Exchange Traded Funds

Get your hands on a collection of shares that follow market themes, one time!

Make like 58578 Easy you-sers and buy an ETF now
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What the ETF

At a first glance an ETF might look a bit like its distant relative: a unit trust. But unlike its cousin this sexy little portfolio of different shares, bonds, and other instruments, is single and ready to mingle – it can be traded on stock exchanges (like the JSE) as one instrument. The most common ETF’s are designed to track the performance of a market benchmark or index by mirroring the makeup of that index in a portfolio. Some ETF’s even include international companies like Apple, Microsoft and General Electric which is handy when the rand takes a dive.

When it comes to investing, diversification is the word! You need to spread your investments between different shares in different amounts to hit the sweet spot on your risk vs return ratio. Exchange-traded funds (ETF’s) are the cheapest and easiest way to do this. The National Treasury has even decided they are a perfect match for tax-free savings accounts (TFSAs) – so once you’ve deposited some money into your TFSA you can treat yourself to an ETF shopping spree! But they can also be bought as you would normally buy a share in your EasyEquities account, just nje.

Intellidex ETF picks...
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We like any of the three Swix-weighted top 40 funds (Satrix Swix, NewFunds Swix 40 or Stanlib Swix) but we maintain our choice of Stanlib Swix 40 (STANSX) because of its lower expense ratio…

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Although European stocks performed well in the first quarter of 2017, it was off a low base and we still prefer the US funds over its peers because political uncertainty is still, high particularly in Europe. Our choice in this category is a fairly new fund, the CoreShares S&P 500…

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There are a few property-focused ETFs to choose from but our choice is the CoreShares PropTrax 10, which uses an equally-weighted index that reduces the idiosyncratic risk of individual companies.

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If you are investing for a very short period, usually less than a year, then NewFunds TRACI 3 Month (NFTRCI) is a natural choice, because it is least sensitive to sudden adverse interest rate movements.

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We believe returns should be considered on a total return basis which combines both capital growth and dividends. We prefer the Satrix Divi because it is forward-looking, based on projected dividends.

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ETF's assessed

The main difference between an ETF and a unit trust is that ETF’s are listed on the JSE so you can buy or sell them just like a share. That means you can see the prices all day and the only cost to you in buying them is the brokerage fee (with EasyEquities that’s a market low of 0.25%, whoop whoop!). In contrast, unit trusts are not listed on the stock exchange and prices can only be set at the end of the day. Unit trust investors also have to dish out an upfront fee of up to 2% and because most unit trusts are actively managed they tend to have higher costs than ETF’s, which passively track their index.