Unlike traditional unit trusts, the exchange-traded funds are listed on the Johannesburg Stock Exchange and are bought and sold in the same manner as ordinary shares. Whether you are a first-time investor or an old hand, they offer a versatile investment product to fit various objectives. It’s necessary to know how to purchase the ETF in South Africa in order to make the proper decision. From the selection of the broker to the selection of the appropriate ETF, the whole exercise demands thorough planning and awareness of market trends.
How to Purchase ETFs in SA
Buying ETFs in South Africa follows a simple procedure, and all you need to do is choose a brokerage platform, fund your account, and place an order in the desired ETF. The first thing you need to do is to register an account with a qualified stockbroker or an online trading website that offers you access to the Johannesburg Stock Exchange (JSE). EasyEquities, FNB Share Investing, Standard Bank Online Share Trading, and Nedbank Online Trading are some of the popular websites through which you can trade in the ETF. All the websites offer different terms and conditions, so you need to compare the pricing first.
Once you have a trading account, you deposit the money you wish to put in. The minimum you are expected to deposit varies depending on the platform, and some accommodate minimum investments. Hence, the market in the ETF is accessible to the majority of investors. You deposit the money, and you look up the desired ETF. The Satrix 40 ETF, Sygnia Itrix MSCI World ETF, and 1nvest S&P 500 Feeder ETF are some examples in South Africa. You select an ETF based on the market, the ETF tracks, the track record, and the fee.
After choosing the desired ETF, you are required to place an order. You can carry out the order at the market rate, or you can use a limit order to specify the rate. After processing the order, the units in the chosen ETF are added to your portfolio. The majority of the sites provide you the means to monitor the investments in real-time, and you are in a position to track the progress and, if necessary, reallocate.
How Much Do I Need to Invest in an ETF?
One of the most striking positives about the use of ETFs is their availability to investors of different sizes. The money to be invested in an ETF depends on the cost of a single unit and the commission to be settled to the trading platform. The JSE listed some of the ETFs at R50, so they are accessible to new investors. Unlike traditional unit trusts, whose minimum lump sum investments are necessary, ETFs allow the investor to use minimum money and vary the size in the process of building the portfolio.
Additionally, some brokers offer the ability to invest fractionally, so you are able to put money into half a unit, a quarter, and so forth. This makes investing in an ETF easier if you don’t actually have the funds to put into the whole thing. The minimum you are expected to put in isn’t mentioned, so you just pay the additional fees involved in the dealing, the maintenance, and the brokerage.
Can I Buy ETFs Without a Broker?
In South Africa, the majority are bought and sold using the services of brokers and online trading sites, which offer access to the JSE. It isn’t possible to purchase the ETF from the exchange by oneself, but other means are available to use in the same manner as brokers. A few asset management businesses and some other financial businesses provide the means to put money into the ETF by means other than the standard brokerage.
For example, some fund managers provide investors with the option to invest in the ETF through monthly debit orders, whereby the investor establishes monthly debit orders to purchase units in the ETF automatically. The funds are convenient to hands-off investors. Alternatively, you also have the option to invest through TFSAs, if available, or through funds in retirement. The investments are also tax-privileged and provide the investor with the benefit of getting exposed to the market in the ETF.
How Do I Know What to Buy?
Choosing the right option requires detailed research and evaluation. This will be based on your objectives, appetite, and strategy. The different asset classes, including equities, bonds, commodities, and foreign markets, are the targets of different ETFs. Within the local market in SA, some track local market indices, including the FTSE/JSE Top 40. Others provide global market coverage, including the S&P 500 and the MSCI World Index.
Investors looking to maintain the status quo consider the Satrix 40 ETF, tracking established market indices of the significant JSE-listed businesses. International diversifiers could consider the Sygnia Itrix MSCI World ETF. A hedge against economic instability could be supplied by funds based on commodities, such as gold and/or platinum-based ETFs.
Can I Buy an ETF by Myself?
Investors can also buy the ETF independently by opening a trading account at an online trading site that offers JSE access. Unlike the case in conventional funds, in this case, the investor gets to manage his investments himself. Most of the trading websites in South Africa offer simple and easy-to-use interfaces through which the investor gets to search, place, and monitor his investments himself.
Self-directed investing gives the investor control, albeit at the cost of having to understand market trends and the performance of the ETF thoroughly. Hands-off investors could use the auto-investment sites, whereby the portfolios are automatically invested in by the robo-advisor based on the investor’s strategy. The algorithms in the auto-investment sites automatically allocate the money into the ETF based on the investor’s profile and goals.
Final Thoughts
ETFs provide South African investors with an easily accessible and inexpensive means to diversify portfolios and gain entry into the financial market. With low entry fees and numerous choices to select from, ETFs are flexible enough to accommodate both first-time and seasoned investors. Whether purchasing through an online broker, an investment plan, or a tax savings account, there are various ways to gain entry into the world of ETFs in South Africa.
