The A–Z of Investing
Investment markets can be complex and ever-fluctuating. Use this guide to master the key terms and concepts vital to the world of finance.
Spreading investments across cash, equities, bonds, and property to balance risk and return based on current market behavior.
Reducing risk by spreading investments geographically (offshore) and across different industries and sectors.
High-risk, high-reward assets representing ownership in a public company. Historically the best long-term growth engine.
A South African law protecting retirement funds by limiting exposure to risky assets (e.g., 75% max in equities).
The Local Landscape
Understanding these specific South African vehicles is crucial for local investors:
- JSE: The Johannesburg Stock Exchange is Africa’s largest exchange, hosting giants like Naspers and Richemont.
- Tax-Free Savings (TFSA): A vehicle where all growth is exempt from tax, capped at R36,000 annually and R500,000 in a lifetime.
- Living Annuities: Retirement products allowing you to draw between 2.5% and 17.5% of your investment value as income annually.
- Krugerrands: Locally produced gold coins that allow individuals to own physical gold as a “safe-haven” hedge.
Investment Strategies
Active vs. Passive
Active: Managed by a fund manager aiming to beat the market.
Passive: Tracks an index (like the S&P 500) for lower fees.
Offshore Exposure
Gain global growth through Direct (externalizing Rands) or Indirect (local unit trusts using asset swaps) methods.
Investment Horizon: Your strategy depends on time. A 30-year horizon allows for more risk, while short-term goals require income-generating assets.
Confused by the jargon? Let a professional guide your strategy.
Author: Eric Jordaan, CFP®
