Personal Finance Newsletter - Volume 2009, Issue 345, October 2009

In a sense the "hare" behaves very much like an equity investment - it runs very fast, but enjoys a nap. On the flip-side, cash is very much like the tortoise - it plods along and doesn't nap. Given this perspective, one can appreciate the merits of both investments, depending on the investment horison.

Old Mutual plc, the biggest insurer in Africa, said that it has R1.2 billion after the final deadline for South African policyholders to claim their allocated shares passed at the end of August.

South Africa's horrifying crime statistics haven't made property hunters and investors streetwise, according to a recent column on property website Realestateweb.

If investing in South Africa is a minefield, then, for the average South African investor, international investing must be a war zone. If the South African investment environment is already fraught with complexity and costs, conceivably the international investment arena is costlier and even more complex.

According to the latest market research compiled by TPN, a registered credit bureau and developer of the industry's first rental payment profile of its kind in South Africa, on average 10% of tenants default on 2 months' rent.

If you diligently invested money in shares by monthly debit order, what type of return would you hope for after three years? At the very least you might hope to get your money back - especially if these payments coincided with a bull market.

Years of turf war and fighting for market share has decimated the banks' home loan profits. The big three banks that reported their annual results have all shown significant losses in their home loan business.

According to Momentum's annual results, there has been a decline in the sale of retirement annuities (RAs) and endowments. New business for endowments is down a massive 25%, while RAs are down 4%. This has been in part offset with a 13% increase in new business for risk cover.

They say you should own your home, they say you should not pay off someone else's bond, they also say your home is the best investment. Do they know what they are talking about, or are they missing the big picture?

About three or four years ago I stuck my neck out and predicted that the day would come where the "deemed kilometre" method of claiming business travel against a travel allowance falls away, making it compulsory for travel allowance recipients to keep a logbook for claiming business travel. This year's Budget proved that prediction to be true, in that as from 1 March 2010 any claims for business travel must now be substantiated by a logbook - the deemed method will be no more.

Having proper budgets.

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Budgets must be monitored every month.

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Income statements must be completed by the very latest the 15th of the following month and clearly show how income is made up and what action has been taken against defaulters.

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Managing Agents are there for one purpose only - to manage.

The property market is one that has seen highs and lows over the past 3 years because of global economic pressures in the market.

Ask any minister to make a list of "No-Go Topics To Preach On", and chances are they will include sex, politics, and the two that are the subject of this month's "Lowhanging fruit" - money, and how to bring up your kids. Strange, considering that the Bible has so much to say on all of these topics!

It's not just bank managers that have a headache as they watch home-owners repay loans late or not at all. Sectional title schemes and home owners' associations are seeing their finances deteriorate as owners struggle to keep up with levy payments. Some 50% of all members of Western Cape sectional title schemes and home owners' associations are behind on their levy payments - and this can result in the entire scheme deteriorating, maintenance backlogs or, even worse, the scheme running out of funds and ending up in liquidation.

Corporate bonds make up over 65% of Old Mutual's US Life portfolio. Bloomberg recently ran a story exploring predictions that American corporate "junk" bond prices may be on the precipice of a crash. The Financial Times says that "Corporate bond defaults hit record". Is "The Green Giant" teetering on the brink?

South Africans over the age of 18 years are permitted to make use of a single discretionary allowance within an overall limit of R500 000 per individual, per calendar year, without the requirement to obtain a Tax Clearance Certificate.