There are various ways to invest in unit trust funds, exchange-traded funds (ETFs) and shares. You can invest directly into a fund offered by an investment house or in shares through a stockbroker, or you can invest through a product like a tax-free savings account or a retirement annuity.

The product you choose will depend on your investment objective, which may be to invest for a child's education or to invest for retirement, to use just two examples.

Tax-free savings accounts

Assuming you want to invest for a child's tertiary education, a tax-free investment is a great option. With a tax-free investment you don't pay income tax or dividends tax on the returns you earn nor any capital gains tax on the gains you make over time.

Banks and investment houses both offer tax-free savings accounts with the same tax benefits but different underlying investments. Banks' tax-free savings accounts often have bank savings accounts as the investment, but some also offer unit trust funds and ETFs. Investment houses offer tax-free unit trust funds, ETFs and some even offer tax-free life policies.

"The minimums for investing in a tax-free investment vary, but can be as little as R150 a month. Whether you're a low-income earner or a high earner, any savings on tax is huge," says Thandi Ngwane, the head of strategic markets at Allan Gray.

Retirement annuity

If you want to invest for retirement and you are a taxpayer earning an income of more than R75 750 a year, a retirement annuity (RA), which has underlying investments in unit trusts and/or ETFs, would be your most sensible option.

When you invest in an RA, each tax year you are entitled to claim a tax deduction for contributions to the fund up to 27.5% of your taxable income or your remuneration, whichever is higher, but subject to a maximum deduction of R350 000.

Savings in your retirement fund grow free of income tax, dividends tax and capital gains tax. On retirement, the first R500 000 of the one-third you can withdraw in cash is tax-free and any pension drawn from the remainder is taxed at your marginal tax rate.

Ngwane says many people who are members of an employer-sponsored pension or provident fund think that these savings are enough for retirement, but they are not. Even a little invested in an RA will go a long way towards boosting whatever pension you get out of your employer-sponsored fund, she says.

Often parents pump all their savings into their children's education without making provision for their own retirement, Ngwane says.
But in doing so they will inevitably be a burden on their children.

She says saving for retirement is critical because the state's old-age grant is very low. One of the restrictions of an RA is that it is legally limited to having more than 75% exposure to equities.

Stokvels

If you're a member of a stokvel, your stokvel could invest in shares, unit trusts or ETFs.

If your stokvel is big enough, you could consider engaging a stock broker to invest on your behalf, according to your mandate.