10 Easy Ways to Invest Without Much Money in South Africa

Even if you don’t have a huge amount of money on hand or a large savings account, you can still invest in various financial instruments in South Africa. Here are the best options to consider investing in to easily grow your money for future use.

1. Banks

Investing your funds in a bank is a great option for short, medium, or long term investment. Here are some of the ways you can invest in banks:

2. Bonds

A bond is one of the most secure investment vehicles available today. An RSA Retail Savings Bond lets you invest in the South African government by lending them money for a certain period. The invested amount may earn fixed or inflation-linked interest rates depending on the available option.

Fixed Retail Savings Bonds are available in 2-year, 3-year, and 5-year terms. Different rates apply to each maturity option in the series.

Inflation-linked Retail Savings Bonds, on the other hand, have 3-year, 5-year, and 10-year maturity periods. Interest is adjusted over the term and is payable every 6 months.

The minimum amount you can invest is R1 000, while the maximum is R5 million. This makes it easy for those who don’t have much money to invest in a profitable and secure financial instrument.

3. Mutual Fund or Unit Trusts

A unit trust or mutual fund lets you buy units of a portfolio of investments managed by a professional fund manager. The price of each unit is determined by the underlying value of all assets divided by the number of unit trust holders. Since the number of holders and the share prices change each day, the value of the unit trust is computed daily.

The instant diversity of a unit provides less volatility compared to investing in a single stock in the market. Unit trusts offer attractive rates on monthly investment options, depending on the type of trusts and the kind of underlying assets held under them. Check out some of the best performing unit trust options available for investment in South Africa.

4. Tax-free Savings Account

A tax-free savings account (TFSA) is a non-retirement savings account designed to maximize tax benefits. In a TFSA, capital gains from interest and dividends are free of tax up to a certain amount. Savings qualified for tax exemption amounts to R30 000 per year, up to R500 000 for the lifetime of the account. The money on a TFSA can be invested in fixed-income products and equities.

Banks, including mutual and cooperative, offer TFSAs with varying performance fees and charges. An existing bank account cannot be converted into a TFSA, so you’ll have to create a new one for this scheme. Here is a list of top tax-free savings account available in South Africa that you can look for opening an account for investment.

5. Real-Estate Investment Trust (REIT)

A REIT is a company that finances, operates, or owns an income-generating property that can either be residential, commercial, or industrial in nature. Dividends earned from the investment are divided among investors in proportion to how much each one has contributed to the fund.

You don’t need to have a large amount of money to start investing in properties. With a REIT, you can put your money together with other investors and pool the funds to invest in real estate.

6. Retirement Annuity

A retirement annuity is a tax-efficient savings scheme designed to compound your money for retirement. You can put in up to 27.5% of your annual taxable income or R350 000 per year in a retirement annuity.

In exchange for maximizing tax deductions, you’ll only be able to access the fund after the age of 55. Upon retirement, you can withdraw one-third of your annuity as a lump-sum payment and have the remaining as a pension.

ALSO LEARN: Top 9 Ways to Boost Your Retirement Savings

7. Stokvels

A stokvel is a pool of funds where individuals regularly contribute an agreed amount. The pooled funds are then distributed equally among each member according to the scheduled payout cycle.

A stokvel is a financial support system designed for varying investment purposes:

8. Guaranteed Investment

A guaranteed investment appeals to many citizens because it’s safe, effective, and affordable. If you have a low appetite for risk and prefer to grab small wins over huge gains, then you can’t go wrong in getting a guaranteed product.

In a guaranteed investment, your capital is guaranteed for the whole 5-year fixed term. No matter what happens to the market, you’ll safely recover your capital. Additionally, there’s a minimum percentage you’ll gain at the end of the term, so it’s basically a nothing-to-lose scheme for investors.

9. Robo-Advisor

A robo-advisor is a digital platform programmed to provide financial planning services without human intervention. Using the data collected from a survey regarding your financial situation, capacity, and target, the automated system can recommend the best strategy to grow your money.

Robo-advisors provide more convenient account setup to customers, easier portfolio management, more robust financial planning, and better security features.

But the most attractive advantage of using robo-advisors is their lower fees compared to traditional advising services. On average, the professional fee of service advisers cost around 3% of the investment, while robo-advisors charge less than 1%.

Robo-advisors can cater to investments amounting to as low as R100 per month. This makes robo-advisors friendlier even if you don’t have much money on hand.

A robo-advisor can help beginners like you set up an account and build their portfolios through the algorithm-based recommendations on the platform. Phone calls and face-to-face meetings are unnecessary because everything can be done online.

Popular robo-advisors in South Africa include:

Although the big players in the financial industry are incorporating robo-advisors in their investment options, people are still having trouble entrusting their money to a robot. To assure investors like you on the security of the platform, the robot will only help build your investment profile but a traditional fund manager will still handle your portfolio.

10. Stock Market

The Johannesburg Stock Exchange (JSE) offers a way to get you invested in established companies in the local market.

When buying a stock, think of it as investing your money in a business. Make sure that the company has good earnings, a huge future potential growth, and a sound business plan.

As a rule of thumb, avoid buying shares of a popular company with a stock price that’s already soaring high. They’ll most likely be overvalued and you might be buying at the peak of the hype.

Learning to invest in the stock market may not be as easy as other investment vehicles. However, the gains that can be achieved through this option outmatches other instruments offer.