Stocks vs ETFs vs unit trusts

These are the three most common ways South Africans invest — and each suits a different style. Here's how they compare on control, cost, risk and effort, so you can choose the right mix.

Individual stocks (shares)

Buying a share means owning a piece of one specific company. If you pick well, the upside can be significant. But your outcome rides entirely on that single business, so shares are the highest-risk of the three and demand the most research.

Best for: investors who enjoy researching companies and are comfortable with higher risk for the chance of higher return.

ETFs (exchange-traded funds)

An ETF holds a basket of many shares (or other assets) and trades on the exchange like a share. Most track an index and charge low annual fees. One purchase gives you instant diversification, which is why ETFs are a favourite starting point for beginners.

Best for: hands-off investors who want diversification and low costs without picking individual companies.

Unit trusts

A unit trust (also called a mutual fund) also pools investors' money into a basket of assets, but it isn't traded on an exchange. Instead, you buy and sell units once a day at a price set by the fund manager. Many unit trusts are actively managed — a professional chooses the holdings, aiming to beat the market — which usually means higher fees.

Best for: investors who want professional active management and don't mind paying more for it.

Side-by-side comparison

You don't have to choose just one. A popular approach is a diversified core of low-cost ETFs, with a small allocation to individual stocks you've researched.

Which should you choose?

Start with your goal, time horizon and how involved you want to be. If you want simple, low-cost, long-term growth, a broad ETF is a sensible default. If you enjoy analysis and accept more risk, add individual shares. If you prefer a professional to manage the decisions, a unit trust may fit. Whatever you choose, keep an eye on fees and stay diversified.