A road trip to financial freedom

5 Ways the world’s become a better place for investors

By Lizelle Steyn

26 April 2023

fewer hurdles for investors

Photo credit: Andrea Piacquadio

As someone who’s been investing since 2004, I can vouch for the fact that the world has become a better place for South African investors. Dramatically so. New technology, online platforms, new products, greater competition and progress on the regulatory side have removed several of the hurdles to investing that so many South Africans faced 10 years ago.

Let's dive in and explore the five most exciting changes in the investment world that are making it easier than ever for South African investors to achieve their financial goals.

1 Tax-free investment products

Ten years ago there were no tax-free savings accounts in this country. If you wanted to save tax-efficiently, a retirement product was the go-to. But retirement products lock you in until age 55 at least – not very attractive when you’re in your twenties or younger. And their rules dictate which asset classes and regions you can invest in. Fortunately, since 2015 we have tax-free investment accounts on every investment platform. An easy, feel-good buy with very little restrictions. The only downside is that you cannot invest more than R36 000 per tax year.

2 You can invest with as little as R1

You’ve heard the news: investing is no longer for the rich only. With new technology called fractional shares, investing’s no longer just for the wealthy few. In the past, the top shares on the stock market were out of reach. One share in Naspers or Richemont would have cost you several thousand rand. And that’s only one share – not a well diversified share portfolio. Using fractional share technology, platforms like Easy Equities and Satrix make it possible to now invest from as little as R1. On top of that, Easy Equities also offers demo accounts, so you can first familiarise yourself with the protocol and terminology of buying and selling shares and ETFs before you commit your money.

3 Offshore investing is so much easier and cheaper

At the time of my first offshore investment in 2008, I was still a runner, and getting money offshore felt like an epic achievement - not unlike running my first half marathon. First I had to save up bit-by-bit the R100 000 minimum amount required for offshore accounts on the Allan Gray platform. Then I had to queue at the SARS offices in Bellville to get a tax clearance certificate before queuing again at the bank to transfer the money to my offshore bank account, from where I transferred it to Allan Gray’s offshore bank account after completing a multiple-page investment application form.

Fast forward to 2023. No longer is tax clearance needed for amounts under R1m per year. Within seconds the money is transferred from my bank to my Easy Equities ZAR account. A few clicks and rands get converted to dollars and end up in my Easy Equities USD account. From there, choose any of a multitude of offshore ETFs and we’re done. More happy dance and less marathon running.

Or, worried that the rand is historically too weak to take money offshore? Then stick to your ZAR account and choose a locally-listed FNB quanto product with offshore exposure. With these relatively new quanto products you can enjoy any rise in the offshore market without the currency risk. In other words, when the rand strengthens, it doesn’t drag down the value of your portfolio. Multiple hurdles to offshore investing have tumbled in the past decade.

4 Fees have come down

Ten years ago it wasn’t uncommon to pay a total of 3% or more in annual fees on your investment. That is unfortunately still true for some insurer-sold retirement products. But alongside them a new generation of investment platforms have competed with one another and over the years reduced fees dramatically for the DIY investor. Now you shouldn’t be paying more than 1.2% p.a. for your retirement annuity and 1% p.a. for your tax-free savings account, assuming you choose low-cost index-tracking funds inside these products.

5 Investment companies respond on social media

With the majority of SA investment companies now active on social media, it’s easier than ever to get answers to your questions. If you “get stuck” browsing company websites/apps and comparing different investment options, you’re not alone. Many new investors find the range of choices confusing. Fortunately, via social media you can reach out and receive same-day responses – forget the 48-hour turnaround time of email queries. Also, many investment companies now use social media to educate investors and raise financial literacy, providing a valuable resource if you want to improve your investment knowledge. The raised level of engagement via social media also helps to build trust between investor and investment platform, leading to more people opening investing accounts – something to celebrate.

All of the above said, we have not yet arrived at investor nirvana. Some products and particularly fee structures are either too complicated or not transparent, making it difficult to compare product providers. The industry still pushes the agenda of retirement, while there are healthier, more financially sound and more creative life goals than abruptly ending a career and all active income at age 60. And the jargon- and acronym-ridden language used by the industry is very hard to weed out. Still, huge progress has been made, and that’s something to celebrate.