WATCH | exchange traded funds — five reasons to get on board
Join the discussion on the evolution and benefits of ETFs as an effective investment instrument on November 26
One only has to look at the latest results of the Sunday Times Top 100 Companies, which were announced earlier this month, to see how things have shifted as businesses felt the pinch of lockdown.
This year, 13 of the top 20 companies were engaged in the mining sector. While mining shares have always performed well according to the criteria of the Top 100 Companies — five-year returns on the JSE — this year they’ve shone with a certain lustre.
However, this leaves the person on the street and potential investors wondering which way to turn at a time of extreme volatility. If they’re in a position to start investing, how do they go about it? This is where the beauty of exchange traded funds (ETFs) come to the fore.
What is an ETF, and what benefits do they hold?
The JSE explains ETFs as “listed investment products that track the performance of a group or basket of shares, bonds or commodities. These baskets are known as indices”.
This means that instead of following individual company shares on the stock market — which takes a great deal of time and expertise — ETFs provide a more efficient and easier way to invest.
Five reasons why ETFs are the way to go, particularly for first-time investors:
Due to the relatively low cost of purchasing ETFs, they present a low barrier to entry and are an ideal way for young people with limited cash resources to start investing and planning for their futures. ETFs are passively managed, which means they don’t require the same amount of resource and attention as actively managed investments and are therefore more affordable.
ETFs hold the benefit of diversification, that is investors can reap the benefit of gaining exposure to a variety of companies within a single investment, or they may also use different asset class ETFs to diversify their portfolios and manage their risk. An added benefit is that all ETFs are completely transparent, giving investors full sight of what they are investing in.
There are two main ways that ETFs deliver returns — either through dividends (payouts) or by realising profits when trading them like stock: selling for a higher value than they were initially purchased.
They’re easy to buy and easy to sell. ETFs can be bought with a monthly debit order, or with a single lump sum investment.
Not only do many ETFs qualify for tax-free savings, they’re well-regulated by the JSE and Financial Sector Conduct Authority.
Join us as we celebrate the 20th anniversary of ETFs being listed on the JSE and hear a discussion on their evolution and benefits as an effective investment instrument. #20YearsofETFs
- Nerina Visser, ETF strategist and adviser, etfSA
- Helena Conradie, CEO Satrix
- Adèle Hattingh, business development and exchange traded products manager, JSE
Date: Thursday, November 26 2020
Time: 12pm — 1pm
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.