The various ways to invest.

Cash.

Cash is normally the safest way to invest. You shop for the best interest rate you can get, and if you fix the term you can sometimes get a slightly higher rate. Tax on cash is calculated as follows:

• The first R23,800 of interest a year is tax-free if you are under 65 (R34,500 if you are 65 or older). The rest is taxed at your marginal rate.
• Many people fix a rate but do not consider the tax on the interest.

Money Markets.

Money markets work the same way as cash, but the rate can change as funds are placed across different banks. Sometimes you earn more than the current interest rate from a single bank. Tax works the same way as cash.

Listed Shares.

Shares can be bought on the stock exchange, locally or internationally. People buy shares because they generally perform better than cash over a longer period. They are bought at a listed value which normally increases over time as the underlying company grows. There are usually two dividend payments a year, so growth is twofold: dividends plus share price growth.

Shares do carry the risk of dropping in value. If you sell below the purchase price, you will get less out than you put in.

Tax on shares falls under Capital Gains Tax (CGT). As a general indication, CGT for an individual works out at up to 18% of the capital growth, almost half the top rate on interest. A good blue-chip share will usually grow faster than the interest rate, but not all the time. Over a short period cash can outperform shares, sometimes for three years or longer, so patience matters.

Unit Trusts.

Unit trusts are similar to shares but with more of a safety net, and sometimes they outperform shares. A unit trust fund is a basket of shares, cash, bonds and other instruments, and you can tailor the basket to your risk appetite. The more cash in your basket, the less volatile the fund. A good balanced fund can, and often does, outperform shares and cash over certain time horizons.

Interest earned inside the fund is taxed like cash, growth on the share portion attracts CGT when you sell, and local dividends are taxed at source. Fund managers make the difficult decisions in the markets for you.

A fund manager charges a fee to manage these funds. A higher fee does not necessarily mean a lower return; on many occasions it is just the opposite. Unit trusts can be bought and sold with no waiting periods, and all fees are disclosed in your quotes and in the Record of Advice.

Endowments.

Endowments are similar to unit trusts but structured to be more tax-efficient. Funds can be selected as in a unit trust, though the choice is usually smaller. Most providers offer balanced funds.

The tax advantage: tax is paid inside the policy at a flat rate, usually lower than a high earner's personal rate, and this includes CGT. So what is paid out after five years, you keep.

Because of that advantage there are restrictions. In the first five years you are normally allowed one loan and one partial withdrawal. After five years you can withdraw as often as you like or cash in the policy. Endowments can nominate a beneficiary, which makes them a good education policy, and they can be ceded to a bank as collateral for a loan.

Retirement Annuities.

Retirement annuities (RAs) are used solely for saving for retirement. They are not short-term investments. RAs must invest within Regulation 28 limits, which cap the riskier asset classes.

• Tax deduction on contributions. If your tax rate is 25% and you contribute R1,000 a month, you get back roughly R250 of every contribution from SARS. That's a 25% head start before any growth.
• Contributions are deductible up to 27.5% of your taxable income, capped at R350,000 a year.
• At retirement, up to a third can be taken as cash, and the first R550,000 of lump sums over your lifetime is tax-free.

Retirement lump sums are taxed on this table (2025/26):

If your RA is worth R247,500 or less, you can take the full amount as cash. Since September 2024, new contributions are split into savings and retirement components under the two-pot system. We'll explain exactly how that applies to you.

Property Investing.

Property investing means buying a flat, townhouse, house or commercial building and renting it out. Typically you borrow from the bank, use the rent to pay the bond and subsidise the difference. It was considered relatively low risk until the 2008 credit crisis changed things. The risks include:

• Tenants who stop paying. Evictions can take six months to a year, and forcing a tenant out unlawfully attracts stiff penalties.
• Maintenance and repairs, which can cost several months of rent after a tenant moves out.
• Finding a reliable tenant at all.
• Net rental income is fully taxed.
• A five-year-plus horizon, and the money isn't easily accessible.
• Properties bought without a bond usually return only 4% to 6% net.

That said, many investors have done very well with property.

Tax figures reflect the 2025/26 tax year and change annually. This is general information, not personal advice. Speak to us before making investment decisions.