Exchange Traded Funds or ETFs are listed investment products that track the performance of a group or "basket" of Shares, Bonds or Commodities. These "baskets" are known as indices. An example of an index is the FTSE/JSE Top 40 Index. An ETF can be bought or sold in the same way as an Ordinary Share. Investors save time and money as ETFs enable an investor to invest in a variety of asset classes through a single listed investment product.
Who is this for?
ETFs are used by both professional and private investors wishing to gain exposure to different sectors, asset classes, types of Shares, Commodities or Government Bonds. They are the ideal investment vehicle for those who are new to the world of investing.
- Provides exposure to a variety of underlying instruments and not just one instrument i.e. it offers diversification
- Can be bought and sold quickly, at a low cost.
- Are hassle free; you gain exposure to a wide variety of securities or assets without having to do extensive research
- Are well regulated by the JSE and the FSB.
- May pay investors dividends when the underlying instruments held in the ETF pay dividends (not applicable to all ETFs).
- Are exempt from securities transfer tax (STT).
- ETF prices fluctuate, as do the prices of the ETF’s underlying instruments. However, because of the advantage of diversification, the risk of losing money is lowered.
How to get it
- Open a brokerage account with an authorised JSE Equity member.
- Open an investment plan with an ETF provider. This way, you can easily buy ETFs with a monthly debit order or a single lump sum investment.
- Use a platform that allows investors to purchase ETF products from different issuers.