In a word or two – Yes, absolutely! If you have not got these as part of your portfolio then you have not received appropriate advice or haven’t heard of them.
What is an ETF?
An Exchange traded fund, or ETF’s as they are also known, are a type of collective investment (CI’s for short - also known as unit trusts). An ETF, like a CI, invests your money into different asset classes depending on the fund.
An Exchange traded fund, or ETF’s as they are also known, are a type of collective investment (CI’s for short - also known as unit trusts). An ETF, like a CI, invests your money into different asset classes depending on the fund.
What they are is a passive investment vehicle rather than an actively traded fund such as your Investec or Allan Gray funds – which are run by an investment manager or house view. An ETF is a passive index tracking instrument and are designed to track their benchmark index as closely as possible. There is no one person or house making a call, it is purely a computational decision based on facts and figures.
The funds are transparent – trade during normal working hours and are thus priced during the day’s trading (not at one point in the day as in conventional CI’s ). One can also track your holdings daily to ascertain exactly what shares you own and are being tracked in the index.
Where do you find them?
All the ETF’s are listed on the local Johannesburg Stock Exchange (JSE) and the prices can be seen either online or in the newspapers. There are a number of ways one can access when wanting to invest in these instruments. They can be accessed through the providers directly or through a good investment platform such as Momentum Wealth or Itransact. The platform that we are beginning to utilise a lot of is Itransact. This platform houses all the ETF’s available in the local market, including the Deutsche Bank x-trackers (offshore equity ETF’s).
All the ETF’s are listed on the local Johannesburg Stock Exchange (JSE) and the prices can be seen either online or in the newspapers. There are a number of ways one can access when wanting to invest in these instruments. They can be accessed through the providers directly or through a good investment platform such as Momentum Wealth or Itransact. The platform that we are beginning to utilise a lot of is Itransact. This platform houses all the ETF’s available in the local market, including the Deutsche Bank x-trackers (offshore equity ETF’s).
One can include ETF’s in any portfolio, no matter whether you are investing in discretionary or in your retirement investments (RA’s or pension funds). The only thing that will limit your ability to access to ETF’s these is the platform that you are using or the advice you are receiving.
What are the minimums per investment?
On the Itransact platform the minimum debit order is R 450 and this can be split into a maximum of three funds. If you go direct to Satrix their minimum is R 300. I would advise to rather look at using Itransact where possible as the service from Satrix is slow and their call centre is inept.
On the Itransact platform the minimum debit order is R 450 and this can be split into a maximum of three funds. If you go direct to Satrix their minimum is R 300. I would advise to rather look at using Itransact where possible as the service from Satrix is slow and their call centre is inept.
If you would like to look at adding ETF’s to your Momentum platform investments, you will require quite large premiums or lump sums. This is due to Momentum Wealth’s decision on how to offer these funds on their platform. By far the most efficient and cost-effective way is either through Itransact or Satrix.
Risks & Rewards
Investing in an asset class such as equities is an aggressive move in a portfolio. If you are looking for steady growth with little or no volatility then you should not be looking at this at all. A conservative view, however, will see your investment growing at inflation and the whole reason to invest is to grow your capital so that it is worth more when you withdraw or need to utilise the capital to produce income.
Investing in an asset class such as equities is an aggressive move in a portfolio. If you are looking for steady growth with little or no volatility then you should not be looking at this at all. A conservative view, however, will see your investment growing at inflation and the whole reason to invest is to grow your capital so that it is worth more when you withdraw or need to utilise the capital to produce income.
Investing in shares is a calculated risk. One knows the possible pitfalls (loss of capital) and you balance this with research and knowledge. Purchasing an asset that one understands and has the capacity to grow is a good investment. ETF’s are a great investment and should be a cornerstone of your portfolio.
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