DEMO ZAR: INCOME PORTFOLIO

A demo portfolio to earn a potential R2,000 after tax. Not financial advice.

DEMO PORTFOLIO TO EARN R2,000 PER MONTH WITH R300,000 INVESTED

One of my followers asked me what a demo portfolio would look like for me personally to earn R2,000 per month. At first, I was hesitant, but it was an innocent question and maybe a few people will find value in how I think about this.

BACKGROUND

To earn income from a portfolio, you need to invest in cash, property and/or dividend-paying companies and ETFs. Your personal level of risk will determine how much you invest into each asset class.

DIVIDEND PAYING COMPANIES & ETFs

The first R36,000 goes into my TFSA. The annual limit is R36,000. Find a dividend paying ETF. There are quite a few to choose from. In the demo, I decided on the Satrix Divi Plus. It returns 5,02% per annum tax-free. If you want to find dividend paying ETFs, simply use the https://etfs.easyequities.co.za/

It is no secret that I like stock picking, so individual dividend-paying stocks rank high for me when I invest, after my TFSA is maxed out. I filter it into 3 main areas:

1. Companies I know and use like Shoprite. This makes research and keeping up to date with the news seamless. Shoprite pays a 2.8% dividend, and the share price is flat over the past 5 years. You can read more on Shoprite and how I rank the retail giants here https://finmeup.app/post/0979bbed-7285-480b-ad48-04060aa1b305
2. Industries I find fascinating and like reading about for example Mining, Coal & Logistics. The African continent is rich in resources. We have some of the most successful mining houses on the planet with exceptional management teams. Not a day goes by where you do not read about mines or Transnet doing something, so BHP, Grindrod and Exxaro also make the cut for the monopoly portfolio. The share prices of these businesses have also proven to beat the market the past 5 years.
3. For a bit of risk, I added Sibanye Stillwater into the mix. SSW listed on the JSE 19 February 2020. It is essentially still a growth company. Final 2021 Revenues were up 35% in ZAR terms and 50% in USD terms. The company is only 9 years old.

Tips:

1. Find the industries that you like/understand. Play to your own strengths
2. Find the companies in that industry that pays dividends
3. Research the companies you find interesting
4. Allocate according to your risk appetite
5. Adjust your weightings and dividend yields to see the impact on your income

PROPERTIES

Your options are endless when it comes to property. You can choose from:

1. Property ETFs like 1nvest Global REIT Index ETF, 1nvest SA Property ETF, CoreShares S&P Global Property ETF, CoreShares SA Property Income ETF, Satrix Property ETF or Sygnia Itrix Global Property ETF
2. Normal property-owning companies like hotels and investment holding companies
3. REITs
4. Fractional ownership on EasyProperties

For the demo portfolio I went with Vukile. I believe that the risk with Vukile is low, and the share price still has some runway after the March 2020 crash. Vukile management has an innovative strategy going forward and who doesnt want to own malls in Barcelona.

CASH

The National Treasury issued the new rates for retail bonds early July. We now earn 10.5% on the 5-year fixed rate bond. It does not get any easier than that. The rate is fixed for the term. You can read up more on retail savings bonds in my previous article.

CONCLUSION

The demo portfolio returns below:

1. Dividend & Interest income of 9.8% per annum pre-tax
2. Share prices also strengthened by approximately 9.4% per annum over the past five years
3. Total return approximately 19% per annum

Reason number 2 is the main reason why I would not put my full R300,000 in cash. It does not fit my personal risk appetite, which is medium to aggressive.

Past performance is not indicative of future performance, but that is a risk I am willing to take. If your risk appetite is lower and you are okay with only earning income from your portfolio, you must consider allocating larger amounts into bonds.

I hope you enjoyed this read, even though the portfolio is not a real one.

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes. Only opinions are expressed.