Reason number 1 ? protect your assets from creditors.
When you run your affairs in your own name you expose all your assets to the mercy of creditors. So if you ever get into financial trouble you could end up losing everything but the shirt off your back! One of the main benefits of a trust is that you are able to separate yourself from your assets, thus providing protection of those assets from creditors in the event of you ever being sued. With the correct estate planning you are even able to protect your business assets from creditors as well.
Reason 2 - You don`t pay executor`s fees with a trust.
Your estate and ultimately your family will pay 3.5% plus VAT or 3.99% of the gross value of your estate away in executor`s fees. But if you manage your estate through a trust, NO executor`s fees are payable. It doesn`t seem like much but listen to this example to get an idea of what 3.99% of the gross value of your estate could amount to.
Work out your own current scenario by taking the value of your gross estate today and multiplying it by 4 and then multiplying that amount by 3.99%. This will work out the kind of saving you would benefit from if your assets were owned by a trust and you died in 12 years time.
The third reason is the state won`t freeze your assets.
When a person dies their estate is immediately frozen and it takes on average two years to wind up an estate. This means that your family has very little access to your assets on your death, potentially causing huge problems for your loved ones. But in a trust, the assets are not frozen, so your family will be able to access your estate immediately.
Reason number 4: you get absolute security in the event of a disability.
If you were in a coma and could not continue to manage your own affairs a curator would need to be appointed by the high court. This would cost thousands of rands even the curatorship is not contested. In a trust all that would happen is that you would be relapsed as a trustee and your affairs would carry on as normal. So your family and business will always remain financially secure, even in difficult or unfortunate times.
Reason 5: You could save 20% in donations tax
You will pay donations tax at a rate of 20% on any donation in excess of R100,000 per annum or R200,000 in the case of married couples. However, with a trust, no donations tax is payable on any capital or income passed to a beneficiary of the trust.
So for example: Let`s assume that you wanted to give R500,000 to one of your children. In your private capacity you would pay R60,000 in donations tax while through a trust you would not have to pay any donations tax.
The 6th Reason is you won`t pay any estate duty with a trust
One of the main disadvantages of running your personal affairs in your own name is that estate duty is paid on the future growth of your assets. But with a trust, no estate duty is payable.
So for example: You pay estate duty at a rate of 20% on net assets in excess of R3 500,000. So if your net estate was worth R5,500,000 and you died leaving your entire estate to your children they would pay an estate duty fee of R400,000. If these assets were in a trust NO estate duty is payable.
And lastly -
You are able to regulate your ex spouse`s maintenance with a trust
A main disadvantage in case of a divorce is the fact that if maintenance is paid for a child to an ex-spouse, the ex-spouse would have a capital claim against your estate for all future maintenance at the time of your death.
Thursday, April 3, 2008
The Science of The Stock Market
The first one you need to look at is the Dividend yield.
A dividend is the money paid on each share from the company`s net profits. Small companies often don`t pay dividends ? they plough their profits back into growing their business. But if a large company doesn`t increase its dividend or cuts it, you can bet it needs the money simply to survive. As the share price falls though, the dividend yield (dividend compared against share price) will rise. This could make the stock a relative bargain.
The second and most important ratio is the Earnings per Share or E.P.S.
It represents a company`s post-tax profits divided by the total number of shares in issue. Generally, an E.P.S. higher than the cash flow per share (shown on the cash-flow statement in the company`s annual report) indicates a company with strong value. A steadily rising E.P.S. indicates financial health and growth.
The next ratio is the Dividend Cover.
This tells you whether a company can afford to pay its shareholders their dividend or not. Divide the E.P.S. by the dividend announced by the company. The result should be 1 or higher. If it`s less than 1, avoid it. The firm hasn`t got the cash to pay its dividend and is digging into cash reserves.
The fourth ratio is the Price-Earnings Ratio or P.E.
It`s calculated by dividing the share price by the earnings per share. If you`re investing for the mid to long term, look for shares with a low P.E. compared with other firms in its sector. If you want a fast profit though, you could buy a stock with a high P.E. Although these shares are overvalued, the price will have upwards momentum. Investors who move quickly can make money. But you must sell the stock before it rebounds.
The next one is the Price/sales ratio or P.S.R.
Use this ratio for new companies with fast growth, but no profits yet. Divide last year`s sales figure by the market value of a firm. Buy if a stock has a low P.S.R. compared to others within its sector ? especially if it`s less than one. For market leaders, the P.S.R. will be around 3 or 4.
The final ratio is the Return on capital employed or R.O.C.E.
This measures management performance. The R.O.C.E. is calculated as profits before tax and interest on loan repayments, divided by capital employed. In sectors like retail, the share price will increase if there is a rising R.O.C.E. A company can improve its R.O.C.E. by buying back shares from the stock market. This can also improve its share price. Buybacks are a definite buy signal for you ? but you have to buy as soon as the buyback is announced to get the maximum financial gain.
A dividend is the money paid on each share from the company`s net profits. Small companies often don`t pay dividends ? they plough their profits back into growing their business. But if a large company doesn`t increase its dividend or cuts it, you can bet it needs the money simply to survive. As the share price falls though, the dividend yield (dividend compared against share price) will rise. This could make the stock a relative bargain.
The second and most important ratio is the Earnings per Share or E.P.S.
It represents a company`s post-tax profits divided by the total number of shares in issue. Generally, an E.P.S. higher than the cash flow per share (shown on the cash-flow statement in the company`s annual report) indicates a company with strong value. A steadily rising E.P.S. indicates financial health and growth.
The next ratio is the Dividend Cover.
This tells you whether a company can afford to pay its shareholders their dividend or not. Divide the E.P.S. by the dividend announced by the company. The result should be 1 or higher. If it`s less than 1, avoid it. The firm hasn`t got the cash to pay its dividend and is digging into cash reserves.
The fourth ratio is the Price-Earnings Ratio or P.E.
It`s calculated by dividing the share price by the earnings per share. If you`re investing for the mid to long term, look for shares with a low P.E. compared with other firms in its sector. If you want a fast profit though, you could buy a stock with a high P.E. Although these shares are overvalued, the price will have upwards momentum. Investors who move quickly can make money. But you must sell the stock before it rebounds.
The next one is the Price/sales ratio or P.S.R.
Use this ratio for new companies with fast growth, but no profits yet. Divide last year`s sales figure by the market value of a firm. Buy if a stock has a low P.S.R. compared to others within its sector ? especially if it`s less than one. For market leaders, the P.S.R. will be around 3 or 4.
The final ratio is the Return on capital employed or R.O.C.E.
This measures management performance. The R.O.C.E. is calculated as profits before tax and interest on loan repayments, divided by capital employed. In sectors like retail, the share price will increase if there is a rising R.O.C.E. A company can improve its R.O.C.E. by buying back shares from the stock market. This can also improve its share price. Buybacks are a definite buy signal for you ? but you have to buy as soon as the buyback is announced to get the maximum financial gain.
- A stock may appear good value on the basis of one ratio, but poor value on another. Use a number of ratios in analysing a stock and look for consistency before selecting the stock you will invest in.
- You must always remember though, the stock market is unpredictable because of the market sentiment factor, so there are times when shares drop in value without any warning, you must be prepared for this too. But stick to a successful picking strategy and you could build a safety barrier for your investments.
Wednesday, April 2, 2008
Blogs and E-letters
Both (a.k.a. e-zines or e-mail newsletters) are ideal marketing tools for small-business owners. They give you two inexpensive ways to communicate with your customers, give them useful advice, and reveal your latest products and services.
But though they have the same purpose, they are very different.
First, let’s define our terms.
A blog is a website that you can create yourself using Web-based software. Blogs tend to have a personal flavour and speak in the distinct voice of the blogger. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Unlike a traditional, static website, the content or information posted on a blog is up-to-the-minute, frequently updated (although it doesn’t have to be), and displayed in reverse chronological order, the most recent posting first. Also, readers can contribute their comments, turning the blog into an online conversation.
An e-letter is basically an electronic newsletter that you send out regularly via e-mail to a list of people who have given you permission to do so. The content of an e-letter is more evergreen. It can be anything from news about you and your business to tips that demonstrate your expertise. When you use an e-mail marketing service or software, it’s also very easy to design and send.
The main difference between the two is this: You "push" an e-letter to your list so you control the contact, while a blog is a "pull." Readers have to go there on their own, so you have a lot less (or no) control over the contact. The quality of the readers is different too. E-letter readers went out of their way to sign up, so you can consider them a lead for your marketing messages. They’ve essentially raised their hands and asked you to keep in touch. Blog readers, on the other hand, are information hounds, so they may not be as responsive.
Let’s compare.
A blog is easier to set up - but not by much. It literally takes 10 minutes to create, and you don’t need any technical expertise. However, you have less freedom with the layout due to the limitations of most blog publishing software (especially the most popular and free ones, like blogger.com and typepad.com). With an e-letter, on the other hand, it takes a bit more time to create the prototype and template, whether in text or html. But once that’s done, you just type the text for each issue into that template and send it out.
It takes more time to write an e-letter. Most small-business owners take time to write and edit their e-letters, as they should. Because you’re pushing your e-letter to people, asking them to read what you’ve written, it has to be well-thought-out, concise, and to the point. On the other hand, since a blog tends to be made up of snippets of ideas posted frequently (sometimes several times a day), bloggers don’t labour over their text.
Plus, a blog is less formal, because it’s like a conversation. That means "you can speak in your everyday voice, which is (hopefully) friendly and approachable." So says Colleen Wainwright, a.k.a. The Communicatrix, a graphic designer who blogs. "On a blog, the expectations are much lower for both grammar and formality. Also, you can combine personal and professional elements in your blog; how much of each depends on what you’re comfortable with and what your prospective clientele will be comfortable reading. You can write about anything (and many people do), but if you’re using it to promote your business, it will be most effective if you focus and use the blog to establish your credibility within that narrow niche."
My e-letter goes out weekly, and between the writing, editing, and layout, I spend approximately one hour on each issue. My blogging takes a half-hour on a Sunday morning. That’s when I draft and schedule my three posts for the week. Each one is usually no longer than a paragraph or two with a couple of links. At least one post is simply a link to an article I like, plus a little intro from me about why I think it’s relevant. If your e-letter goes out more frequently - like Early to Rise - the time you spend on it expands by leaps and bounds.
It takes more time to maintain a blog. For most people, creating fresh content several times a week, or even weekly, requires a certain mindset. It isn’t even that it takes so much time to create the material. (Blog posts are mostly very short pieces accompanied by a link.) What takes time is getting into the groove of blogging - and that involves much more than posting to your own blog. It includes visiting other people’s blogs, reading their posts, and commenting on them. It’s not difficult. It just takes time and practice to get into that mode. E-letters, on the other hand, don’t carry the same expectation of freshness, so there is a lot less pressure to produce. You send it out when you like - daily, twice-weekly, monthly, or even occasionally.
A blog attracts more Web traffic. Even if no one ever reads your blog, posting it regularly can be a tremendous boon to your search engine rankings because search engines love fresh content. Any website with new content will come up earlier in search engine rankings than a site that hasn’t been changed in months (or years). Meanwhile, the traffic an e-letter drives to your website consists of those who already know you, not new prospects and leads.
An e-letter makes more sales. Some people make money by displaying ads on their blogs - but if you want to sell products or services, an e-letter is more effective. Why? Because with an e-letter you "push" (send) your offer to your prospects, then watch while they click and, hopefully, buy. Because a blog is a "pull," there’s no way to measure or track sales. On a blog, you show how much you know. You shouldn’t expect to "get work" from your blog, but it will be good for driving traffic to your website. And once you get people to your website, they can sign up for your e-letter… which will allow you to sell to them directly.
Both inspire trust in the visitor. Inspiring trust depends more on the tone you take than the format. If you’ve spent time composing your e-letter, it will show, and that certainly inspires trust. A blog, with its rapid-fire and often impassioned comments, can convey a sense of impulsiveness, which rarely inspires trust. Trust is important on the Internet (a very anonymous medium), because unless people trust you, they’re not going to buy from you.
If you don’t already have a website to promote your business, a blog is a good first step in that direction. It provides a way for people to find you online without your spending a lot of money or time working with a Web designer or learning Web design software. In fact, some people use a blog as their one and only Web presence.
If you already have a website and are ready to branch out with an e-letter or a blog, which one should you start with? That depends on your goal. If your goal is to generate revenue from a known group of prospects, an e-letter is the right choice. If you are less focused on revenue-generation and are looking instead to position yourself as an expert and make it easier for new prospects to find you online, a blog is better.
If both goals make sense in your business plan, by all means do both. Blogs and e-letters work beautifully hand-in-hand.
Here’s how we do that at Marketing Mentor: I want to be able to reach out to my qualified prospects on a regular basis, to keep reminding them who I am and what I have to offer. I don’t want to wait for them to come back to my website or have time to read my blog. I want to be in their inboxes, rather than on their browsers.
But though they have the same purpose, they are very different.
First, let’s define our terms.
A blog is a website that you can create yourself using Web-based software. Blogs tend to have a personal flavour and speak in the distinct voice of the blogger. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Unlike a traditional, static website, the content or information posted on a blog is up-to-the-minute, frequently updated (although it doesn’t have to be), and displayed in reverse chronological order, the most recent posting first. Also, readers can contribute their comments, turning the blog into an online conversation.
An e-letter is basically an electronic newsletter that you send out regularly via e-mail to a list of people who have given you permission to do so. The content of an e-letter is more evergreen. It can be anything from news about you and your business to tips that demonstrate your expertise. When you use an e-mail marketing service or software, it’s also very easy to design and send.
The main difference between the two is this: You "push" an e-letter to your list so you control the contact, while a blog is a "pull." Readers have to go there on their own, so you have a lot less (or no) control over the contact. The quality of the readers is different too. E-letter readers went out of their way to sign up, so you can consider them a lead for your marketing messages. They’ve essentially raised their hands and asked you to keep in touch. Blog readers, on the other hand, are information hounds, so they may not be as responsive.
Let’s compare.
A blog is easier to set up - but not by much. It literally takes 10 minutes to create, and you don’t need any technical expertise. However, you have less freedom with the layout due to the limitations of most blog publishing software (especially the most popular and free ones, like blogger.com and typepad.com). With an e-letter, on the other hand, it takes a bit more time to create the prototype and template, whether in text or html. But once that’s done, you just type the text for each issue into that template and send it out.
It takes more time to write an e-letter. Most small-business owners take time to write and edit their e-letters, as they should. Because you’re pushing your e-letter to people, asking them to read what you’ve written, it has to be well-thought-out, concise, and to the point. On the other hand, since a blog tends to be made up of snippets of ideas posted frequently (sometimes several times a day), bloggers don’t labour over their text.
Plus, a blog is less formal, because it’s like a conversation. That means "you can speak in your everyday voice, which is (hopefully) friendly and approachable." So says Colleen Wainwright, a.k.a. The Communicatrix, a graphic designer who blogs. "On a blog, the expectations are much lower for both grammar and formality. Also, you can combine personal and professional elements in your blog; how much of each depends on what you’re comfortable with and what your prospective clientele will be comfortable reading. You can write about anything (and many people do), but if you’re using it to promote your business, it will be most effective if you focus and use the blog to establish your credibility within that narrow niche."
My e-letter goes out weekly, and between the writing, editing, and layout, I spend approximately one hour on each issue. My blogging takes a half-hour on a Sunday morning. That’s when I draft and schedule my three posts for the week. Each one is usually no longer than a paragraph or two with a couple of links. At least one post is simply a link to an article I like, plus a little intro from me about why I think it’s relevant. If your e-letter goes out more frequently - like Early to Rise - the time you spend on it expands by leaps and bounds.
It takes more time to maintain a blog. For most people, creating fresh content several times a week, or even weekly, requires a certain mindset. It isn’t even that it takes so much time to create the material. (Blog posts are mostly very short pieces accompanied by a link.) What takes time is getting into the groove of blogging - and that involves much more than posting to your own blog. It includes visiting other people’s blogs, reading their posts, and commenting on them. It’s not difficult. It just takes time and practice to get into that mode. E-letters, on the other hand, don’t carry the same expectation of freshness, so there is a lot less pressure to produce. You send it out when you like - daily, twice-weekly, monthly, or even occasionally.
A blog attracts more Web traffic. Even if no one ever reads your blog, posting it regularly can be a tremendous boon to your search engine rankings because search engines love fresh content. Any website with new content will come up earlier in search engine rankings than a site that hasn’t been changed in months (or years). Meanwhile, the traffic an e-letter drives to your website consists of those who already know you, not new prospects and leads.
An e-letter makes more sales. Some people make money by displaying ads on their blogs - but if you want to sell products or services, an e-letter is more effective. Why? Because with an e-letter you "push" (send) your offer to your prospects, then watch while they click and, hopefully, buy. Because a blog is a "pull," there’s no way to measure or track sales. On a blog, you show how much you know. You shouldn’t expect to "get work" from your blog, but it will be good for driving traffic to your website. And once you get people to your website, they can sign up for your e-letter… which will allow you to sell to them directly.
Both inspire trust in the visitor. Inspiring trust depends more on the tone you take than the format. If you’ve spent time composing your e-letter, it will show, and that certainly inspires trust. A blog, with its rapid-fire and often impassioned comments, can convey a sense of impulsiveness, which rarely inspires trust. Trust is important on the Internet (a very anonymous medium), because unless people trust you, they’re not going to buy from you.
If you don’t already have a website to promote your business, a blog is a good first step in that direction. It provides a way for people to find you online without your spending a lot of money or time working with a Web designer or learning Web design software. In fact, some people use a blog as their one and only Web presence.
If you already have a website and are ready to branch out with an e-letter or a blog, which one should you start with? That depends on your goal. If your goal is to generate revenue from a known group of prospects, an e-letter is the right choice. If you are less focused on revenue-generation and are looking instead to position yourself as an expert and make it easier for new prospects to find you online, a blog is better.
If both goals make sense in your business plan, by all means do both. Blogs and e-letters work beautifully hand-in-hand.
Here’s how we do that at Marketing Mentor: I want to be able to reach out to my qualified prospects on a regular basis, to keep reminding them who I am and what I have to offer. I don’t want to wait for them to come back to my website or have time to read my blog. I want to be in their inboxes, rather than on their browsers.
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