SPLASH­ING IN THE ETF POND

War­ren Dick was thrown in at the deep end when he be­gan his ca­reer as ETF colum­nist

Financial Mail - Investors Monthly - - Front Page - WAR­REN DICK fol­low War­ren on Twit­ter @War­ren—Dick

Anew role for me means this will be my last col­umn for ETF Watch, so par­don me as I rem­i­nisce a lit­tle bit and look back on the last five and a half years that I have been fill­ing th­ese pages.

ETF Watch was my first gig as a fi­nan­cial jour­nal­ist.

The col­umn came about when Stu­art Theobald launched

In­vestors Monthly back in Fe­bru­ary 2010. Ob­vi­ously, be­ing the well-read man that he is, Stu­art had an idea that th­ese ob­scure prod­ucts, ETFs, would at some stage be­come in­stru­ments in the hands of the main­stream in­vest­ing public.

My own in­ter­est in in­vest­ing had led me to read a book writ­ten by The Mot­ley Fool in the late 1990s (their slo­gan was to ed­u­cate, amuse and en­rich). The book was writ­ten for the ben­e­fit of Bri­tish in­vestors, but in an easy and com­pre­hen­sive man­ner it set out the benefits of us­ing low-cost, broad-mar­ket ETFs.

It also of­fered a bru­tal as­sess­ment of just how dif­fi­cult it is for ac­tive man­agers (in de­vel­oped mar­kets) to beat their re­spec­tive in­dices.

The over­ar­ch­ing achieve­ment of the book was to con­vince me of the rea­sons for us­ing ETFs.

For this rea­son I con­sid­ered my­self at least a par­tially en­light­ened soul when Stu­art in­vited me to write the col­umn. But de­spite be­ing a huge con­sumer of fi­nan­cial lit­er­a­ture, I had never writ­ten for a pub­li­ca­tion be­fore (a brief in­ter­lude at North­cliff High School’s The Sand­wich didn’t count). So what does a per­son do when he has no clue what he is sup­posed to be do­ing? He begs, bor­rows and steals.

I asked a friend of mine, Oliver Speers at In­vestec, what I should write.

He was get­ting in­volved with In­vestec’s foray into pas­sive prod­ucts and would be en­gaged with what later be­came the In­vestec Z-Govi ETF. In his en­thu­si­asm, he wrote a draft copy of what he thought the col­umn should look like. And he did such a good job that, let’s just say, I bor­rowed heav­ily from Oliver’s draft (sorry, Stu!).

While Oliver’s con­tri­bu­tion ended af­ter that first col­umn, ETF Watch, this lovechild of de­ceit and pla­gia­rism, was born. But enough about the col­umn. Back in 2010, South Africans were still con­fus­ing ETFs with EFTs (elec­tronic funds trans­fers). As­sets un­der man­age­ment were tiny in re­la­tion to the size of SA’s to­tal sav­ings pool.

But things have changed rapidly over the last five years.

While not quite as daunt­ing as the 900-odd unit trust funds the av­er­age in­vestor can pick from in the mar­ket, there is now a va­ri­ety of pas­sive prod­ucts to choose from. And you can buy them in var­i­ous guises: as ETFs (in­stru­ments traded on the JSE), unit trusts (avail­able on LISPs — linked in­vest­ment ser­vice provider plat­forms), or ex­change traded notes (also traded on the JSE, though is­sued by a bank). So, from hav­ing too few choices, we now prob­a­bly have too many.

Over the years I have cov­ered the ar­rival of new prod­ucts, the shift in at­ti­tudes to the prod­ucts, and the growth of the in­dus­try, both lo­cally and off­shore.

But I share the sen­ti­ment of Ja­son Zweig from The Wall Street

Jour­nal . Mar­ket con­di­tions change, fi­nan­cial in­no­va­tion con­tin­ues, mar­ket fads come and go — that will all be news­wor­thy. But it’s been my job to carry on bang­ing on about the “bor­ing” and “repet­i­tive” rea­sons of why we should use th­ese prod­ucts. It’s the same rea­son The Mot­ley Fool pro­vided me with all those years ago: sim­plic­ity, per­for­mance, and peace of mind.

So from hav­ing too few choices, we now prob­a­bly have too many

When chaos meets an­ar­chy…

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.