Young investors go DIY, but experts warn of rising risks and regulatory blind spots
South Africa’s investment landscape is undergoing a rapid shift as younger, tech-savvy investors move away from traditional unit trust funds and toward direct investing in shares, ETFs, actively managed certificates (AMCs) and even cryptocurrencies on digital and technology-driven trading platforms.
While this trend mirrors global patterns, industry experts caution that the move brings both opportunity and significant risk, especially when investors misunderstand the difference between long-term investing and short-term speculation.
David Oberholzer, business manager at EasyETFs, says the shift in investment presence is already well under way in the South African investment landscape.
“While unit trusts-centric LISP platforms are still very popular, they’re struggling to keep up with the convenience, speed and cost of modern trading platforms.”
“Investors want instant execution, transparent pricing and access to a wider range of listed instruments. ETFs, including the fast-growing category of actively managed ETFs on the JSE, are becoming the preferred entry point for both new and experienced investors.”
However, he warns that convenience often masks complexity.
“Most young investors are clear about the difference between trading and investing, but the real trouble sits in the get-rich-quick schemes and high-risk products marketed to investors under the guise of niche investments. Leveraged instruments, FX academies and unregulated CFD providers can wipe out capital quickly, and those risks are often understated.”
Safety net
Oberholzer emphasises the importance of choosing the right investment structures on licensed platforms.
“ETFs remain among the most regulated and investor-friendly products in the market. They are dual-regulated under the Collective Investment Schemes Control Act (CISCA) and the Johannesburg Stock Exchange (JSE).”
“ETFs ring-fence investor assets and eliminate unnecessary counterparty risk, AMCs, by contrast, are debt instruments backed by a bank, and investors still carry the issuer’s credit risk. Both have a place, but it’s essential that investors understand the regulatory protections behind each vehicle.”
The challenge, he adds, is that many new entrants invest directly without fully appreciating the role that professional managers play in portfolio construction and risk oversight.
“Diversification isn’t just about owning many shares. It’s about spreading exposure across asset classes, sectors and geographies. When people build their own portfolios, concentration risk creeps in quickly – and it’s often invisible until markets move.”
Copy trading: a fast-growing concern
Oberholzer says one of the most worrying trends is the rise of copy-trading influencers.
“Anyone providing discretionary management or influencing trades should hold an FSCA FAIS Category II licence,” he says. “But many individuals position themselves as ‘educators’, skirting regulation while encouraging investors to mimic their trades.”
The risks, he notes, are significant: loss of capital, no oversight, and no recourse available to investors.
“Copying a public portfolio is not regulated advice. Investors must still take responsibility for their decisions, but unlicensed operators make that far harder.”
New products, new complexity
As markets evolve, so do contradictions in regulation. Crypto ETFs, for example, may be listed on the JSE in future, but will not be eligible for tax-free savings accounts under current restrictions.
“This breaks the long-held assumption that all ETFs qualify for TFSAs. We’re entering a period where product education has to catch up with innovation. Investors need far clearer information on what is allowed inside retirement products, preservation funds, TFSAs and other regulated wrappers.”
Platforms can align internally with settlement cycles to make direct investing feel seamless, but Oberholzer points out that regulated funds still carry their own limitations.
“TFSAs allow only CIS-compliant products. Retirement products remain fully Reg 28-restricted. Direct investing has no such constraints, but the responsibility shifts entirely to the individual.”
Education
Oberholzer says the trend toward DIY investing is positive, but only if investors understand the rules.
“Direct ownership is empowering. It lowers barriers and opens markets. But it also places all responsibility on the investor. We need to help people choose the right structures, avoid unlicensed operators and build portfolios that support long-term wealth creation rather than short-term speculation.”
Comments