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S2 E8 Choosing The Right Investment Vehicle For Your Journey · The Swan Effect - Creating and Sustaining Your Financial Wellbeing

• 0:00
  Malika Petersen: Your legacy is about more than just investment return. It's about the peace of mind that comes with knowing that you've partnered with an investment manager with the right skills and experience to grow your wealth Old Mutual Wealth is a world class investment destination offering you a wide range of investment strategies and specialist wealth management solutions. Together with your financial planner, we model a strategy around your specific needs supported by a multi skilled team dedicated to taking your wealth further, whether your goal is to grow your wealth, generate income or preserve capital, we select the best and most suitable investments based on your investment strategy and our extensive research and insight.
• 0:44
  Malika Petersen: Old Mutual Wealth is an advice led wealth management business aimed at providing financial planners and their clients with a full suite of industry leading strategies and services. For more information, please visit our website at www.oldmutual.co.za/wealth walk
• 1:14
  Arthi Rabikrisson: Hi, there, I'm Arthi Rabikrisson
• 1:17
  Malika Petersen: Hello, I'm Malika Peterson.
• 1:19
  Arthi Rabikrisson: Welcome to The Swan Effect Podcast. Money makes the world go round. Yet it's not so easy to understand its complexities, particularly when it comes to investing.
• 1:32
  Malika Petersen: That's why Arthi and I are using this platform to educate, inspire and help you gain confidence in your relationship with money.
• 1:40
  Arthi Rabikrisson: So that you can better manage your finances and investments.
• 1:45
  Malika Petersen: We are two women in finance.
• 1:47
  Arthi Rabikrisson: That's pretty cool, isn't it?
• 1:49
  Malika Petersen: It certainly is. You've been in stock broking, private wealth management, asset management and now an award winning business woman who is coaching and assisting businesses with capital and strategic advice
• 2:03
  Arthi Rabikrisson: And Malika you have a wealth of experience in wealth, excuse the pun in financial planning, investments and relationship management. So you're also at the coalface when it comes to where and how people are investing, or getting it right and getting it wrong
• 2:21
  Malika Petersen: And stuck in the grey areas to indeed, I've seen the many phases and moods of financial cycle and how our decisions that those times impact us. So listeners and subscribers if you are looking to get unstuck, feel empowered and make some strides in how you tackle your money. We are here to help you.
• 2:43
  Arthi Rabikrisson: And it all starts with listening to this upcoming episode. Enjoy.
• 2:53
  Arthi Rabikrisson: Hi, everyone. Hi, Malika. I'm so excited about our journey thus far. Our moneyverse is shaping up really nicely and after our last episode where we were talking about taxes Oh yeah. I'm feeling inspired to ensure that my money was grows to counteract the negative impact of taxes, which no one likes to talk with think about but can be used constructively to still grow our investment and wealth basis.
• 3:22
  Malika Petersen: I'm inspired too Arthi. Yes, we had quite a serious but I think it was thought provoking discussion in Episode Seven. And it was needed so that we can all start the new tax year in South Africa purposefully ,however I'm quite excited about the next step in our journey. Wespoken about the various aspects of how to start to build financial freedom. And I think it is now important that we look at some of the technical aspects of investments that are important.
• 3:54
  Arthi Rabikrisson: Oh, I agree Malika. You know, everyone in order for us to take our journey to wealth freedom to that next level, we do need to understand some of these underlying aspects that make up our moneyverse.
• 4:06
  Arthi Rabikrisson: We've alluded to it in episode six and seven and here's another opportunity for us to now unpack it another step further for all of you, our subscribers and listeners of the Swan effect podcast.
• 4:19
  Malika Petersen: Now it's important Arthi you mentioned a very important aspect, right?
• 4:22
  Malika Petersen: Where we need to understand the underlying aspects of our moneyverse. Now I like to refer to this as choosing the right vehicle for your financial freedom journey. Now, listeners, I want you to understand that you may feel overwhelmed by some of the content that we're going to talk about today. And you may want to retreat into your shell and go back to doing what you did before right? Ignorance is bliss. But it's exactly at these times that you need to keep pushing through. Arthi do you perhaps have any tips on how we can overcome those feelings in those moments?
• 5:00
  Arthi Rabikrisson: Oh, yes, you know, Malika, what you're talking about in terms of that overwhelm is when someone has actually left their comfort zone, they then find themselves in a fear zone, and then retreat back to their comfort zone. So everyone, the comfort zone is where we feel safe, secure, we know our routines and it's just easier to work within the within that loan frame. A lot of what we've been talking about the season and is hopefully giving you our listeners that confidence to tackle your money matters. And we want to help move you forward out of the fear zone into what's called the Learning Zone, which is where you feel equipped to deal with challenges as they arise, because you've acquired these new skills, thanks to using our practical tips, and also reaching out to the different support resources that are available to you. And listeners if you stick with that, and you push forward into more of that learning, you then enter this wonderful growth zone, which is where you really find your purpose. You actualize your perspectives of financial freedom, and in essence, you're living your dreams, doesn't that sound wonderful?
• 6:22
  Arthi Rabikrisson: So when you're having these feelings, or the stress and this doubt or overwhelm, what you want to do is instigate your rational brain to come back into the picture here by having a conversation with yourself. Yes, yes, everyone. That's right, I'm talking about talking to yourself. Even better, if it's in front of a mirror, right. And here's it, the self talk acts like a bit of a pep talk. And as you're talking, you start to rationalize what you're feeling what you're thinking, it automatically starts to calm you down. So talk out loud, it makes you realize that potentially, there's a difference between what is actually happening and what's all going on in your head. So that's a, that's one tip to think about it.
• 7:06
  Arthi Rabikrisson: Here's another one, take some deep breaths to really calm yourself down. So inhale slowly, for a count of five, hold for a count of five, and then exhale for as long as you can, a count of five or more will be wonderful. And you know, just doing this a simple breathing exercise three to five times is enough everyone to just reduce the level of anxiety you're feeling. And to just clear the head again, to bring that rational thought in.
• 7:33
  Arthi Rabikrisson: Malika i want tooffer a third one as well and I would say this is probably my favorite and I call it a pattern break. When we feel that we're spiraling out of control emotionally, a pattern break helps us to remove ourselves from a situation with a meaningful distraction and it also helps us to clear our mind.
• 7:53
  Arthi Rabikrisson: So everyone you can hear I'm talking about things that can help you gain clarity, because when we're in emotions, we become very, very clouded. So that freshness allows us to tackle things especially things that are important to us like our money and our finances. So if you're sitting down someplace and you're you know, you're experiencing this overwhelm, stand up and take a walk, right change the environment in the scenery, something else you could do is put on your favorite mood boosting music and popped it I love doing that actually,put out some videos that make you laugh like a sketch from SNL, which I love or something you know, that actually makes you feel all gooey like watching puppies doing cute things, you know, whatever it takes.
• 8:35
  Arthi Rabikrisson: So everyone all of these are just examples to take our mind off that stressful element around our finances and money for a short while because what it does, it helps us to lift our mood and then we come back into the situation with a better mindset. So if you're feeling overwhelmed about your finances, try these little tips everyone just to gig you out of it so that you can refocus. I always say you know don't take yourself completely out of the game like oh my god I can't deal with this and I'm just not going to think about it no don't do that. Just take a temporary timeout ensure you come back because the outcome of this game around your money it's still in your hands no one else's. So Malika musics a basketball analogies here because I was watching Space Jam two with my five year old this so that's
• 9:23
  Malika Petersen: LeBron James,so so well everyone we know managing money can fit a bit like Looney Tune sometimes right? We think seem to go upside down despite our best efforts. It's all about as Arthi has just said picking yourself back up, getting back in, right and one day way to do that.
• 9:43
  Malika Petersen: Remember, the power is in your control. Knowledge is of the power so feel free to access the old mutual moneyversity on www.moneyversity.co.za. There's loads to help guide you listeners and the more we can get you into learning zones and eventual growth and the beta for you, right?
• 10:04
  Malika Petersen: So let's get into the nitty gritty of it, shall we? There are two key aspects that you will need to consider when investing money. The first is the investment vehicle that will be used and the second is the underlined fund or assest composition that will be used.
• 10:22
  Arthi Rabikrisson: I like that we making that distinction as well Malika. And essentially, everyone your investment vehicles refers to that tax structure. So see we linking it to our previous episode. Refers to the tax structure that is most suitable for your wealth creation journey. Now, I know Malika this is quite tricky, right?
• 10:41
  Malika Petersen: Absolutely Arth in South Africa, there are quite a few pre retirement investment vehicles that can be considered and these absolutely strength in diversity, right? I think, as South Africans, we know that better than anyone and that is definitely the end goal but until then we need to remember that this is a journey. And so it's important to have a plan on how we achieve that diversity within our portfolios.
• 11:11
  Arthi Rabikrisson: Right. So when we talk about those investment vehicles, everyone we're referring to the likes of, and you would have all heard of this, right retirement annuities, unit trusts, life wrapped investments, and also tax free investments. You know Malika, I think it will be very our listeners to understand what those are. So between you and I, useful let's unpack that. Alright, so I'll go, let's start with the first one, the retirement annuity or the RA. So everyone, this is one of the most efficient investment vehicles for retirement because your premiums that you pay, do get deducted off your income for tax purposes. So what this means is that the revenue services or SARS here in South Africa, contributes to your savings at your marginal tax rate, and money then grows in this vehicle is the tax free. I love things tax free. So everyone, if you're not sure what we mean about marginal tax rate, please do listen to episode seven, our previous episode. And you'll learn more about that. Okay.
• 12:14
  Arthi Rabikrisson: Now, however, everyone note that with your IRA, you can't access this money until retirement age.
• 12:18
  Arthi Rabikrisson: Okay. It's very deliberate in that way. Alright and the second one we mentioned was a unit trust or linked investment. And actually, everyone, I think you're quite familiar with that.
• 12:27
  Arthi Rabikrisson: Those are your straight investments into the stock market and all of that. So these investments are taxed with there is growth or dividends, or its interest based on your marginal tax rate. And we also did discuss this the last time too.
• 12:41
  Arthi Rabikrisson: Malika, do you have explained the others?
• 12:44
  Malika Petersen: Absolutely Arthi. So, as you said, bearing in mind those three events that trigger tax growth dividends or interest right. There is two other vehicles that differ based on this. So you've got your life wrapped investment, and then your tax free investment, the life wrapped investment is investment that applies tax within the investment in any of the events that I just mentioned, as if the investor is at a 30% marginal tax rate. Now, this vehicle is naturally more suitable for investors who fall in a higher tax rate than 30%.
• 13:22
  Malika Petersen: Because it means that they will be essentially paying less tax than they would in a personal capacity. Tax free investments, we actually spoke about those rights. They are savings, right, which have a cap of R36,000 and a the lifetime cap of R500,000. It is absolutely no tax applicable on those tax free investments, not on the growth, not on the interest, not on the dividends. So it's important, again, that we reiterate that we are providing you with factual and high level information related to investments for the purposes of education. Again, I want to encourage people, every individual Listening to us, please speak to a financial advisor will be able to help you assess your unique situation and set up a detailed financial plan.
• 14:18
  Arthi Rabikrisson: Exactly right Malika I mean, that's the purpose of our podcast, everyone, it's to equip you, our listeners with enough information to be able to ask all the right questions, and to be able to make informed decisions in conjunction with your support resources like your financial advisor.
• 14:37
  Malika Petersen: I think for me Arthi especially prior to retirement, the two most important investment vehicles that we should be setting up is the RA and the tax free investment. Now we've spoken about these vehicles in our last podcast, and I want to make sure that if there is anything that our listeners take away from our podcasts, it would be this Set up your tax free plan first pay as much as you can into the investment up to a maximum. And then consider the other vehicles. The RA, like I said last time is the gift that keeps on giving. So we need to ensure that we take advantage of that benefit, right? Make sure that you automate your contributions into these vehicles. And then just forget about them and watch your wealth grow.
• 15:26
  Arthi Rabikrisson: I'm liking I'm liking this plan of action.
• 15:29
  Arthi Rabikrisson: I love this, you know, you're, you're giving us a very deliberate strategy here, Malika and that's important to everyone because it's gonna guide your your map towards your growth, your wealth growth, as Malika is saying.
• 15:40
  Arthi Rabikrisson: Okay, so let's assume then that we are ready to automate our tax free plan, and our RA contribution, these last few are the aspects that we need to consider. One of these would be the cost of the investment.
• 15:53
  Arthi Rabikrisson: Okay. Now, while these are largely legislated to be fair to all clients, it's important to understand the nuances that exist with respect to the cost and the value from one investment vehicle platform to another. Isn't that right, Malika?
• 16:12
  Malika Petersen: Absolutely. And then the next thing that our listeners need to consider is the underline funds or asset allocations. Now, it to explain this, we need to consider that the underlined funds or assets allocations are the things that really provide us with the investment growth, right? When you consider that we are building our wealth from scratch, it's easy to understand that a variety of types of assets may be required to do so.
• 16:41
  Arthi Rabikrisson: Yeah, you know, as you're talking Malika, I'm beginning to think of an analogy here. And I liken this to the analogy around the baobab tree, right, the tree of life for for Africa, is uncanny. I mean, we all know what to be your baobab tree looks like, right? I find it quite uncanny that the branches of the baobab looks like its roots. And everyone does call this tree the upside down tree, right? Because it looks as if the roots are in the air but its not One of the things that noticeable is that those branches just like the roots, they're spreading everywhere. Okay, so if we analogize this in terms of our financial investments, and the asset types, we're talking about everyone, when you set up variety of asset types within which we can grow? Well providing this really strong foundation, which then creates a substantial channel in the form of this massive trunk that his boabab tree has , right? So think of it in that way and we're using that massive trunk to funnel our financial resources all the way up to those branches, which as we know, are spreading all over.
• 17:51
  Arthi Rabikrisson: And remember the tree of life. I mean, every single part of the tree is used for something or the other when it's medicinal, whether it's for food, you know, it ears leaves, it bears fruit, it's bringing life. That's why it's called the tree of life. So think about it that way that when you've got these proper investment strategies, these vehicles and these asset types, that's that strength in those roots that's going to power that massive branches and everything that comes with it.
• 18:19
  Malika Petersen: It's gonna provide abundance and shade for generations to come. Right. I love that.
• 18:24
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• 18:25
  Arthi Rabikrisson: Absolutely. I mean, when we talk about generational wealth, this is down laying those roots and those foundations, this diversity that we're talking about. You know, everyone in Episode Six, we mentioned a variety of these underlying assets, these personal asset types. So, a quick recap for your benefit, there is property, okay, there's investments like some of the ones we've mentioned, there's also your savings and cheque accounts, money market accounts as well. Okay, I think we will be familiar with all of these ones, gold coins, such as Krugerrands. Also, they continue to have a store of wealth, especially in uncertain economic times. And of course, we have the rise of crypto currencies to where you know, even now your financial advisors are starting to understand the dynamics of this and are starting to talk about including it as part of the diversity of your portfolio.
• 19:17
  Arthi Rabikrisson: We've also mentioned that there are other types of assets that can increase in value to like fine art, jewelry, but because these are assets that can be used, you know, we typically read the books we use the jewelry, their store value tends to decrease a little bit over time, and it sometimes becomes price, a price taking and a price making sort of situation where a willing buyer will determine the price okay. We also Malika mentioned that we can even use some liabilities to help us as well, like taking out a loan for a property. All of these things add to our moneyverse everyone.
• 19:58
  Malika Petersen: That is such a great recap. The way I see it.
• 20:02
  Malika Petersen: If we take the idea of the tree of life in the concept of these assets and the vehicles that we mentioned, then I can diversify, like the roots and cement my foundation, right? It makes me think then that the more I pay myself, and then split these payments into different areas, the better it would be if I spread my risk, but also strengthen my foundation.
• 20:26
  Arthi Rabikrisson: And you know what, medica, it's not difficult to do, right? We think it's difficult, but it's not. Working with a financial advisor or financial planner will help you everyone. I mean, if I look at my example, and I'm sure you'll think of yours to Malika, I do a number of these different types of investments, even through my own bank, you know, because it's so easily accessible. And you know, you can view it on your online app, it's just so easy, right. And then I do a whole other batch through different financial institutions. So there's also the view of diversity and spreading your risk across different types of managers and institutions as well. So that's another way to think about how you can bring in and spread in a spread out sorry, that diversity, Malika, any examples that you want to share what you will be doing in the space?
• 21:17
  Malika Petersen: Ya look, I think, for me, obviously, coming from the financial world, I'm quite heavily indoctrinated. So i do make sure that that I have all of my underlying vehicles in place. However, as much knowledge as I have Arthi, about this world, about the investment world, I depend on my financial advisor when it comes to my own personal financial growth and development and I think that's, that's so important. You know, we we always need the expertise, when it comes to our own personal financial security.
• 21:56
  Arthi Rabikrisson: I couldn't agree more I also I use my financial advisor for all of these aspects. So again, everyone, please do ensure that you're bringing in those resources to help you understand this even better to set you up into these different vehicles and to create that journey for you towards financial freedom.
• 22:15
  Arthi Rabikrisson: Malika, you know, we've been talking around interesting things today and I think we've given our listeners a really good map in terms of where to start a bit of an understanding about the different investment vehicles, and hopefully they're gonna go out, do a bit of homework and talk to the financial advisors and planners, and you know, everyone in our next episode, we're likely going to dive into some of these asset types that we've mentioned now as well. So we can help you understand and assess what are some of the right things for you to be considering to include in these vehicles. So Malika, as we're wrapping up, do you have a parting shot for today?
• 22:51
  Malika Petersen: No, absolutely.
• 22:51
  Malika Petersen: So today, it my parting shot is definitely that we need to ensure that we gain enough knowledge to be able to manage our wealth portfolios. Now, this by no means is an inference that we do not seek the expertise of a professional, right? Yes, yes.
• 23:10
  Malika Petersen: In exactly the same way that a CEO of a company gets information from the experts in his organization and then uses that information, plus hidden knowledge to take an informed decision. And so too, we need to be the CEOs of our own manners.
• 23:26
  Malika Petersen: Right? That Yeah, well, what about you at you Arthi, What about a parting shot on your side?
• 23:34
  Arthi Rabikrisson: Okay, yes. So I guess my parting shot is around that comfort zone, everyone, and more importantly, the fear zone, okay. Because I think a lot of us find ourselves in that space and as I said, we want to retreat. So one of the things we can do is reframe fear, into good stress into curiosity about wanting to know more, rather than thinking, Oh, my goodness, everything's just gonna go wrong, I don't understand and then we start to spiral and move backwards. Okay.
• 24:09
  Arthi Rabikrisson: And actually, if you think about it, everyone, that's not the case, right? I think of it simply in this way. If, if this and if you have a scenario, and this three potential outcomes, right, it's either things are gonna go bad things are gonna go good, or things could stay the same. There's only 33 and a third percentage chance of something going wrong, right?
• 24:29
  Arthi Rabikrisson: Not 5050 Everyone because things could go very well, as I said, or they could remain the same.
• 24:32
  Arthi Rabikrisson: And you know what, I actually like my odds because 66 and two thirds is telling me I'm actually going to be at the current level, I'm going to be better off right? So everyone just reframe what's going on in your mind in that fear zone and then watch yourself come into your own and your financial growth would happen too.
• 24:53
  Malika Petersen: You I'm loving those odds Arthi and we say life, is a gamble. Yeah, but actually, the gamble is mostly in our favor, right. Not the other way around with all the doom and gloom.
• 25:03
  Arthi Rabikrisson: Yeah, that's right. It's right. So everyone banish the doom and gloom. Okay.
• 25:05
  Arthi Rabikrisson: Eat fear for breakfast. That's what I say. The rest of the day is for learning and growth.
• 25:13
  Arthi Rabikrisson: Okay, swallow all of it in the morning and go out and prosper.
• 25:18
  Malika Petersen: So motivational you make me think of Snap, crackle and pop Rice Krispies.
• 25:24
  Arthi Rabikrisson: All right, cool.
• 25:25
  Malika Petersen: All right, guys, here's wishing you well in your money journey listeners and subscribers. Until next time.
• 25:36
  Malika Petersen: Sharing is caring,
• 25:38
  Arthi Rabikrisson: and knowledge is power.
• 25:40
  Malika Petersen: Time for you to be daring
• 25:42
  Arthi Rabikrisson: and let your money confidence bloom like a sunflower.
• 25:47
  Malika Petersen: Thanks for joining us. We hope you found these ideas and guidance useful.
• 25:52
  Arthi Rabikrisson: Do subscribe, share and write a review or send us comments. We would love to hear from you.
• 25:59
  Malika Petersen: Catch you on the next episode
• 26:01
  Arthi Rabikrisson: Of the Swan effect podcast
• 26:03
  Malika Petersen: Bye for now.
• 26:04
  Arthi Rabikrisson: Ciao.