By Maria Smit*
Financial education is one of the most powerful gifts you can give yourself. In a world filled with jargon, fine print, and complex products, it can be easy to feel left out or unsure. But the truth is, you don’t need a finance degree to understand the basics.
Everyone has the ability – and the right – to learn how their money works.
Understanding common financial terms is a great place to start. It’s the foundation for making better choices, asking the right questions, and feeling more confident in conversations about your financial future.
My hope is that this information gives you a solid foundation to build from so that you can take control of your personal financial journey.
What is an asset?
An asset is anything you own that can grow in value or generate income – like shares, property, or bonds.
What is a portfolio?
Your portfolio is the total collection of all your investments. It reflects your overall strategy and financial goals.
What does diversification mean?
Diversification means spreading your money across different investments to reduce your overall risk. If one performs badly, others may balance it out. Think of it as not keeping all your eggs in one basket.
What is liquidity?
Liquidity is how quickly and easily you can turn an investment into cash without losing value.
What’s the trade-off between risk and return?
Generally, the higher the potential return, the greater the risk. Safer options tend to grow more slowly.
Equities (shares): owning a piece of a company
Shares represent partial ownership in a listed company. You can earn dividends and benefit from growth in the share price.
Bonds: lending your money
Bonds are are effectively loans you give to the government or a company in return for regular interest payments.
Unit trusts: investing as a group
A unit trust pools your money with that of other investors. A fund manager decides where to invest it, typically in a mix of assets.
ETFs: tracking the market
Exchange-traded funds (ETFs) also pool money and invest in an index, like the JSE Top 40. You buy them like shares.
TFSA: a tax-free savings account
A TFSA lets you earn tax-free growth, interest, and dividends – up to annual and lifetime limits.
Living annuity: retirement with flexibility
A living annuity lets you draw income during retirement while keeping the rest of your money invested.
Guaranteed annuity: income for life
This product gives you a fixed monthly income for the rest of your life, no matter what happens in the markets.
TER: total expense ratio
This shows the percentage of your investment used for admin and management costs (excluding trading fees).
TIC: total investment charge
TIC includes the TER plus all transaction costs involved in managing your investment.
EAC: effective annual cost
EAC gives you a full picture of what your investment costs – including advice, admin, and management – expressed as an annual percentage.
Why fees matter:
Even a 1% fee difference each year can dramatically affect your final return over decades. Always ask your adviser what fees you’re paying and what you’re getting in return.
Capital gain or loss: your profit or loss
When you sell an investment, the difference between what you paid and what you receive is your capital gain (or loss).
Dividend yield: income from shares
This is the income you get from dividends, shown as a percentage of the share’s price.
Total return: the full picture
Your total return includes capital gains and any income earned from the investment.
CAGR: measuring long-term growth
The compound annual growth rate (CAGR) shows how much your investment has grown on average each year.
Volatility: ups and downs
Volatility is how much an investment’s value moves up and down over time. More volatility means more uncertainty.
Inflation risk: losing buying power
If your investment doesn’t grow faster than inflation, its real-world value declines over time.
Market risk: reacting to global shifts
Market risk is the chance that your investment will lose value due to changes in the broader economy or markets.
Credit risk: lending isn’t risk-free
This is the risk that the issuer of a bond won’t be able to repay the money they owe you.
Hedging: protecting your position
Hedging involves using strategies or financial instruments to reduce the risk of loss.
Capital gains tax (CGT): tax on profit
You pay CGT when you sell certain assets for a profit.
Dividend withholding tax (DWT): 20% on payouts
This tax is taken off dividends paid from shares.
Estate duty: tax on your legacy
When you pass away, your estate may be taxed on assets over R3.5 million.
Section 4Q deduction: tax-free transfers to your spouse
This allows you to pass assets to your spouse without paying estate duty.
Offshore allowance: invest beyond borders
You can invest R1 million offshore annually without approval, and up to R10 million with SARS and SARB approval.
Bull market: prices are rising
A bull market is a period when prices in the market are increasing steadily.
Bear market: prices are falling
A bear market is when prices are consistently declining over time.
Blue chip shares: big, trusted companies
These are shares in large, stable companies like Naspers or Anglo American.
Index: a market benchmark
An index is a group of selected shares used to represent overall market performance (e.g., JSE All Share Index).
IPO: a company’s first public share sale
An initial public offering (IPO) is when a company offers shares to the public for the first time.
Nominal growth: headline numbers
This is the increase in your investment’s value before adjusting for inflation.
Real growth: what you actually gain
This is the growth after accounting for inflation – your true increase in purchasing power.
Example:
If your investment grows 10% but inflation is 6%, your real return is about 4%.
Formula: Real growth = Nominal growth − Inflation rate
Final thought
Financial confidence comes from understanding the basics. Learning these terms puts you in control and helps you ask the right questions. You don’t need to know everything – but knowing what to ask is a great start.
* Maria Smit CFP® professional is an advisor at Brenthurst Pretoria
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
