Personal Finance Newsletter - Volume 2015, Issue 414, July 2015

Money management. There are many ways to do it well - yet many people appear to do it poorly. In current times of economic and financial uncertainty, it would be wise to at least try to do it better.

It is arguably one of the most difficult issues that many investors face in retirement: Growing assets ahead of inflation without also subjecting their portfolios to the significant volatility that typically accompanies a sizeable exposure to shares.

This article was originally published in the January 2012 issue of Moneyweb's Personal Finance, but has been updated to take into account the current (2015/16) tax tables.

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A favourite mantra of many investment advisors is 'diversification', which is a fancy word for what your grandmother would call "not putting all your eggs in one basket". Simply put, there are different types of investment markets (equities, property, bonds, cash, etc.) whose movement is driven by different factors, so in order to reduce one's risk it is usually considered prudent to have a portion of your money invested in various different assets.

Market terms explained: financial year and year of assessment

Over the past 50 years since Warren Buffett took control of multinational conglomerate Berkshire Hathaway, compound growth in shareholder wealth has been 19.5%. No wonder then that the 'Oracle of Omaha' is often referred to as the most successful investor of the last century.

With South African equity prices looking stretched, many local investors are looking at the potential in other markets. One of the simplest ways to do this is through investing in local rand-denominated unit trusts or exchange-traded funds (ETFs) that invest offshore.

A reader's question asking for advice about estate planning is answered in the article.

Preference shares generally offer a higher yield than money market rates, currently around 8% to 9% compared to about 6.5% on a money market fund. They are easily accessible investment instruments and their fixed or prime-linked dividend returns make them attractive. As preference shareholders receive dividends before ordinary shareholders are paid out, they are viewed as less risky than ordinary shares.

SARS key upcoming tax dates

Director of investments at Sanlam Private Wealth, Alwyn van der Merwe, put forward a case for holding Anglo American shares, recently explaining that price-to-book (P/B) value is a far better alternative to the price-to-earnings multiple as a technique for analysing whether or not the stock was worth investing in - which, he says, it was. We have sought out other analysts' views on the matter, while also comparing the P/B ratios of some of the mining industry's other heavy hitters.

For most investors, the first place they look when choosing a unit trust or exchange-traded fund is the performance numbers. Historical return is often the most decisive factor in fund selection.

Living annuity policyholders withdrew on average 6.59% of their capital as income last year. According to the Association for Savings and Investment South Africa's (ASISA) 2014 Living Annuities Survey, this figure is slightly lower than the average drawdown of 6.63% in 2013. Yet it is considerably higher than the recommended 5%.

Confirming what we've suspected all along, a recent medical aid survey emphasises that choosing the right medical aid is overwhelming - and the endless nuance in medical aid plans makes meaningful comparison impossible.

The first quarter of 2015 was once again dominated by strong returns in the equity markets, both locally and globally. Locally the FTSE/JSE All Share Index delivered stellar returns of 5.9%, while the MSCI World Index returned 2.3% in US dollars.

Although opportunities are few and far between, it is possible to generate alpha in the fixed income market, an analyst says.

A common estate-planning technique to ensure that an estate with substantial fixed assets, but insufficient cash with which to pay all the estate duty due, is for the testator to establish a life policy to settle this estate duty.