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Moving from Saver to Investor
Many South Africans are excellent savers but reluctant investors. We put money into bank savings accounts, thinking it is safe. But with inflation often running between 4% and 6%, money in a low-interest bank account is actually losing value in real terms. To build real wealth—the kind that allows for a comfortable retirement or pays for university fees—you need to invest. The good news is that in 2025, investing is more accessible than ever before.
The Magic of Tax-Free Savings Accounts (TFSA)
If you do nothing else, open a Tax-Free Savings Account. This is a gift from the government to encourage saving.
The Rules: You can invest up to R36,000 per year (and R500,000 over your lifetime).
The Benefit: You pay zero tax on the growth. No tax on interest, no tax on dividends, and no capital gains tax when you cash out.
The Strategy: Don’t use a TFSA for cash! Use it to buy high-growth assets like Exchange Traded Funds (ETFs). Because the growth is tax-free, you want the asset with the highest potential growth over 10 or 20 years. Using a TFSA for a 5% interest bank account is a waste of the allowance.
Understanding the JSE and ETFs
Buying individual shares (like buying just MTN or just Sasol) is risky. If that one company fails, you lose money.
Enter the ETF: An Exchange Traded Fund buys a basket of shares for you. For example, a “Top 40” ETF buys shares in the 40 biggest companies on the Johannesburg Stock Exchange (JSE). You own a tiny slice of all of them. If one company fails, the others balance it out.
Global Exposure: You can also buy ETFs that track the US market (like the S&P 500) using Rands. This is a great way to hedge against the Rand weakening without having to take money offshore physically.
Unit Trusts: Letting the Professionals Drive
If you prefer a hands-off approach, Unit Trusts are the traditional route. You pool your money with other investors, and a professional Fund Manager decides what to buy and sell.
Pros: Professional management and diversification.
Cons: Fees. Fund managers charge annual fees (often 1% to 2%), and sometimes performance fees. These fees eat into your returns over time. Always check the “Total Investment Charge” (TIC) before signing up.
The Power of Compound Interest
Albert Einstein reportedly called compound interest the “eighth wonder of the world.” It is interest earned on interest.
Example: If you invest R1,000 a month for 10 years at 10% return, you don’t just get your R120,000 back plus 10%. You get nearly R205,000. If you leave it for 20 years, it grows to over R750,000. The earlier you start, the less you have to put in to reach your goal.
Risk vs. Reward
Every investment carries risk.
- Low Risk: Money Market accounts, Government Retail Bonds. Your capital is safe, but returns are low.
- Medium Risk: Property, Balanced Unit Trusts. Moderate growth, moderate volatility.
- High Risk: Equities (Shares), Crypto. The price can swing wildly up and down. Over the long term (5+ years), shares historically beat all other asset classes, but you must have the stomach to ride out the crashes.
Start Small, But Start Now
You don’t need millions to be an investor. Apps like EasyEquities allow you to buy shares for as little as R10. Capitec and FNB allow you to buy shares via your banking app. The barrier to entry is gone. The only barrier left is mindset. Stop waiting for the “perfect time” to invest—the best time was ten years ago; the second-best time is today.
