SPLASHING IN THE ETF POND
Warren Dick was thrown in at the deep end when he began his career as ETF columnist
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…