Your investment, financial, and business insurance questions answered

As a first-time mom keen to secure my child's future, I'm looking for advice on the most effective savings and investment options to consider. I need to save for his education and eventually purchase a home. Could you recommend the best strategies or accounts to help me build this goal? Carina van Rooyen, Wealth Manager, PSG Wealth, Pretoria-Oos / Pretoria East

Imagine planting two seeds today - one destined to grow and become your child’s education fund, the other to form the financial foundation of your future home. With patience and the right financial soil, both can flourish and grow. 

Here is how I would recommend cultivating each goal: 

An early start to fund your child’s future education: 

Tax-free investment accounts 

A fantastic start to saving for your child’s education would be to start contributing towards a tax-free investment account in their own name. A tax-free investment account allows tax-free growth on interest, dividends, and capital gains over time. 

You may contribute up to R 36 000 per annum (a total of R 500 000 over the investor’s lifetime) to these tax-efficient investment vehicles. A wide range of funds are available to choose from, suiting each investor’s needs, investment time horizon, and profile. The real power lies in remaining invested for the long term and maximising the benefits associated with tax-free compound growth over time. 

Unit trust investment accounts 

In addition, you may also invest in a unit trust fund held within a voluntary investment portfolio for funds you have available in excess of the maximum annual contribution allowed in a tax-free investment. For long-term educational goals, equity or balanced unit trusts offer stronger growth potential. Providers like PSG Wealth provide flexibility and clarity – allowing you to invest monthly or as a lump sum – depending on whether you need short-term stability or long-term growth. 

Select short-term, high-interest vehicles for your home deposit: Short to medium-term goals, such as saving for a deposit to purchase a property, require an investment strategy that offers liquidity and stability. Interest-bearing investment products such as notice deposits, money market instruments, or income-generating unit trust funds offer attractive returns whilst keeping funds accessible and preserving capital – ideal for funds that need to remain liquid and accessible. 

Keep goals clear and distinct: Clarity of purpose will ensure that each fund or investment product aligns with your timeline and risk profile, preventing confusion and misaligned solutions with specific goals. 

May these financial seeds you sow today grow into a flourishing life filled with purpose!

I am a 30-year-old woman interested in starting an investment portfolio, but I have no idea where to start. Can you help narrow down my options so I can start small and gradually build my portfolio? Amelia Morgenrood, Wealth Manager, PSG Wealth, Faerie Glen Stockbroking and Financial Planning

There are two considerations when starting an investment portfolio. First, you need to decide on the vehicle, and then you must decide in which asset class you want to invest

The investment vehicle:

The three options I would consider for starting an investment portfolio:

1. Retirement annuity: This would be my first choice if you are paying tax and do not already contribute 27.5% of your taxable income towards a retirement fund. The contributions towards a retirement annuity are tax-deductible up to the legislative limits.
2. Tax-free savings vehicle: Up to R36 000 per annum (with a lifetime limit of R500 000) can be invested and are not tax-deductible; however, all growth and returns are tax-free. 
3. Unit trust investment/s.

Depending on your circumstances, one or more of the above can be considered to start an investment portfolio. This will depend on the amount available for investment. All of the above allow for monthly and ad-hoc contributions. 

The underlying investment: 

The next step is to decide where to invest.

There are only four basic asset classes that you can invest in. This applies to all countries worldwide; if you invest offshore, the asset classes are the same. All investments, whether in a unit trust, policy, pension, or annuity, ultimately end up in one or a combination of the following asset class categories. This can be locally or offshore:

1. Shares: from which the return comprises dividends and capital growth/loss
2. Property: where you receive rental income and capital growth/loss
3. Money Market or cash: from which you receive interest
4. Bonds: from which you receive interest and capital growth/loss

Given your age and my assumption that you plan to invest for the long term, I suggest allocating at least 75% of your portfolio to shares, both locally and offshore. This can be achieved through a combination of unit trusts.

Investing and retirement planning are a journey; it is advisable to find a qualified certified financial planner to assist you in preparing a plan. 

As I approach retirement in two years, I'm looking for guidance on creating a solid monthly financial plan that will provide me with peace of mind. I've saved for my retirement over the past 45 years and have accumulated a substantial lump sum. How do I balance financial security without compromising on my lifestyle at this stage of my life? Kobie Kritzinger, Wealth Adviser, PSG Wealth, Menlyn

Congratulations, only 6% of South Africans can retire comfortably, and you are part of this unique group. The two years that you have left until your retirement provide the ideal opportunity to create a retirement strategy that balances security without compromising on lifestyle. 

Start by listing your expected living expenses (housing, healthcare, groceries, etc.) and lifestyle expenses (travel, hobbies, dining, etc.), and calculate this as a percentage of your lump sum. This will be your withdrawal rate. Findings suggest that withdrawing 4% of an initial retirement portfolio and adjusting this amount annually for inflation will allow retirement savings to last at least 30 years.

Your 45 years of disciplined savings have built a strong foundation. A bucket-investment strategy will ensure that your money works just as hard for you during retirement. Imagine three buckets: the first invested in cash and bonds covers your expenses for the first 3 years; the second bucket invested in a blend of equities and bonds covers your expenses for the following 3 years; and the third bucket houses the rest - invested in growth assets which will work overtime to ensure that your nest egg outpaces inflation and lasts throughout retirement. This investment strategy will provide liquidity, diversification, and growth in your portfolio whilst mitigating market risks. 

The best retirement plans blend compulsory and voluntary investments to maximise after-tax income. 

I would recommend that you consult a skilled financial adviser to assist you, as with careful planning, you can confidently enjoy a golden retirement with financial peace of mind. 

I’m a young professional in my 20s, and I've been told that the financial habits I build now can impact my future. Could you give me some financial strategies to ensure long-term gain? Bianca and Annika Strydom, the FinTwinz, PSG Wealth, Silver Lakes.

In your 20s, financial factors like entry-level salaries, student debt, rent, and social pressures are all relevant as you figure out your way through the world. However, the financial habits formed during this decade can significantly influence your long-term stability and freedom. 

The most important habits to build are: 

An emergency fund: Building an emergency fund is vital before considering investments or retirement, as this assists you in covering your main costs in case something unexpected happens. 

Saving before spending: Make a habit of having a debit order go off each month into either a tax-free savings account or retirement fund to make sure you’re steadily building towards your later years. Be disciplined by not withdrawing from these accounts to ensure you receive the benefits of the investment. 

Budgeting: Creating a spreadsheet or using a budget app to track your spending is key to keeping updated with what you’re spending and helps you make intentional financial decisions. 

Live below your means: Make sure your expenses don’t exceed your income. This is one of the most important aspects to avoid future financial hurdles that you might not be able to overcome. 

A financial adviser can help you plan according to your unique needs and lay the foundation you require to navigate your financial journey. 

As a business owner, I sometimes worry about how fraudulent activity by an employee could impact my business and financial standing. Can you share some insights on this, and if insurance can protect my operations from this type of crime?  Ryno de Kock, Head: Distribution at PSG Insure

Great question and a reality that many businesses face. In fact, it’s estimated that organisations lose around 5% of their revenue to employee fraud each year, with South Africa consistently topping the list of countries in Sub-Saharan Africa that experience high organisational fraud. The most common types of employee fraud in South Africa include: 

• Theft of cash or physical stock
• Payroll fraud
• Procurement fraud 
• Falsification of financial records 

Mitigating risks

While it’s impossible to eliminate risk entirely, there are practical steps that a business can take to minimise exposure to employee fraud:

• Implementing internal controls
• Performing regular reconciliations and audits
• Vetting new employees thoroughly 
• Monitoring transactional data for unusual patterns, such as frequent returns, duplicate payments, or repeated small losses
• Creating an open culture that encourages employees to speak up when something looks suspicious – confidential whistle-blowing channels can be effective

Fidelity insurance is a standard line of defense for every business.

Designed to protect a business against financial losses incurred due to dishonest acts of employees, fidelity insurance covers everything from petty theft to full-blown corruption, within specific terms and conditions. The amount of cover you will need depends on your risk profile and other key factors, such as your staffing levels, stock movement, and any potential incentives for internal fraud. One of our experienced advisers can help assess your exposure to internal fraud risks, determine appropriate cover levels, and ensure your business complies with any requirements to validate a future claim. 

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