What is Long-Term Investment?
Long-term investments refer to financial instruments in the form of stocks, bonds, cash equivalents, or real estate assets that the company intends to hold for more than 365 days.
It is to maximize the company’s profits and is reported on the asset side of the balance sheet under the head of non-current assets.
Best Long-Term Investments In South Africa
Fixed Deposits
High-yielding fixed deposit savings are some of the best safe investments. This investment works best if you have enough to make it big at a decent interest rate.
Apart from the profit, the other advantage of fixed deposit savings is that banks are regulated by the Financial Sector Conduct Authority (FSCA).
The regulator ensures that banks are insured against customer losses from their bank accounts from the bank’s bankruptcy. Look at our list of the top savings accounts to help you decide.
Short-Term Certificates of Deposit
Certificates of Deposit are also savings investments. However, unlike savings accounts, they do not allow withdrawal before the date of maturity. However, there is an option to do so at a cost/penalty. Short-term Certificates of Deposit have high-interest rates.
On the opposite end, though, they typically have a maturity period of 3 months to 9 months. The high-interest rate makes up for the length of time you will have to wait to get any payment. Short-term Certificates of Deposits are made available by most banks in South Africa.
Government of South Africa Treasury Bills
Treasury bills are similar to bonds in that they are debt securities. However, they are short-term. They take from 1 day to 12 months to mature. Bonds, even though there are short-term and long-term kinds, typically take more than 1 year to mature. Long-term bonds even take more than 10 years to mature.
Treasury Bills (T-Bills) are normally made available for purchase on a weekly basis. They are considered safe investments because they are backed by the government.
T-Bills are issued by the National Treasury through the South African Reserve Bank (SARB). All applications are therefore submitted to SARB. SARB then issues the bills through an auction which is only attended by those who qualify.
RSA Retail Savings Bonds
A bond is a debt security that governments or companies use to get funds. The bond issuer gives the bond buyer a bond certificate that serves as an IOU. The buyer then gets paid the amount equivalent to the face value of the bond when it matures.
The profit earned on bond investments is the interest. The interest is calculated as a percentage of the face value of the bond.
These payments can be annual, semi-annual, or even quarterly. It should be noted, though, that these features of a bond are just the fundamental ones. Depending on the terms and the type, bonds can be quite different from each other.
Corporate Bonds
As opposed to government bonds which are issued by the government, corporate bonds are issued by companies and organizations. According to cbonds.com, the South African corporate bond market is “dominated by floating rate instruments.
” Floating rate instruments go by that name because they give bondholders variable interest rates. The site goes on to say that more than 71% of these instruments are traded on the corporate bond market.
Money Market Funds
Money Market Funds are shares in a basket of investments that have a short-term to maturity and are managed by a financial expert. They are a kind of mutual fund. Money market funds give small interest payouts, which are usually discharged monthly.
They are able to do so because they are very liquid. This liquidity comes from their investment in short-term securities. For example, they invest in Treasury Bills, repurchase agreements, and commercial papers. All their investments mature in less than one year.
Which investments have the best returns in South Africa?
Best investments
- Cybersecurity.
- Artificial intelligence.
- Renewable energy.
- Autonomous and electric vehicles.
- Defense.
- Utilities.
- Healthcare.
- Small caps.
What is the most profitable investment in South Africa?
Dividend-Paying Stocks
Stocks that pay dividends are one of the most popular and secure investments among South African investors.
These are shares of publicly traded firms on the Johannesburg Stock Exchange that regularly distribute a portion of their income to shareholders as a cash dividend.