Best Investment Options with Highest ROI in South Africa for 2024

Without a crystal ball, it is impossible to be certain of your returns because, as investors have been reminded over the last few months, markets can be volatile. In a bear market, investors can still find opportunity.

 Speaking generally, at times like these, traders look to commodities, property, and industrial assets as safe havens. Analysts often recommend that newer investors put their money into quality stocks that offer value even in a down market.

Best Investment Returns in South Africa to Consider in 2024

Research fr om wealth manager Glacier by Sanlam confirmed commonly held wisdom – shares outperform other assets. Specifically, they found the JSE All Share Index outperformed property and money market investments when held for between 5 and 15 years. So maybe the JSE All Share Index could become the best place to invest money in South Africa for the years to come.

On top of that, shares can potentially offer the best return on investment in South Africa contrary to simply building an egg nest in savings accounts. So you might ask, what are the best investment opportunities in South Africa at the moment? Especially, since there are other investment options available, starting fr om a new business launch and ending up with the government bonds acquisition. The answer will be very much dependent on your goals, targets, and preferences, be that minimal acceptable income value after a period of time, or the level of risk you are willing to accept.

Stocks - Best for portfolio control

Stocks, typically, are easy to invest in or divest from making them the best asset for investors looking to manage and control their portfolio. Tracking the performance of stocks in your portfolio is paramount. As economic factors and company prospects change or as your investment objectives shift, your portfolio should change as these factors change.

Do not overload on shares that are doing well to the point that one company, or one sector makes up a disproportionately large share of your portfolio. A diverse portfolio allows you wait for the rebound in one sector while still growing value in a sector performing well. Of course, savvy investors understand investing in the dip and see poor performance as an opportunity to add shares.

Liquidity: When there are buyers, stocks are one of the most liquid assets you can hold.

Minimum: There are no set minimums, investment amount is dictated by the stock price.

Fees: Investors can trade through a broker or manage their own portfolio through an app. The choice will determine the cost. 

Robo-advisors - Best for hands-off investment

Investors looking for low-cost, faster and hands off trade management services are choosing robo-advisors. They do not offer fully personalised services, instead use algorithms and personal data collected from clients to manage portfolios.

Based on financial position, goals, and risk profile, robo-advisors create a suite of assets to meet client requirements. Clients can choose to either automate trades or use the resources and tools provided by their chosen robo-advisors or to trade the assets chosen for them.

By assessing needs, robo-advisors can suggest a personalised portfolio. Better robo-advisors provide investors with a high or low risk portfolio options.

Liquidity: Divesting assets and withdrawal of funds are dependent on the service but tend to be hassle free.

Minimum: Depends on the robo-advisor, with some setting no minimum investment

Fees: Fees range between 0.20% and 1% of assets under management, with a 0.73% charge the average.

Index funds - Best conservative approaches

Index funds are a group of related assets that allow investors to own multiple stocks with one trade. Fund managers choose the criteria, they can be a simple as a fund comprising of the largest JSE shares by value and set minimum investment and fee structure.

Considered low-risk investments, they give investors two ways to grow their capital. Holders benefit from capital growth as the value of the fund grows and, the diverse basket of shares will include securities that pay out dividends that are distributed to investors.

Liquidity: The popularity of index funds makes them easy, and fast, to buy and sell.

Minimum: Minimum investment depends on the index fund investors choose

Fees: Offers investors transparent fee structure 

Cryptocurrencies - Best high risk high reward approach

Cryptocurrencies are digital assets created and stored on a network of decentralised computers. This structure allows them to exist outside the control of authorities and acts as a buffer against the currency collapsing at one single point of failure. Unlike traditional currencies whose value stems from the strength of the issuing economy, the value of the cryptocurrencies is set by demand. A second important distinction, anyone can create a new digital currency as long as they follow the rules of the blockchain network they use. Since Bitcoin was invented in 2009, new currencies have been created that have tweaked the usability. Advances include faster transaction speeds or creating more secure multifunction platforms to trade and invest.

Liquidity: Easy to trade but the market is significantly more volatile

Minimum: Cost of investment depends on the currency you invest in

Fees: Expensive to trade, or generate through mining

Government bonds – Low risk retirement planning

Government bonds are backed by the “full faith and credit” of the issuing government. Their worth, and increase in value, is based on the issuing government’s ability to repay their debt. They offer investors low risk investment and earn them a better interest rate than a savings account. In December 2022, South African bonds offered investors interest rates between 7.8% and 11.5%

Investors can buy bonds that mature over 3 months or can be held for as long as 30 years

Liquidity: The popularity of government issued bonds make them easy to trade

Minimum: South African government bonds can be bought for as little as R1000

Fees: Government bonds carry no commission, agency, or service fees

Others to consider

South African Treasury Bills

When they were originally issued, Treasury Bills resembled currency but cannot be traded on sight. Issued with a set pay-out date, usually between 91 and 182 days, T-Bills are an investment in the revenues and assets of a country and can be issued by SARS, or local municipalities after approval by the Reserve Bank.

A safe investment for conservative investors, they are issued to raise capital to fund debt or infrastructure, treasury bills can be acquired in set denominations from R10 000 to R5000000.

Money Market Funds

Money market funds are highly liquid, low risk investments in short term debt like treasury bills and repurchase agreements. Like mutual funds, they maintain value by investing in quality assets while paying dividends to investors. Money market investments lim it exposure to losses by maturing within a set period, often within 60 days but no more than a year.

There are two important handicaps with money market funds. First, they are an expensive investment, requiring a high initial investment, around R120 000, that can be paid in instalments. Second, fund managers charge high fees to administer the fund.

RSA Retail Savings Bonds

Issued to encourage South Africans to save, RSA Retail Savings Bonds offer a low-risk time bound investment with guaranteed returns. You can invest as little as R1000 or as much as five million Rand and can be bought directly from the government or over the counter at post offices.

The two available options, fixed interest or an inflation linked bond, mature between two or ten years with interest paid into a chosen bank account on set payment dates.

Fixed Annuities

Fixed annuities guarantee holders an income in retirement. There are two options available to South African investors. A Living Annuity provides an income based on a percentage of your savings. Holders can choose, and change, the assets they want to invest in, can increase their investment total but have limited access to capital.

A life annuity guarantees pension income for life, but holders cannot change the amount they invest or the assets providing an income.

Dividend-Paying Stocks

Dividend paying stocks generate income even in down markets. For this reason, holders’ profit from ownership in two ways, from growth in the value of the asset and regular payments generated by profits. It takes time, or a large pool of capital, to acquire enough stock to really benefit but buying dividend paying stocks is a fundamental strategy to build a profitable portfolio. Dividend paying companies are usually financially sound and well managed businesses making them a low-risk investment. Another important reason to own dividend paying shares, payments tend to keep up with inflation making the income an important wealth preserver.

High Inflation Options

As inflation rises and goods and service become more expensive, consumers reign in spending. There are sectors that perform well during inflationary times, an investment in these sectors can prove profitable.

Sectors include:

Other potentially best Investment Options to Consider in South Africa in 2024

Traditional investments remain the most popular and easiest to access. As a result of the 20% drop of the NYSE since the start of 2022 has increased interest in alternative investment options.

Access to information has made these options more attractive and easier to invest in. Like traditional investments, the value of alternative investments rest on two principles, supply and demand and proven performance.

Investment in bottled and casked rare whiskeys has increased 55% in the two years since 2020. At the same time, the Cask88 Investment Index has grown by 12.76%. Not all whiskey offers stellar returns, however Rare Whiskey 101’s Icon 100, an index of 100 iconic bottles, has offered one of the highest returns on investment in South Africa of 400% - between 2013, when it was founded, and the end of June 2022.

Alternative investments are complex and, usually, operate in unregulated markets making them a high-risk option. Their popularity, however, make them important to consider.

Real Estate

Investing in real estate is more than purchasing property. It can also include investing in equity debt or partial ownership through a real estate investment trust (REIT). Purchasing a tangible asset like a home, office building or storage unit (as examples) is seen as a hedge in volatile times and offers stability and diversity to portfolios as well as the more concrete benefits of passive income and asset appreciation. Thus it can be considered as one of the good investment options in South Africa

Agriculture

Crowdfunded agricultural investment has become more popular as the benefits have become more apparent. Historically agricultural investments have exceeded the performance of other assets over the long term. The importance of agricultural products means an investment can act as a low-risk hedge against volatile equity markets.

Agricultural Sectors worth looking at

The agriculture sector touches every aspect of our lives. From the food we eat, to the clothes we wear, and the wood used to build. For investors, this ubiquity translates into profitable opportunities.

Fish Farming

Fish farming is, initially, capital intensive but offer investors returns in the 20% – 30% range if investments are allowed to mature over at least 10 years, according to aquaculture consultants Aquasol. You can expect to invest $1 million in an existing operation or spend between $10 and $12 million dollars to start a significant commercial operation.

Cannabis Farming

The global cannabis market is projected to grow to $102 billion by 2026. Africa is poised to become a major source, especially for the medicinal cannabis market. To tap into the growing market, the South African Health Products Regulatory Authority issued 76 medicinal growing licences in 2022. South African investors looking for opportunities can invest in annual harvests through registered financial service providers.

Cattle Farming

Investing in cattle, when you’re not a farmer, has become easier. Investors can multiply returns by and offers two distinct ways to realise returns. Investors can buy into schemes that fund ongoing operations for a percentage of future profits or invest in pregnant or young cattle that will be sold at a profit in the same way as they invest in unit trusts.

Beekeeping

Demand for honey has outpaced supply which has turned beekeeping into a lucrative investment opportunity. While it is considered low risk, it requires a long-term investment horizon. A 10-year investment in a South African bee operation offers returns between 10% and 12% over the term of the investment.

Poultry Farming

With an established and growing market, poultry offers a low-risk investment opportunity. To benefit from the investment that generates low but constant returns, investors need to take a long-term view. Investors can invest in broiler operations, wh ere poultry is raised for cooking, or in hatchlings that are raised for a few weeks before being sold on.

Fruits Farming

As food prices rise, fruit farming has become more profitable. It is also a sector that offers multiple profit streams to assist in creating wealth. Investors can choose to invest in the land, fund harvests or the logistics services to get produce to market. The agriculture sector as a whole is a mature investment market, so investing in fruit farms is simple. Investors can choose to trade in agricultural stocks or REITS, or even fruit as commodity.

Telemedicine

The Covid 19 pandemic highlighted the role technology can play in providing health services. In South Africa telecommunication-based services like HealthConnect and MomConnect have allowed health departments to successfully provide services and information. Telemedicine has proven its value and is becoming an attractive investment opportunity as solutions are developed and adopted to meet specific needs. It is not only services that are attracting investment, but wearable technology that shares health stats is becoming more acceptable while generating increasing profits for investors.

e-Sports and Gaming

Sport has always attracted investors. Brand loyalty has created a market that allows investors to generate income fr om multiple streams. E-Sports and gaming benefit from the same market but offers a comparatively lower investment threshold than investing in a team requires. As it has grown, it has created the same level of excitement and produced super stars who generate the same level as hysteria as Neymar or Mbappe. With growth comes opportunity, and the popularity of digital and streaming gaming platforms means investors can find an investment that excites them.

Virtual Education and EdTech

A global pandemic spurred a decade worth of growth into a few years. As administrators and parents sought new ways to teach children stuck at home, entrepreneurs developed innovative solutions. This has created opportunities for investors. Virtual education is not just for children, it is being promoted as cost effective training tool for business as well. All these opportunities have resulted in the value of the sector doubling to $250 billion in just two years between 2019 and 2021 and seen more players developing and offering solutions, whether it is to improve access in rural areas or to better monitor test takers.

Climate Smart Investments

The climate is changing, and with change comes opportunity. Whether it is to mitigate the effect of more powerful storms, more efficiently generate green power or developing more resistant infrastructure, investors are funding the development and building of smarter technology. Investment managers are buying into the sector. According to the Global Sustainable Investment Alliance, in 2021 about a third of all managed assets globally were invested in the sustainable sector. This change is seismic, and more investors are looking for opportunities. Investing in companies in the sector, mutual funds or ETF’s that invest ‘for good’ is the easiest way easiest way to take advantage of developing opportunities.

Commodities Investment

As long as people have traded, they have traded commodities. Even today commodities, whether they be grown or mined, remain a profitable option to diversify an investment portfolio. Investors looking to invest in commodities have options that go beyond buying the physical commodity. They can invest in the stocks of commodity companies, miners for example, ETF’s, futures, or commodity focussed mutual funds.

Commodities are often seen as a hedge in volatile markets, but commodity pricing can be unpredictable. More sensitive to economic and political factors, a perfect example of this is rising oil prices stemming from the war in Ukraine, they can have an effect on the entire economy.

Urban Logistics

Driven by the adoption of e-commerce, urban logistics is attracting investors wanting to share in a growing market, especially in the need for localised warehousing real estate. The sector also offers investors an opportunity to buy into traditional logistics infrastructure, or to help fund the technology that is making it more agile and responsive.

As fast delivery becomes a competitive edge, companies are looking at ways to improve their supply chains which translates into more opportunity and profits for investors. Interested investors are looking at construction companies turning commercial real estate into warehouses, technology companies developing smart warehouse systems and last mile delivery companies.

Cybersecurity and Data Storage

We live and work in a world built on convenience. Technology has given us smart homes, personalised shopping, and intelligent manufacturing. These benefits are a result of a mountain of data. Companies spend a fortune to protect that data from hackers. As businesses and governments draw more value from your data, they are spending more on technology to protect it.

As the sector grows – PwC estimates it could be worth around $172 billion by 2024 – investors will find more opportunities to benefit. They can invest directly in companies developing secure data storage facilities or developing and managing cybersecurity solutions. These solutions are built on engineering that includes AI and machine learning, developed by technology firms that raise development capital through bonds or stock.

Steps to start investing

Why should you invest? Investing is a better use of your money than saving. Over time inflation reduces the purchasing power of money saved. Money invested is more likely to grow and increase wealth.

But how do you get started?

Decide how much help you need

For new investors using professional investment advisors allows them time to learn how the market works and get advice on different investment options. It serves as an opportunity to learn patience while building a portfolio. As investors get more comfortable, they can continue with a broker they trust or choose to take over management of their investments themselves.

The type of investor you are would also guide how much help you may need. Passive investors are more likely to choose professional advisors who will manage their portfolio, for a fee. Active investors are more involved in tracking the performance of their portfolio and tend to manage their investments themselves.

Choose your account type

Once you understand your goals and have an insight into your financial situation, you can decide on the type of account you choose. For example, a lump sum is best invested into an annuity or, if you can set aside cash every month, then a trading account would be a better fit.

Open your investment account

If you choose to use a broker, it is important to understand the fee structure you are signing up for. What you are being charged for will affect the value of your portfolio. With an investment app, you can trade at lower cost but without the expertise of a broker to guide you. 

Deposit and invest

Understand the cost involved when you start your journey and when you choose an investment vehicle. Brokerages often set minimum deposits and their fees lowers the amount available for investing. Most trading apps do not set minimums to open an account or to trade but do charge a percentage of each trade. 

Investment tips before investing in South Africa in 2024

Investing is a journey. Depending on your goals, understand your options before making any investment before to meet those goals.

Saving vs. Investing - Know the difference

Savings are typically no-risk options that earns you interest on your capital. Usually, a savings account is used to build of pool of cash to meet short term goals or create a buffer for difficult economic times.

Investing is about creating wealth. They offer higher returns against accepting more risk than a simple savings account. An important distinction to consider between savings and investing is liquidity, money saved is easier to access.

Be clear about your goals and objectives

Being clear about your objectives is an important first step when defining how you invest and what you invest in. It is especially important if you are working with a broker who will invest on your behalf to meet those goals. Your objectives could be long term – investing for retirement – or short – investing to buy a home – or a mix of goals.

Short-term vs longer-term investment

Investing to provide a stable source of income, investing in assets like annuities or bonds are seen as a short-term strategy. It is different from long-term investing wh ere your objective is to build wealth. Investing in stocks or real estate, assets that appreciate over time, define a long-term strategy.

Assess your risks

Understanding risk is challenging, but for investors it is important to grasp. Striking a balance between the risk you are willing to accept for the possible reward is the foundation of successful investing. Determining what level of risk, you are comfortable with is shaped by several factors. These include:

Always include ROI in your goals

Calculating and understanding Return on Investment will help you better plan a strategy that meets your financial goals. Calculating ROI will give you a clear idea of the benefit earned after deducting the cost of the investment. Benefits can include dividends earned or appreciation in the value of the asset. To calculate ROI, divide the cost by the expected benefit.

Top-3 factors additional factors to consider

The more you know, the better investor you are and the easier it becomes to make decisions that meet your goals.

Budget: Before you start investing, plan your budget. Include debts and responsibilities as well as the cost of your objectives. Not only will you have a clear understanding of how much have to invest but how much you need to invest.

Volatility: Markets are volatile by nature, but not all sectors or asset classes at the same time. Building a diverse portfolio allows you to continue to build wealth when different sectors move down.

Asset Allocation: Your strategy will guide the types of assets you invest in. Younger investors often invest in stocks which have a longer time horizon for appreciation, and they have more time to recover value after a downswing. Investors closer to retirement tend to choose more conservative low-risk assets. 

Stock trading vs cryptocurrency platforms

Bottom Line

Whatever your reasons for investing, it will be nerve wracking. To reduce the stress of the journey, get informed, understand how markets work, research the risks connected to each type of investment and monitor your portfolio. Don’t be afraid to make changes as your goals change and get advice when you need it. All of this advice will keep you on track to achieving the goals that you set for yourself.