Great TFSA Race Winners Announced

Colin Anthony
By Colin Anthony May 16, 2016 10:55
16 May 2016

Great TFSA Race 15When we started the Great TFSA Race, our ambition was to see how real South Africans are using the new way to save to make a difference to their lives. We weren’t disappointed.

Over the past three months we’ve heard and told stories of many savers who are taking advantage of TFSAs. While our race has to be short term, saving is really a long distance race. Have a read over some of their inspiring stories here.

It’s almost unfortunate to have to choose three savers to win the prizes on offer – three accounts with R5,000 each from sponsors EasyEquities. Every saver is a winner, securing their own long-term financial security, but the judges had to whittle it down to these. Congratulations to the winners!

  1. Best Investor

Won by: Allen Mafokwane

Allen managed to earn the highest return of our eligible entrants, boasting an annualised 22.6% on a time-weighted basis. That was down to some lucky timing, as he contributed to his TFSA account at EasyEquities when he had cash available. He made sure he invested his full allowance last year with most of it invested late in the year, and has been making regular contributions so far this year. What boosted his returns was his choice of investment: foreign equities. He obtained exposure to them by investing in a mix of the DB x-tracker MSCI USA exchange-traded fund and the DB x World fund, with his money invested evenly between them each time he contributed to his account. The timing meant he gained the full benefit of the rapid fall in the rand after the mid-December firing of finance minister Nhlanhla Nene.

  1. Best Strategy

Won by: Dustin QuintiniDustin Quintini

The judges considered the best strategy to be that which best matched the savers’ objectives. Not every investor should be taking on the risk of investing in equities if their savings objectives don’t support it. Dustin told us when he joined the competition that his objective was to save for a deposit on a house in the next three years. So he chose a low-risk investment option by opening a cash deposit TFSA with First National Bank. Cash deposits earn interest and there is no risk of any loss to capital. When you are facing a relatively short time horizon it is best to choose an investment where your capital is guaranteed. Dustin then made regular monthly contributions to the account, and topped it up with extra cash he received such as from gifts. You can read more in our interview with Dustin here.

  1. The Biggest Saver

Won by: Amber Watkins*

Amber did two things right to end up with the biggest TFSA balance of our entrants: over R64,000. First, she saved the maximum amount possible as early as possible. So she contributed the full R30,000 limit on the day she opened her account with Standard Bank as soon as TFSAs were introduced last year, and then topped it up with another R30,000 on the first day of the new tax year. Second, she put her money into strongly performing investments. She put all of her initial R30,000 into the DB x USA exchange-traded fund, which tracks the United States’ equity markets, earning a 17% return on it. The second R30,000 has gone into the DB x World ETF, which invests in developed market equities worldwide. Some slight rand recovery since means that the investment is off 5%. But overall, the weak performance of the rand certainly helped those returns, leaving Amber with the biggest balance in our competition. You can read more in our interview with Amber here.

*name changed at Amber’s request

There are some habits the top investors in the Great TFSA race share:

  • They make regular monthly contributions to their TFSA fund, usually by monthly debit order. They seem to be following Warren Buffett’s dictum: spend what you have left after saving, rather than saving what you have left after spending. Amounts contributed ranged from just R100 per month to R3,000.
  • They topped up their accounts regularly with extra cash. One participant put cash received as a birthday present into the account. Another deposited a wedding gift.
  • They were fully invested in underlying investments. In stockbroker accounts, the ones showing the highest returns were ones who invested their cash into ETFs, rather than leaving idle cash in the accounts.
  • The best performers did not touch their savings – savers did their best to let their accounts accumulate value rather than switching between investments or withdrawing any value.
  • Smart investors on the stock market diversified their exposures using ETFs. The best performers spread their investments between local and foreign investments.

 

Colin Anthony
By Colin Anthony May 16, 2016 10:55
Researching Capital Markets & Financial Services

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Researching Capital Markets & Financial Services