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February 2007
Silke Financial Monitor, Issue 7 |
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Dear "Taxpayer" So, what does the 2007/2008 Budget have install for you? Collections have exceeded the Budget. With a seemingly healthy economy and a widening of the tax net, it has allowed Trevor Manuel the opportunity to ease the tax burden for most South Africans. Income tax relief of R8.4 billion has been allowed by increasing the levels of the tax brackets. The brackets have allowed lower income earners to have a real reduction in income tax, while the top end earners will have a higher real liability (but still have a decrease in nominal levels). Nominal reductions are as follows (for persons under 65): * R60 000pa 15% R120 000pa 9% R250 000pa 7.2% R500 000pa 4.3% R1 000 000pa 1.8% * Sin taxes are up. A 340ml can of malt beer is up 5c, 750ml bottle of wine up 13c and 750ml bottle of spirits up R1.88. Traditional African beer, has no tax increase - yet again. Cigarette smokers will have to pay 60c extra for each pack of 20 cigarettes. * With the general fuel levy increasing by 5c a litre and the Road Accident Fund levy by the same amount vehicle owners will be paying 10c a litre more for petrol and diesel from 4 April this year. * The Estate Duty abatement has been increased from R2.5 million to R3.5 million and the annual exemption for donations tax has been adjusted from R50 000 to R100 000 per annum from 1 March 2007. * All these changes should, to a greater or lesser degree, impact your financial planning. Silke Financial Services assists private investors in calculating and determining their investment objectives, portfolio and looking at your tolerance to risk. Contact Mandy Carolus, for a copy of the 2007/8 Tax pocket guide, on 021 683 3380 or mandy@silke.co.za. Kind Regards In this issue
Articles1.1 Protecting yourself, your family and your property– Shane Thom Why does insurance really matter?
How much cover do you need? If you make a claim, the maximum an insurer will pay out is as set in the policy contract. That sum has to cover everything. Most people underestimate the value of what they own and 'under-insure'. In this case, you won't get enough money to cover the total cost of your loss. Check your cover regularly, so that your sum insured keeps up with building costs and any renovations. How do you get the best cover? Shop around and get a few quotes. The insurer will ask you a few questions, which must be answered fully and honestly. You must tell them all the facts that could be relevant, otherwise the insurer may be entitled to refuse or reduce payment on a claim. You may save on insurance premiums by agreeing to pay an 'excess'. Compare the actual cover offered in each quote. Go through what they policy covers and what it excludes with a fine-tooth comb. Many people find out only too late that something was not covered. Insurance covers only what's defined in the policy and nothing else. A cheap policy that doesn't cover what you need could be worse that a more expensive policy with unnecessary features. If you have special needs, seek expert advice before you take out insurance cover. In the next issue I will discuss 'Get the most from your retirement fund' 1.2 Investor Psychology– Ken Silke It's hard not to think of the stock market as a person: it has moods that can turn from irritable to euphoric: it can also react hastily one day and make amends the next. Behavioral finance theorists say that psychology really help us understand financial markets. Tenets and Findings of Behavioral Finance This field of study argues that people are not nearly as rational as traditional finance theory makes out. For investors who are curious about how emotions and biases drive share prices, behavioral finance offers some interesting descriptions and explanations. The idea that psychology drives stock market movements flies in the face of established theories that advocate the notion that markets are efficient. Proponents of efficient market hypothesis say that any new information relevant to a company's value is quickly priced by the market through the process of arbitrage. But is this correct? For anyone who's been through the internet bubble at the start of this century and the subsequent crash, the efficient market theory is pretty hard to swallow. Behaviorists explain that, rather than being anomalies, irrational behavior is commonplace. In fact, researchers have regularly reproduced market behavior using very simple experiments. Let's look at how the average person behaves when incurring financial Losses versus Significant Gains on his investments. Here is one experiment: offer someone a choice of a sure R50 or, on the flip of a coin, the possibility of winning R100 or winning nothing. Chances are the person will pocket the sure thing. Conversely, offer a choice of a sure loss of R50 or, on a flip of a coin, a loss of R100 or nothing. The person will probably take the coin toss. The chance of the coin flipping either way is equivalent for both scenarios, yet people will go for the coin toss to save themselves from loss even though the coin flip could mean an even greater loss. People tend to view the possibility of recouping a loss as more important than the possibility of a greater gain. The priority of avoiding losses holds true also for investors. Just think of Nortel Networks shareholders who watched their stock's value plummet from over $100 a share in early 2000 to less than $2. No matter how low the price drops, investors, believing that the price will eventually come back, often hold onto stocks.. The Herd versus the Individual Herd instinct explains why people tend to imitate others. When a market is moving up or down, investors are subject to a fear that others know more or have more information. As a consequence, investors feel a strong impulse to do what others are doing. How many people do not contact or even praise their financial advisors when their investments are doing well but are quick to call their advisors complaining about bad service and advice when their investment values go south. A geopolitical shock in 2007 could cause a stockmarket meltdown this year – we just don't know. That's why we insist that we review our clients portfolios regularly in person so as to ensure that our clients fully understand the risks they are subject to and that appropriate action be taken in line with our clients' needs. 1.3 Are you a Baby Boomer and able to Retire– Ken Silke In a recent Sunday Times article headed "Baby Boomers heading for 65", the reality of retirement for those of us born between 1946 and 1964 was humorlessly highlighted. Here is a extract from that article:
In the next five to 20 years, we're going to see a lot of people who think they're going to be ready for retirement, and all of a sudden, look at how much money they've saved and realize "I can't retire". In David Bach's book "Start Late, Finish Rich", he says that just because you started late doesn't mean you are doomed to an uncertain financial future. Whether you're in your thirties, forties, fifties, or even beyond, there is still time to turn things around. It's never too late to live and finish richer. All it takes is the decision to start! Our Range of ServicesWe offer the following range of services to provide a one–stop service:
Silke Sponsorship Program – Ikwezi Art CentreWe are proud to be the Main Sponsors to the Ikwezi Art Centre situated at the Montebello Design Centre in Newlands, Cape Town.Please feel free to contact Joel Zwane, manager, should you require any further details. Cell: 073 608 9984. Bring this Newsletter to get a 10% discount at the Ikwezi Art Centre. Quote of the Week
Authorised Financial Services Provider FSP No. 12462 Accredited Health Care Broker: BR 3440 |
Editor: Shane Thom, Silke Financial Services FSP No. 12462 · An Authorised Financial Services Provider Copyright © 2007 by Silke Financial Services CC – All Rights Reserved. |
