Published 5 April 2026
New to investing in South Africa? This glossary explains the most important investing terms in plain English — no jargon, no unnecessary complexity. Each term includes a plain-English definition and links to the most relevant calculator or guide on this site so you can take immediate action. Use the A–Z navigation or search (Ctrl+F) to find the term you’re looking for.
A
Asset Allocation
How your investment portfolio is divided between different types of assets — typically equities (shares), bonds, property, and cash. A common beginner allocation is 70–80% equities (for growth) and 20–30% bonds/cash (for stability). Your asset allocation should align with your investment time horizon and risk tolerance. The longer you have to invest, the more you can afford to hold in equities.
Annuity
A financial product that pays you a regular income, typically in retirement. There are two main types in South Africa: a life annuity (the insurer pays you a fixed amount for life) and a living annuity (you draw down from your invested capital at a chosen rate, usually 2.5–17.5% per year). Most retirement annuity holders must purchase an annuity at retirement with at least two-thirds of their RA fund value.
B
Bear Market
A period when investment prices fall by 20% or more from their recent peak, typically lasting months or years. Bear markets are a normal part of the market cycle. The key is to stay invested — historically, every bear market has been followed by a recovery and new highs. Selling during a bear market locks in your losses permanently.
Bond
A loan you make to a government or company in exchange for regular interest payments and the return of your principal at a set date. South African government bonds (like the R2035 and R2040 series) are considered lower-risk than equities but offer lower long-term returns. The Satrix GOVI ETF tracks South African government bonds and is available on most platforms.
Brokerage Fee
A fee charged by your investment platform each time you buy or sell an investment. EasyEquities charges approximately 0.25% brokerage per trade. Satrix debit orders don’t charge brokerage. Brokerage is a transaction cost — unlike the TER, it only applies when you trade, not on an ongoing basis. See how fees affect your returns.
Bull Market
A period when investment prices are rising, generally defined as a 20%+ rise from a recent low. Bull markets tend to last longer than bear markets. The JSE All Share Index has spent more time in bull markets than bear markets over the past 30 years, which is why long-term investors are rewarded for staying invested.
C
Capital Gains Tax (CGT)
Tax owed when you sell an investment for more than you paid for it. In South Africa, individuals have an annual exclusion of R40,000 on capital gains. Above that, 40% of the gain is included in taxable income (this is the “inclusion rate”). So at a 36% marginal rate, your effective CGT rate is 40% × 36% = 14.4%. Inside a TFSA, there is zero CGT. Learn about TFSA tax benefits.
Compound Interest
Interest (or returns) earned on interest. When your investment grows, that growth itself begins earning returns in subsequent periods — creating exponential growth over time. Albert Einstein allegedly called compound interest “the eighth wonder of the world.” R10,000 invested at 10% for 30 years (with no additional contributions) grows to R174,494. Use our Compound Interest Calculator to see your specific numbers.
CPI (Consumer Price Index)
The official measure of inflation in South Africa is published monthly by Statistics SA. It tracks the price changes of a basket of goods and services. If CPI is 5% and your savings account pays 4%, your money is losing purchasing power — it’s growing in nominal terms but shrinking in real terms. Use our Inflation Calculator to see the real value of your money over time.
D
Diversification
Spreading your investments across different assets, sectors, or geographies to reduce risk. If one investment falls sharply, a diversified portfolio is cushioned by the others. A single ETF like the Satrix MSCI World provides instant diversification across 1,302 companies in 23 countries — at a cost of just 0.35% per year.
Dividend
A portion of a company’s profits paid to shareholders. When you hold an ETF that includes dividend-paying companies, you receive periodic dividend payments. The Satrix Top 40 has a dividend yield of approximately 2.58% per year, paid quarterly. Inside a TFSA, dividends are completely tax-free. Outside a TFSA, the withholding tax of 20% applies.
Drawdown Rate
In the context of a living annuity, the percentage of your investment you withdraw each year in retirement. SARS requires a minimum drawdown of 2.5% and a maximum of 17.5% per year. A sustainable drawdown rate (one that doesn’t deplete your capital before you die) is generally considered to be 4–5% per year, depending on your investment returns and life expectancy.
E
Emergency Fund
3 to 6 months of essential living expenses kept in a liquid, accessible account (not in investments). An emergency fund is the foundation of sound financial planning — it prevents you from having to sell investments at a loss during a crisis. Use our Emergency Fund Calculator to find your target amount.
Equity
In investing, equity means shares or ownership in a company. “Investing in equities” means buying shares — either directly or through an equity ETF or unit trust. Equities are the highest-returning asset class over long periods (10+ years) but also the most volatile in the short term. The JSE All Share Index has returned approximately 14% per year over the past 30 years.
ETF (Exchange-Traded Fund)
A fund that holds a collection of investments (usually shares) and trades on a stock exchange like a single share. When you buy one unit of the Satrix Top 40 ETF, you automatically own a proportional slice of all 40 JSE Top 40 companies. ETFs are the preferred investment vehicle for most South African beginner investors due to their low fees, instant diversification, and TFSA compatibility. Read our full ETF guide.
G
Gross Salary
Your total salary before any deductions — PAYE tax, UIF, pension fund contributions, and medical aid. The number on your offer letter. Your gross salary determines your tax bracket. Use our Salary Calculator to see exactly what you take home after all deductions.
I
Index
A list of investments used to represent a particular market or segment. The JSE Top 40 is an index of the 40 largest companies on the Johannesburg Stock Exchange. The S&P 500 is an index of the 500 largest US companies by market capitalisation. Index ETFs track these indices passively — buying the same companies in the same proportions.
Inflation
The rate at which prices increase over time reduces the purchasing power of money. South Africa’s long-term average inflation (CPI) is approximately 5–6% per year. If your investments return less than inflation, you’re losing wealth in real terms. ETFs targeting 12–15% long-term returns significantly outpace inflation. Model the impact of inflation with our calculator.
J
JSE (Johannesburg Stock Exchange)
South Africa’s main stock exchange was founded in 1887. The JSE is the largest stock exchange in Africa and one of the top 20 globally by market capitalisation. All South African ETFs trade on the JSE. The JSE All Share Index tracks the performance of all companies listed on the exchange.
M
Market Capitalisation
The total market value of a company’s outstanding shares (share price × number of shares). Used to rank companies by size. Most equity indices are “market-cap weighted” — larger companies have a greater influence on the index. In the JSE Top 40, Naspers/Prosus, Anglo American, and Richemont are among the heaviest weighted companies.
Money Market Fund
A low-risk fund that invests in short-term, highly liquid instruments like treasury bills and bank deposits. Returns are typically 1–2% above a savings account but significantly below equity returns. Suitable for emergency funds or short-term savings (less than 2 years) — not ideal for long-term investing due to low real returns.
N
Net Salary
Your take-home pay after all deductions (PAYE, UIF, pension, medical aid). The amount deposited into your bank account each month. Use our Salary Calculator to calculate your exact net salary from your gross figure.
P
PAYE (Pay As You Earn)
The income tax deducted from your salary each month by your employer on behalf of SARS. Your employer calculates the tax based on your annualised salary and the current tax tables, then deducts it before paying you. If your tax affairs are simple (salary only, no other income), you generally don’t need to file a tax return.
Portfolio
The complete collection of investments you own. Your portfolio might include a TFSA holding two ETFs, an RA with a unit trust, and a money market fund for short-term savings. Portfolio management is about balancing these holdings to meet your long-term financial goals while managing risk through diversification.
R
Rand-Cost Averaging
The strategy of investing a fixed rand amount at regular intervals (e.g., R1,000/month via debit order) regardless of market prices. When prices are high, your R1,000 buys fewer units. When prices are low, it buys more. Over time, this averages out your purchase price and removes the risk of investing a lump sum at the worst possible time.
Rand Hedge
An investment that naturally increases in rand value when the South African rand weakens against foreign currencies. Offshore ETFs (like the Satrix S&P 500 or Satrix MSCI World) are rand hedges, meaning when the rand falls against the dollar, your returns in rands increase, even if the underlying dollar-denominated investment didn’t change. Most financial advisors recommend holding 30–50% of a long-term portfolio in offshore ETFs as a rand hedge.
Regulation 28
A section of the Pension Funds Act that restricts how retirement fund money (including RAs) can be invested. Key limits: maximum 75% in equities, maximum 45% offshore, maximum 25% in property. TFSAs are not subject to Regulation 28 — you can put 100% of your TFSA in offshore ETFs if you choose. This is one reason many investors prefer TFSAs over RAs for flexibility. Compare TFSA vs RA.
REIT (Real Estate Investment Trust)
A company that owns income-generating property (offices, shopping centres, warehouses) and is listed on the stock exchange. REITs must distribute at least 75% of their taxable income to shareholders as dividends. In South Africa, REITs are listed on the JSE and can be held in a TFSA. The Satrix Property ETF tracks a basket of SA REITs.
Retirement Annuity (RA)
A tax-advantaged investment account designed for retirement savings. Contributions are tax-deductible (up to 27.5% of taxable income, max R350,000/year), growth is tax-free inside the fund, and withdrawals are taxed on exit. Funds are locked in until age 55. Subject to Regulation 28. Ideal for higher-income earners who have already maxed their TFSA. Use our RA Calculator or see your tax savings.
Risk Tolerance
Your ability and willingness to accept short-term losses in exchange for higher long-term returns. A high-risk-tolerance investor is comfortable holding 100% equities and watching their portfolio drop 30% in a bad year, knowing it will recover. A low-risk-tolerance investor might prefer a balanced fund (60% equities, 40% bonds) for smoother returns. Your investment time horizon should be the primary driver of your risk tolerance — the longer you invest, the more risk you can afford to take.
S
SARS (South African Revenue Service)
South Africa’s tax authority, responsible for collecting income tax, VAT, capital gains tax, and dividends tax. SARS administers eFiling, where individuals and businesses submit their tax returns. For most salaried employees, PAYE deductions mean SARS rarely requires additional payment at year-end. Understand your tax brackets.
Section 12T
The section of the South African Income Tax Act that governs Tax-Free Savings Accounts. For an investment to qualify for TFSA status, it must be a “Section 12T compliant” product. All major ETFs from Satrix, CoreShares, and 1nvest are Section 12T compliant. This is why not all investments can be held in a TFSA — your broker will typically only allow compliant products in your TFSA account.
T
TER (Total Expense Ratio)
The annual fee charged by a fund manager, expressed as a percentage of assets. The TER is the single most important number to check before investing in any fund. Index ETFs have TERs as low as 0.10%. Active unit trusts typically charge 1.50–2.50%. Over 30 years, this difference can amount to millions of rands. See the full impact of fees.
TFSA (Tax-Free Savings Account)
A government-created investment account where all growth — interest, dividends, and capital gains — is completely exempt from tax. Annual limit: R46,000. Lifetime limit: R500,000. Unused annual limits don’t roll over. Withdrawals are allowed, but permanently reduce your remaining lifetime contribution room. The best first investment account for most South Africans. Read the complete TFSA guide or use our TFSA Calculator.
Tax Bracket
The range of income to which a specific tax rate applies. South Africa has seven tax brackets (18%–45%). Being in a higher bracket means only your income above that threshold is taxed at the higher rate — not your entire income. See the full tax brackets with worked examples.
Tax Year
In South Africa, the individual tax year runs from March 1 to February 28/29. This differs from the calendar year. Your TFSA annual limit (R46,000) also resets on March 1. SARS’s eFiling season for individuals typically opens in July each year for the previous tax year (March–February).
Time Horizon
The length of time you plan to keep your money invested before you need to access it. Longer time horizons allow for more risk (more equities) because you have time to recover from market downturns. If you need the money within 3 years, keep it in cash or a money market fund. If you’re investing for 10+ years, a diversified equity ETF is historically the best-performing option.
U
UIF (Unemployment Insurance Fund)
A compulsory insurance fund that provides short-term relief if you lose your job or can’t work due to illness, maternity, or adoption leave. You contribute 1% of your gross salary (capped at R177.12/month), and your employer matches this with another 1%. UIF benefits are limited — typically 38% of your salary for a period based on how long you contributed.
Unit Trust
A pooled investment fund managed by a professional fund manager. Investors buy “units” in the fund. Unlike ETFs, unit trusts are typically actively managed (the manager picks investments), trade at a price set once per day (not on an exchange), and charge higher fees (1.50–2.50% TER). Some unit trusts are available in TFSA wrappers. Major South African unit trust managers include Allan Gray, Coronation, Investec, and Ninety One.
V
Volatility
The degree of price fluctuation in an investment. A highly volatile investment (like a single tech stock) can gain or lose 50%+ in a year. A less volatile investment (like a government bond) moves much less. For long-term investors, short-term volatility is the price you pay for long-term returns. Diversified equity ETFs are volatile in the short term but have historically delivered consistent long-term growth.
Y
Yield
The income generated by an investment as a percentage of its current price. For ETFs, yield typically refers to the dividend yield — the annual dividends paid out divided by the current price. The Satrix Top 40 has a dividend yield of approximately 2.58%. For bonds, yield represents the annual interest payment relative to the bond’s price. Inside a TFSA, all yield is received tax-free.
Ready to put this knowledge into practice? Start with our Complete Beginner’s Guide to Investing in South Africa or jump straight to our TFSA Calculator to model your growth.