currency THE currency of the future?

Virtual Currency has been the question on my mind of late. A few years ago a virtual currency called Bitcoin emerged. No surprise to me as currency in today's day and age is mostly just electronic ones and zeros. 

There's been alot of hype lately about the virtual currency called Bitcoin.  The past few days has seen the price of a single Bitcoin more than double and as speculators triggered a wave of inflated expectations, the price of Bitcoins soared at one point to a high of $266 each. Then yesterday it crashed from its peak & hit a low of $105! Is it just hype like the dotcom of the day? or is a further crash just looming around the corner? 

Is the value of Bitcoins just mere speculation?
My personal investing view is "If I don't understand the investment or how to value it, then I simply wont invest in it. Its just that simple. I don't follow the lemmings..."

So what is Bitcoin all about? If you’re new to Bitcoin, you’ve probably got a lot of questions. How does it work? Who controls it? Where do I buy Bitcoins? Is it safe?
Ive uploaded a short 3.5 minute video to explain all that. While the video doesn’t go into much detail on how to create Bitcoins through “mining” or how to store Bitcoins in a digital wallet, it at least offers a handy overview.

Monday, 8 April 2013

Commit to a good savings plan

The only way anyone really saves money is to spend less than you make. It’s a simple equation that many people have a difficult time following. Even when I began working and making money, I never changed my spending habits. I could afford to have bought a new car, yet I used that money to invest in businesses and the stock market. I continued to live as though I was on a tight budget – and along with this key rule, these are the other values I’ve kept to build and grow my wealth slowly. Follow these money rules and maybe 2013 will be your best financial year yet.
1. Educate yourself on proper Investing
* Have the right account: Never keep all of your money in a bank checking account that earns little or no interest. Check online for accounts offering a higher yield, as well as accounts that will not charge you ridiculous maintenance and other transaction fees. Many banks like Capitec  have low transaction fees and attractive saving interest rates compared to other banks.
 * Have a retirement account: The younger you start, the better. Make the initiative to learn the best option for you, and take it. If your company offers any kind of contribution match – I’d grab it! It’s free money!
 * Get automatic: Set up automatic transfers to a savings account earning high interest so that you can start effortlessly saving money.
 2. Learning where to put your money (and in what order)
* Always pay your debt as soon as possible. Follow the Debt Snowball Method so you slowly chip away at the debt you have. 
* Build an emergency fund. The rule of thumb is at least three months salary.
* Invest in the stock market. Look at cost effective ETFs like Satrix (www.satrix.co.za). Over the long term Satrix has provided better than average returns and outperformed other savings vehicles.
* Lastly fund your retirement and put the rest in a high interest saving or checking account.

3. Having a positive outlook on money
* Create goals: Figure out an amount you want to save and write it down. Once you have that goal, figure out how you are going to attain it. Cutting costs? Extra work? Selling some of your things? A book I really love that I’m reading now is Think and Grow Rich by Napoleon Hill. It’s the concept of knowing and believing that you will attain riches will help it to become a reality.
* Stay positive: Don’t get in the mindset that whatever your situation happens to be means that you will never be able to attain wealth. Maybe you lack formal education or you have a low paying job. You can’t continue to blame outside factors – it is in YOUR power to change your situation, and staying positive and knowing that you are capable of having the lifestyle you desire will attract that into your life.
This year, start taking control of your finances. Commit to a savings plan. Stop buying things you don’t need or can’t afford. Try to automate at least 15% of your salary to go into your savings account every month. I like to think of this as paying yourself first. If 15% sounds like too much, decide on a amount of each paycheck you can afford that can go into a savings account as soon as you earn it. This way, you won’t consider yourself having those funds to waste on unnecessary purchases.

Its very important to mentally condition your mindset to pay yourself first. So for example, you earn R10,000 in salary every month, and when payday comes around, have 15% (R1500) of your salary automatically transferred into a savings/investment account . Pretend like that money never exists. Thats a potential R18,000 stashed away per year with little or no effort. Now continue to live the rest of the month as though you're earning R8500 (R10,000 - R1,500). With annual increases in salary and inflation, simply repeat the same exercise. You’l find that over time you would have build up a significant nest egg just by simply automating your savings plan.  It's the easiest way to save money.

A small tip to get you saving for Retirement

Money is like a seed. You plant it, protect it, and nurture it. Over time, it suddenly gets bigger and generates more seeds (more money) for you to plant. Just like it may take 20 years for you to end up with an orchard, it takes time to become wealthy. But if you are going to get older anyway, why not plant the seeds now so you can have that future?

We all want more money in the bank to keep up with the ever-changing demands of our lifestyles. But with the local economy currently in recession, many people are finding it hard to end the month in the black.

We invest so much time and energy into making money yet somehow fail when it comes to managing it. To gain optimal financial quality of life, we need to be able to manage our money in such a way that it does exactly what we want it to, ensuring that it is meaningful for us.
Saving is easy enough and is all a matter of putting aside a certain amount each month. Investments on the other hand are another thing altogether and the variety of options available can seem rather intimidating.

Imagine going through life planting financial seeds explained in the  example posted below every year, through crashes and bubbles.  You would reach the end of your retirement with an overflow of riches, with assets generating plenty of dividends, interest, and ‘rents’ into your bank accounts to spend, save, give to charity, or fund new investments.

A 25 year old who has a tiny sum of R300 to save every month for retirement can start to attain financial freedom by the time he is 65 years old. Starting young is the perfect time to begin putting small sums of money away for their retirement years. You decide to put your money into an ETF (Exchange Traded Fund) like Satrix (www.satrix.co.za) that offers a realistic minimum average growth of 15% per annum over its lifetime. There’s a range of ETFs available to you,  you can find out more at www.etfsa.co.za. The minimum investment amount for Satrix is R300 per month. I live on the principal that it’s VERY important that when you get paid your salary that you pay yourself first! You can do so by having the investment in Satrix automatically debited from your account.
For the next 50 years the investment in the ETF(Satrix) is ignored and the cash dividends pile up and is reinvested, generating further income. You never make a withdrawal from the fund.  Like a seed planted in the forest and left to nature, you walk away and forget about it.

What happened over that half century?  How much money would be in the account as a result of your investment in that ETF account?
Well, did you know that…If today you were to invest just R300 per month (R3600 per annum) at a rate of 15%, your investment at the end of 50 years would be worth a staggering sum of R3,901,166 !

Monday, 1 April 2013

Procliviti launches the LinkedIn Workshop

LinkedIn is by the far the world’s largest online professional network, with users in over 200 countries and territories. To date, LinkedIn boasts more than 187 million members globally, including executives from every Fortune 500 company. There are an estimated 640 million professionals globally, and LinkedIn is focused on connecting them all. In South Africa, LinkedIn has passed the 2 million mark.
“Two million South Africa members is an important milestone for us. It shows that South African professionals have truly understood the career potential and the personal development possibilities at the core of the LinkedIn experience,” said Fredrik Bernsel, LinkedIn’s Commercial Director, Partnerships, EMEA.

What this workshop is about

A large majority of South Africans do not yet know how to use LinkedIn effectively. This 1-day workshop covers the depths of LinkedIn in order to unleash it’s full potential.
The workshop starts with LinkedIn’s position within Social Recruitment, a component within Social Media, and then proceeds to the basics of LinkedIn, as well as the advanced elements of LinkedIn. The workshop concludes with a practical 6-week implementation plan for getting to the most out of LinkedIn.

How you’ll benefit from this workshop

Attending this 1-day workshop will help you to understand how to leverage the world’s largest and fastest-growing professional network.
Individuals will learn:
  1. How to build and enhance your personal brand
  2. How to find a better job
  3. How to expand your professional network
  4. How to expand career opportunities
Companies will learn:
  1. How to build and enhance your corporate brand
  2. How to recruit the right people for the right job
  3. How to expand your professional network and company “following”
  4. How to expand business opportunities

Who should attend

Business Owners, Business Executives, HR and Recruitment Professionals, Sales and Marketing Professionals

LinkedIn South Africa – Fast Facts

The three biggest industries on LinkedIn in South Africa:
  • Information technology and services
  • Financial services
  • Accounting
The three companies with the most employees on LinkedIn in South Africa:
  • Absa
  • Eskom
  • Standard Bank Group
Top 3 Groups (by membership) on LinkedIn for South Africa:
  • South African Business Network
  • Johannesburg Business Club
  • South African Engineers and Expats

Workshop Outline

Session 1:
An introduction to Web 2.0 and Social Media
The new Social Recruiment Paradigm
LinkedIn, the company
Getting started with LinkedIn
Account Settings
The LinkedIn Profile
Recommendations and Endorsements
Session 2:
Using and Expanding Connections
Groups – Directory, Participation, Creating
Jobs – Finding, Posting, Managing
Inbox – Messages and Invitations
Companies – Search, Follow
News – LinkedIn Today, Signal
Skills & Expertise
Session 3:
Search: People, Jobs, Companies, Answers, Groups
Advanced Search: People, Jobs, Answers
Tools, Apps, and Mobile
LinkedIn Hacks and Tricks
LinkedIn Best Practices
Lead Generation and Conversion
Content Marketing
Session 4:
Job Seeker Premium
LinkedIn Premium
Talent Solutions
HR and Recruitment Focus
Sales and Marketing Focus
Advertising on LinkedIn
Strategy – How to get the most out of LinkedIn
Monitoring and Measurement
6-week Implementation Plan
Date: Tuesday, 30 April 2013
Time: 9am – 4pm
Venue: Ambassador Hotel, Bantry Bay, Cape Town (see http://ambassador-hotel.co.za/)
Trainer: Jamaaludeen Khan (click here for full bio)
Cost: R2,300 (Early bird fee R1,900 before 16 April 2013)
Included: Lunch and LinkedIn Resource Pack
Bookings: Click here to book, or Email info@procliviti.net, or call 076 604 2778

Warren Buffett Quotes

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