Best Investments for Your TFSA in South Africa
You have opened a TFSA — great! But what should you invest in? Not all TFSAs are the same. Some invest in savings accounts (low growth), others in shares (higher growth). Here is a simple guide to help you choose.
Key Takeaways
- For long-term (10+ years): equity (shares) funds grow the most
- For short-term (1-3 years): money market or fixed deposits are safer
- Index funds (like Satrix Top 40) are cheap and effective
- Fees matter a lot — 1% less in fees = thousands more over time
- Do not put your TFSA in a normal savings account (growth is too low)
Do NOT use a bank savings account
Many people open a TFSA at their bank and it goes into a savings account earning 5-7% per year. This is a waste of your tax-free benefit. Why? Because the first R23,800 of interest is already tax-free in a normal account. You want your TFSA in something that grows MORE — like shares or equity funds.
- Bank savings TFSA: 5-7% growth per year
- Equity fund TFSA: 10-14% growth per year (long-term average)
- Over 20 years, the difference is MASSIVE
- R3,000/month in savings = about R1.2 million after 20 years
- R3,000/month in equity = about R2.2 million after 20 years
- That is R1 million more — just by choosing the right investment
Best option for most people: Index funds
An index fund buys a little bit of every big company on the stock market. It is simple, cheap, and historically gives good returns. You do not need to pick individual shares.
- Satrix Top 40: Tracks the 40 biggest companies on the JSE
- Satrix MSCI World: Tracks big companies around the world
- Ashburton 1200: Tracks global companies
- Fees are very low (0.1% to 0.4% per year)
- No need to pick stocks — the fund does it automatically
- Good for people who want to invest and forget about it
If you want less risk: Balanced funds
A balanced fund mixes shares, bonds, and cash. It grows less than pure equity, but it is smoother — fewer big drops. Good if you are nervous about the stock market.
- Mix of shares (60-75%) and bonds/cash (25-40%)
- Less scary when markets drop
- Still grows more than a savings account
- Good for: people within 5-10 years of needing the money
- Examples: Allan Gray Balanced, Coronation Balanced Plus
How to choose based on your timeline
The most important question is: when do you need this money?
- Need it in 1-3 years: Money market fund (safe, low growth)
- Need it in 3-7 years: Balanced fund (medium risk, medium growth)
- Need it in 7+ years: Equity/index fund (higher risk, highest growth)
- The longer you can leave it, the more risk you can take
- If you are young (under 35), go 100% equity — you have time to recover from dips
Ready to see your own numbers?
Use the TFSA Growth Calculator