Exchange Traded Funds (ETFs) are listed investment products that track the performance of an index such as a basket of shares, bonds, or single commodities.
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. ETFs enable investors to invest in various asset classes through a single listed investment product, saving time and money. As these types of ETFs track the performance of underlying assets/indices, they follow a passive investment strategy
Another type of ETF, an Actively Managed ETF (AMETF), is a listed investment product that offers exposure to a Collective Investment Scheme (CIS) portfolio managed through an active investment strategy.
Who is this for?
ETFs are used by both professional and private investors wishing to gain exposure to different sectors, asset classes, themes, investment strategies or geographies They are the ideal investment vehicle for those who are new to world of investing.
Features:
- They provide hassle-free exposure to various underlying assets and investment strategies.
- They offer accessible portfolio diversification opportunities.
- They are bought and sold quickly and at a low cost.
- Are well-regulated by the JSE and the Financial Services Conduct Authority (FSCA).
- May pay investors dividends when the underlying instruments pay dividends (not applicable to all ETFs).
- ETF prices fluctuate, as do the prices of the ETF’s underlying instruments. However, because of diversification, the risk of losing money is lowered.
- Purchases of ETFs are exempt from Securities Transfer Tax (STT).
- Listed, traded, and settled in Rands.
- Market maker presence to ensure adequate liquidity.
How to invest
- Open a brokerage account with an authorised JSE Equity member.
- Open an investment plan with an ETF provider and make a lump sum investment or invest by debit order.
- Use a Financial Services Provider’s (FSP) online platform that allows investors to purchase ETF products from different issuers.