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How to make R100,000 with ARBITRAGE
One video. R5.2 million in profits. Here's how we move:
MoneyMoves
July 26, 2024
What an unbelievable way to make money! Before we break it down: The full 10-minute episode is live on YouTube!
Thus far, we’ve partnered with 52 viewers, generating an estimated R5.2 million in profits for them. This is what it’s all about. Check it out here:
What is Arbitrage?
Arbitrage is when investors take advantage of a product that is trading at different prices in different markets. Let’s look at an example:
Packet of NikNaks in SA = R15
Packet of NikNaks in US = $1 = R18
How to arb? Buy cheap, sell expensive. Easy as that. In this example:
Buy in SA @R15 (the cheaper market) and sell in the US @R18 (more expensive market) and make a profit of R3 per packet of chips.
How do we do it?
Whilst buying and selling NikNaks sounds like something I’d genuinely want to do for a living😂 , there is a way to do it that is faster, cheaper, and way more scalable: Crypto.
Firstly, Bitcoin in the US is slightly cheaper than it is in South Africa. There are a few reasons for this (story for another day), but the point is that there is a slight price difference that can be exploited. Here’s how we do it:
1. Exchange ZAR for $ at a local bank (E.g. Capitec)
2. Send $ to US crypto exchange (e.g. Coinbase)
3. Buy Bitcoin with $
4. Send Bitcoin to SA exchange (e.g. Luno)
5. Sell Bitcoin for ZAR
= PROFIT
And then? Repeat. Over and over again.
Send R100,000, get back R101,000. Send R101,000, get back R102,000. Send R102,000, get back R103,000. All. Day. Long.
How much profit are we making?
SARS limits each SA individual to take R1 million out of the country per calendar year, plus an additional R10 million with special application. If you make full use of the facility, that’s 11 million per cycle that you can trade with.
Currently, we’re making roughly 1% in net profits (after fees), meaning you use the same R100,000 to arbitrage back and forth between SA and the US, up to 11 million per year. 1% profit on 11million = R110,000.
Not exactly “Billions and Billions”, but R110,000 per year is a considerable amount of money for doing so little effort.
Risks
Whilst arbitrage is 99.9% risk free, there is still that 0.01% that something goes wrong. Let’s talk about it:
Negative trade: There is roughly 15 minutes between buying the Bitcoin on the US exchange and sending it to the SA exchange. If you execute the trade at an estimated 2% profit, and Bitcoin drops by 3% in that 15 minutes, you lose 1% on the trade (2% - 3% = -1%). Whilst this almost never happens, we counter it with derivative products (insurance) on every trade to eliminate the risk.
Counterparty risk: There is a chance that the company you use to administer the arbitrage, or the crypto exchanges where buying and selling takes place — freezes or steels one’s funds in the process that arbitrage takes place.
Even though the chances of these event occurring are almost non-existent, it is worth mentioning it. Nothing is truly 100% risk free.
SARS never sleeps
Let’s address the elephant in the room, SARS.
I am writing this newsletter whilst in Ingwelala (near the Kruger National Park) and there are literally 20 elephants about 50 meters from me at the waterhole. Unreal experience. Can recommend.
Herewith the facts:
✅Arbitrage is legal (in fact, it is encouraged as it improves efficiency in the market).
✅Arbitrage profits are recognised as income tax.
✅SARS knows about it and makes millions in tax revenue from arbitrage activities each year.
And yes, you do have to declare it. Do not mess with SARS.
How to get started
Firstly, you have to use your own money. It can not be a donation from a friend or family member. Most common sources of funds include:
Bank: Money market or savings
Loan: Personal loan or home loan
Investments: Withdrawal of liquid investments, such as Allan Gray or EasyEquities funds.
The minimum capital required is R100,000 of one’s own funds. The sweet spot is R250,000, as this decreases the trading costs and trading time significantly.
If you want me to assist you in getting the ball rolling, feel free so send me a mail, WhatsApp, or book a meeting.
The Holy Grail
💍Marriage! Yes, you heard right. Having a spouse is the best way to make money with arbitrage. Why? Because spouses may share trading capital (the minimum of R100,000) and use it to trade the full 11 million facility for BOTH spouses (i.e. R22 million).
So, instead of making 1% profit (+-R110,000) on one individual’s R11 million facility, you can now make 1% profit on a combined R22 million facility (+-R220,000 profit). Like Ingrid mentioned in the video, “if you’re not married yet, this is the sign” 😂
Episodes coming your way 🎬
So, what are we covering? Well, depends on who’s asking (literally!). Our aim is simple: Ask your questions, and we’ll cover them as best we can: to inform, educate, and entertain.
Season1 Topics |
|---|
1. What is a TFSA and how can I use it to my advantage? |
2. Can you explain the different types of investments? |
3. I hear people are making money with Arbitrage. What is it? |
4. Debt: Is it good or bad? |
5. Life insurance - should I get it and why? |
6. How big of a deal is compound interest? |
7. Where should I invest my money? |
8. Should I go the DIY route or use a financial advisor? |
Who are we?😎
 The Knowledge Chest | Paul holds an Honours degree in Financial Analysis from Stellenbosch University. With a career spanning investing, accounting, and education, Paul is committed to becoming the best financial planner in South Africa. Despite his many accolades, Paul insists that his greatest achievement is that he is dating a yoga teacher. |
 The Anchor | Ingrid holds a BA Honours in Journalism from Stellenbosch University. She is a self-diagnosed workaholic, excelling in various roles such as marketing, publicity, social media, and strategic partnerships. Ingrid's commitment to promoting wellness and balance extends beyond her professional endeavours, as she is also an avid yoga teacher. |
 The Magic Maker | Alwin holds a BCom in Business Management from Stellenbosch University. Alwin has a unique ability to make things happen - if you need something done, he’s your man! Alwin currently works in the alumni office at the university, connecting past and present Maties and ensuring a brighter future for the youth. |
Connect with us📲
Feel free to reach out if you want to chat about finance (or even just chat!). We’re keen to get to know the community.
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