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Exchange Traded Funds

Information about ETF

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WHAT IS AN ETF?

Exchange Traded Funds or ETFs such as the Satrix 40 ETF pool investor funds in cost-effective instruments that gives investors access to a large basket of underlying holdings, such as shares. Instead of purchasing one share on the market, you can get exposure to the 40 best performing companies listed on the JSE or the top companies listed in the financial and resource sectors.

Most Exchange Traded Funds, with the notable exception of NewGold, the largest ETF measured by market capitalisation, are collective investment schemes and are bound by the regulatory constraints of these investment products

Exchange traded funds are similar to Unit Trusts because you invest in a group or basket of holdings rather than a single share or bond, for example. Like Unit Trusts, Exchange Traded Funds are open ended which means that they have no fixed amount of units in a fund. Exchange Traded Funds are designed to track a wide range of instruments, including actively managed growth portfolios and fixed interest portfolios. There are also Exchange Traded Funds that track optimum mixed asset-type portfolios. Even though an ETF is passively managed, units can be actively traded intra-day. shares are actively traded as each company moves up or down a particular index

ETFs are listed on a securities exchange and offer the same benefits as share trading. This means your asset value and investments holdings will always be valued at prevailing market prices and investments can be redeemed at any time. In addition, ETFs are eligible for automatic dividend and yield reinvestments.

Gold ETFs provide a method for investing in gold without the logistical issues of insurance, storage, moving, and reselling, along with others. Gold ETFs such as NewGold offer an ideal way to get commodity market exposure with limited risks.

In addition to Exchange Traded Funds you now have the opportunity to invest in several ETN products. Exchange Traded Notes provide investors with wider access to a range of commodity based Indexes with many of the same benefits as trading ETFs. We have a dedicated section on Exchange Traded Notes, click here.

HOW DO I INVEST IN AN ETF?

If you are interested in exchange traded fund investing, you can complete the simple online registration process.

STEP ONE: Register online for an ETF account and PSG Online web profile.
STEP TWO: Provide us with your FICA details if you are new to PSG Online. PSG Online will open your ETF account within 72 hours of receipt of your FICA documents.
STEP THREE: Login to your account. You will use the same username and password chosen when you registered for your web profile in Step One.
STEP FOUR: Purchase your ETFs in your investment plan from the New Order screen.

WHAT ARE THE ADVANTAGES OF INVESTING IN ETFs?

Diversification - There are a wide range of ETFs, designed to track domestic and foreign equity indices, commodity-based indices, property indices, 'style' and fundamental indices, as well as bonds and multi-asset portfolios.
Liquidity - ETFs are actively traded as a cost-effective instrument to gain sector and market exposure. Investors can access their investment at any time.
Accessibility - ETFs can be traded using your PSG Online share trading account or via the PSG Online ETF Investment Plan account, this can be done as a once-off transaction or via monthly debit orders.
Flexibility - PSG Online offers you access to a wide range of ETFs from a number of different ETF providers, including ABSA, Deutsche, RMB, Nedbank, Proptrax, Investec, Standard Bank and SATRIX.
Cost Effective - ETFs offers smaller monthly investment amounts with a low cost structure.
Transparency - ETF owners know exactly what stocks or underlying assets they are holding and what the value is.

ETFs can serve as a cornerstone of a long-term strategy for creating wealth. They give you the opportunity to make smaller monthly investments while still getting exposure to the financial markets. ETFs spread your risk by virtually eliminating portfolio fallout from a single stock plunge, while you will benefit from the growth possibilities of many other stocks. ETFs are exempt from securities transfer tax because a basket of securities is transferred to the redeeming party and no cash is exchanged. However, ETFs are subject to capital gains tax when you sell your investment. An exchange traded fund investment fund meets all the criteria for sound, long-term financial planning. ETFs are low-cost, diversified and tax-efficient.

What are the disadvantages of investing in ETFs? ETFs are sold as cost effect investments. Prospective investors should however be aware of the relative costs, including initial fees, annual fees and re-investment costs of different investment options. Investors can either invest in EFTs through an Investment Plan, or directly through a stock broker. PSG Online offers both options.

Secondly investors should be aware that the performances of index trackers are generally better investments in upward trending markets. Markets lacking direction generally favour bottom-up stock picking strategies.

WHAT ARE THE DISADVANTAGES OF INVESTING IN ETFS?

ETFs are sold as cost effect investments. Prospective investors should however be aware of the relative costs, including initial fees, annual fees and re-investment costs of different investment options. Investors can either invest in EFTs through an Investment Plan, or directly through a stock broker. PSG Online offers both options.

Invest in ETFs, invest in your future. Register now to start.

WHAT ARE THE COSTS?

Note: You are able to make a once-off purchase into an ETF Investment Plan or invest through a monthly debit order. If you wish to make a once-off purchase you will need to deposit funds into your account prior to making the purchase.

Investment Requirements
Debit orders are subject to a minimum of R300 per fund per investment period. The minimum lump-sum investment is R1000.

Investment Plan Costs
There is a 1% annual fee (excl VAT) based on the total value of your portfolio. This is debited monthly to your account. Debit order fees are charged at R3.50 on all debit order investments. A Trading fee of 0.1% (excl VAT) and a Settlement fee of 0.0002% (excl VAT) are levied on all transactions.

Invest from as little as R300 per month. Register for your ETF today.

WHO PROVIDES THE ETFs?

PSG Online provides the investment platform through which you can invest in a range of exchange traded funds provided by different companies.

Exchange Traded Funds offer investors several advantages that give you more choice, more control, and more protection over your investment portfolio. However, like all investments the role of Exchange Traded Funds in your overall strategy is dependent on your goals and preferences.

Register with PSG Online to invest in a wide range of ETF investment plans, or contact a financial advisor if you would like someone to invest in ETFs on your behalf.