A primer for new investors
There are ten levels of investing. Most people should stop at three.
Investing gets more complicated the further you go — options, spreads, portfolio overlays. What it does not get is more profitable. This page explains every level, what it costs you, and where the evidence says you should actually stand.
The evidence
Professionals with teams and terminals mostly lose to the index.
If full-time managers cannot reliably beat a cheap tracker fund, the case for a part-time investor doing it with more complicated instruments is weak. These are not opinions — they are the published scorecards.
of active US large-cap funds underperformed the S&P 500 in 2024 — slightly above the 64% average annual rate across the scorecard’s 24-year history.
SPIVA US Scorecard, year-end 2024
of the 38 fund categories S&P tracks — equity or fixed income — had a majority of managers beat their benchmark over the 15 years to December 2024.
SPIVA US Scorecard, year-end 2024
of South Africa Equity funds were merged or shut over ten years. Failed funds quietly disappear from the averages that survivors are judged by.
SPIVA South Africa Scorecard, year-end 2024
The ten levels
Every level explained, with an honest verdict on each.
The first three levels are where the evidence supports most investors. Everything above is a choice to take on more work and more cost for a return the data does not promise.
Index funds and ETFs
A fund that buys an entire market — every share in the S&P 500 or the FTSE/JSE Top 40 — and charges you almost nothing to do it. No forecasting, no stock picking.
From R500 · Under 1 hr a month
Balanced and multi-asset funds
One fund holding shares, bonds, property and cash in a managed mix. Convenient — but check the fee, because in South Africa these are expensive relative to what they do.
From R1 000 · Under 1 hr a month
Dividend-paying blue chips
Owning a handful of large, established companies that pay and grow a dividend. Easier to hold through a crash because the income feels real. Watch for high yields signalling distress.
From R50 000 · About 1 hr a week
Core and satellite
Keep 70–90% in broad index funds, then add small tilts to a theme, sector or region. The core protects you from the satellites being wrong.
From R500 000 · 1–2 hrs a week
Factor and smart-beta investing
Tilting toward traits that have historically paid — value, quality, momentum, low volatility. Requires a decade-plus tolerance for lagging. Value spent roughly 2007 to 2020 in the wilderness: its deepest and longest drawdown on record, from December 2006 to a trough in mid-2020.
From R500 000 · 1–2 hrs a week
Picking your own shares
Reading annual reports, building a valuation, judging management. Done properly this is a second job. The honest test: can you write down why the person selling you the share is wrong?
From R1 000 000 · 5–10 hrs a week
Charts and tactical trading
Buying and selling on price patterns and momentum. Long-horizon systematic trend-following has real evidence behind it. Short-term chart trading mostly does not: of Brazilians who kept day trading beyond 300 trading days, 97% lost money and 0.5% out-earned a bank teller; in Taiwan, only 44% of day traders were still trading a year later.
From R500 000 · 5–15 hrs a week
Basic options
Covered calls, cash-secured puts, protective puts. Used carefully these manage risk or generate income on shares you already own. Used carelessly they concentrate risk you cannot see.
From R1 000 000 · 3–5 hrs a week
Option spreads
Combining two or more options so your maximum loss is known before you enter. Defined risk is not low risk — ten small positions can still compound into one large loss.
From R2 000 000 · 5–10 hrs a week
Portfolio options overlay
Running options as a system across the whole portfolio. The Cboe S&P 500 BuyWrite Index — a mechanical covered-call strategy — returned 8.5% a year against the S&P 500’s 9.8% from June 1986 to December 2018, with about two-thirds of the volatility. The shortfall is concentrated in the post-2009 bull market, when a covered call caps upside; from 1986 to early 2012 the two were level at 9.2% each. It is a swap of upside for smoother returns, not free money.
From R3 000 000 · 5–10 hrs a week
What it costs
The fee is the one return you can predict in advance.
Markets are uncertain. Fees are not. Below are published charges on funds a South African investor can buy today — and the gap between them is wider than most people realise.
| Fund | Type | Annual fee | Cost over 25 yrs |
|---|---|---|---|
| Vanguard S&P 500 (VOO) | US index ETF | 0.03% | Under 1% |
| Satrix 40 ETF | JSE index ETF | 0.10% | ~2% |
| Satrix MSCI World Feeder ETF | Global index ETF | 0.25% | ~6% |
| Coronation Balanced Plus (A) | Active balanced fund | 1.61% | ~33% |
| Allan Gray Balanced (A) | Active balanced fund | 1.78% | ~36% |
| Ninety One Opportunity (A) | Active balanced fund | 2.18% | ~42% |
Read the right-hand column again. A 2.18% annual fee does not cost you 2.18% — compounded over a working lifetime it consumes something closer to two-fifths of what you would otherwise have ended up with. That is the single largest, most controllable decision on this page.
Check yourself
Six signs you have climbed higher than you should have.
Run this every few months. Three or more, and the honest move is to step back down a level — not to try harder at the one you are on.
- You check prices more than once a day.
- You have placed more than twenty trades in the past three months.
- You cannot explain every holding you own, from memory, in a sentence.
- You are holding something because it will “come back”, not because your reason for buying it still stands.
- You have lost sleep over a position in the past month.
- Your partner does not know the full extent of what you hold.
Where to actually start
Three things worth doing before anything else.
Step one
Fill your tax-free account
R46 000 a year from 1 March 2026 (up from R36 000), with a R500 000 lifetime contribution cap. No tax on growth, dividends or withdrawals. Hold a diversified equity ETF inside it. Contribute over either limit and SARS adds 40% of the excess to your normal tax — so track it.
Step two
Use your retirement deduction
Contributions to a pension, provident fund or retirement annuity are deductible up to 27.5% of the greater of your remuneration or your taxable income, capped at R430 000 a year — raised from R350 000 on 1 March 2026. That deduction is a guaranteed return equal to your marginal tax rate, which is better than anything at Level 10.
Step three
Then open a normal account
Only once the first two are full. A local platform for JSE-listed ETFs, or an offshore broker with a W-8BEN filed to cut US dividend withholding from 30% to the 15% treaty rate for individuals. Buy the broad market and leave it alone.
Do those three consistently for twenty-five years and you will likely be ahead of most people reading about option spreads — with a fraction of the effort, the tax friction and the stress. Contribution limits and tax rules change; verify the current figures with SARS before you act.
The point
Costs compound against you. Time compounds for you. Sophistication is optional — discipline is not.
Educational content, not investment advice. MCH Advisory Services is not a registered financial services provider, and nothing on this page accounts for your personal circumstances, tax position or objectives. Fund charges, contribution limits and tax rules change — verify against the manager’s current minimum disclosure document and the SARS website before acting. Speak to a registered financial and tax adviser before making any decision. See our terms of use.
Figures on this page were verified against primary sources on 30 July 2026. The two performance-fee funds in the cost table are re-checked quarterly.
Sources: S&P Dow Jones Indices — SPIVA US Scorecard and SPIVA South Africa Scorecard, year-end 2024 · SARS Budget 2026 Tax Guide and National Treasury 2026 Budget Review · Vanguard, Satrix, Allan Gray, Coronation and Ninety One fund fact sheets and minimum disclosure documents (30 June 2026) · Cboe Global Indices and Wilshire Analytics, options-based benchmark index studies · US Internal Revenue Service tax-treaty tables · Chague, De-Losso & Giovannetti (2020) · Barber, Lee, Liu, Odean & Zhang (2017) · Arnott, Harvey, Kalesnik & Linnainmaa (2021) · UK English.