The end of the Covid-19 pandemic has brought with it the twin threats of high inflation and economic recession. As one of the hardest hit countries in Africa, South Africans are changing up their investment strategies to accommodate current economic conditions.
Wealth studies have shown that there’s a huge level of inequality in the country. Data shows that to enter South Africa’s top 10%, you would need just R496,000. Even middle-class South Africans are finding reasons to invest and grow their money.
But what do South Africans prefer to invest in in 2023?
Government of South Africa Treasury bills
Treasury bills are a type of short-term debt instrument with differing maturities. These maturity rates range from one day to 12 months.
These investments are among the safest investments in the country, because returns on maturity are paid directly by the National Treasury, which acts on behalf of the Republic of South Africa.
Rates have increased in recent years as interest rates have risen. Although they were rarely worth it in previous years, the game has changed, with more conservative investors looking for a good return from an asset backed by a reliable party.
Cryptocurrency has captured investors worldwide for the last few years. While 2022 saw a dramatic crash of cryptocurrency, with Bitcoin losing more than half its value, lower pricing is encouraging some South Africans to jump back in.
While Bitcoin remains the most popular type of cryptocurrency in the country, an increasing number of options are also attracting investors. Coins like Ethereum also gain a huge share of the market, making it some of the best crypto in South Africa for investors willing to take a risk.
Remember, cryptocurrency is viewed as a risky play with high-volatility. Avoid putting too much of your money into crypto – while substantial gains are possible, the graph can quickly swing in the opposite direction.
The stock market has had a tough time in the aftermath of Covid-19, with many companies seeing large drops in their share prices.
Investors looking to take a defensive stance should consider the best performing dividend-paying stocks. South Africans willing to hold their money in the stock market for the foreseeable future can take advantage of dividend-paying stocks.
These stocks in blue-chip companies are relatively stable and will continue paying dividends throughout the year, enabling you to make a return for as long as you hold those stocks.
Money Market Funds
Money Market Funds are a type of mutual fund that focuses on assets with short-term maturity and high liquidity. Unlike other types of mutual funds, Money Market Funds don’t force you to lock your money in for an extended period.
The promissory note is one instrument that allows investors to essentially lend their money to banks and corporations, with defined interest rates and monthly installments. Some South Africans are also considering a banker’s acceptance, which provides a steady stream of income over a defined period.
Exchange-traded funds (ETFs)
ETFs are a type of investment that lowers investor risk by investing money across a wide segment of the market instead of in a specific stock.
You can find ETFs covering everything from the entire South African investment market to those that cover certain industries, such as mining. There’s also the option of taking a basket of ETFs covering global markets, to spread your risk.
ETFs can also come in the form of tracker funds. Investing in a tracker fund means your ETF attempts to follow the course of the overall market. For example, if you invest in an FTSE/JSE top 40 tracker fund, your ETF will follow the ups and downs of the top 40 publicly traded companies on the South African stock market.
Note that ETFs won’t offer the dramatic returns of other investment assets. Instead, ETFs are designed for investors who are willing to lock their money into their accounts for longer periods.
If you’re thinking about your retirement prospects, investing a sizeable portion of your capital into ETFs is an intelligent idea.
South African investors have a range of investment options to take advantage of. As with every type of investment, ensure that you do your research first. Familiarize yourself with the risk associated with each investing strategy.
No investment is entirely risk-free and there are no guarantees of making a return, but with a long-term perspective, there’s no reason why you cannot grow your wealth.
What are you choosing to invest in in 2023?