In short
Traditional investments are bought on public markets or through supervised intermediaries at prices somebody else publishes: cash, fixed deposits, bonds, listed shares, unit trusts and exchange-traded funds. Alternatives are everything else bought to make money, from physical property and private lending to gold, crypto and collectibles. Moving between them is not a step up a ladder towards better returns. It is a trade of four properties — a published price, a quick exit, somebody else's supervision, and a cheap route to complain — and you can make the trade and end up with less. For an emergency fund, for a known amount on a known date, for a single modest sum, or for anyone unwilling to read the documents, the traditional option is better rather than merely safer.
Almost every version of this comparison is built on a ladder: cash at the bottom, then bonds, then shares, then alternatives at the top, with the returns rising as you climb. It is a tidy picture and it is wrong. Moving from a traditional asset to an alternative one is not a step up a ladder. It is a trade of four properties, and you can make the trade and end up with less.
This page sets out the four, what each is worth giving up, and the cases where the traditional option simply wins. The individual comparisons — starting with private lending against a fixed deposit — do the same job one option at a time.
01 — The two setsWhat each word actually covers
- Traditional
- Cash and fixed deposits, money market funds, government and corporate bonds including RSA Retail Savings Bonds, listed shares, unit trusts and exchange-traded funds, and for most households the home they live in. The common feature is that these are bought and sold on public markets or through supervised intermediaries, at prices somebody else publishes.
- Alternative
- Everything else bought to make money. Property to let. Private lending. Private equity. Money held offshore. Gold. Crypto. Art and wine. The full list is at alternative investments in South Africa.
Neither term is defined in South African law, and the boundary moves. Listed property is traditional by mechanism and alternative by the exposure it gives. Crypto was nowhere on the list ten years ago and now trades through licensed exchanges. Do not treat either word as a category with fixed edges.
02 — The tradeThe four properties you are trading
This is the whole comparison. Everything else is detail on one of these four.
| Property | Traditional | Alternative | What the trade costs you |
|---|---|---|---|
| A price | Published daily or by the second, set by strangers with money at stake | Usually none. A valuation, at intervals, often by someone paid by the seller | You cannot tell how you are doing, and you cannot tell early that something is wrong |
| An exit | Days at most. A unit trust settles in a few days, a share in one. | The asset's own timetable, and sometimes no exit at all before the end | Money you cannot reach is money you may be forced to borrow against |
| Supervision | A licensed manager, a regulator, audited accounts, a complaints route | Ranges from a licensed fund to nobody whatsoever | The checking either gets done by you or does not get done |
| Recourse | An ombud or a regulator, usually free and reasonably quick | Usually the courts, on the strength of your documents | Slower, expensive, and decided by what you signed rather than what you were told |
Read the last column as the price of admission. You are meant to be paid for accepting all four, and the question on any specific alternative is whether the compensation is real. On a secured loan at a defensible rate it can be. On a collectible bought because the category is fashionable it is not.
03 — The other sideWhat the trade can genuinely buy
Three of these are real. The fourth is the one used to sell the other three, and it is the weakest.
- A return that does not depend on a market mood. A loan is owed whether or not the JSE fell that week. That is a genuine structural difference from a share, and the main honest reason to hold private credit.
- Exposure to something the listed market does not contain. The JSE is a narrow market. Large parts of the South African economy — small business lending, unlisted property, private companies — cannot be reached through it at all.
- Payment for patience you were going to show anyway. If the money genuinely is not needed for five years, being paid for locking it up is real compensation rather than a risk taken.
- Higher returns. Sometimes, and not as a property of the category. This is the reason most often given and the one least supported. An alternative that returns more than the market usually does so because it carries a risk the market declined to price, and that risk is not removed by the word.
04 — Straight answersThe cases where traditional simply wins
These are not edge cases. They cover a large share of the people who ask this question, and in each one the traditional option is better rather than merely safer.
| What you are trying to do | Use | Why the alternative loses |
|---|---|---|
| Hold an emergency fund | A bank account or money market fund | Availability on the day is the only property that matters, and it is the one property most alternatives do not have |
| Save for something on a known date | A fixed deposit or an RSA Retail Savings Bond | A known amount on a known date is exactly what an alternative cannot promise |
| Invest a single modest amount | A unit trust or an exchange-traded fund | One alternative position is a bet on one outcome rather than a portfolio |
| Invest without reading documents | Anything supervised | In the alternative market the protection is in the paperwork, and unread paperwork is no protection |
| Get property exposure you can sell | A listed property fund (a REIT) | Physical property and private loans both take months to exit; a REIT takes a day |
What is left after those rows is the case where an alternative can earn its place: money that is genuinely long-term, in an amount that can be spread across several positions, held by someone willing to do the reading.
The order these decisions go in
The mistake is treating this as a choice between two menus. It is a sequence, and skipping the first two steps is what produces the bad outcomes.
- Cover the short term first. Emergency money in cash. Nothing below this step is worth discussing until this one is done.
- Build the ordinary portfolio next. Broad, cheap, liquid, supervised. This is the default, and for many people it is also the finish.
- Only then consider an alternative, and only with money that is genuinely surplus. Not the amount you could afford to tie up. The amount whose complete loss would change nothing about your life.
05 — Doing it properlyWhat changes on the day you go ahead
One thing genuinely changes when you leave the supervised market, and it is not the risk. It is who carries the work.
In a unit trust, somebody licensed reads the accounts, prices the holding and answers to a regulator for it. In an alternative, that work either moves to you or it stops happening. Nobody tells you it has stopped. There is no notice, and the absence looks exactly like everything being fine until it does not.
- In private lending, the work is checking the borrower and the security — checking the borrower, and what the security actually secures rather than the rate you were quoted.
- In any pooled arrangement, the first question is whether somebody is taking money from the public to lend it on, because that requires a banking licence. Deposit-taking is the line most often crossed by accident.
- In anything at all, whether the return can be traced to a real source. The red flags are almost all versions of this one test.
And two legal points that catch people who assumed being outside the traditional market meant being outside the rules. A loan to an individual is covered by the National Credit Act whatever its size, so registration may be required. And a lender the Act does not reach is still an accountable institution under FICA, so those duties apply anyway.