A look at al­ter­na­tive ve ways to buy ETFs

Finweek English Edition - - FEEDBACK -

Areader was ask­ing about the t wo FNB prod­ucts, Share Saver and Share Builder, as an a lter­na­tive to buy ing ex­change-traded funds (ETFs). I will also throw into the mix the Auto Share In­vest from Stan­dard Bank.

First, Share Saver: this will buy you two of the RMB ETFs for you – the Top40 and Mid­Cap ETFs – mean­ing you end up own­ing the top 100 stocks on the JSE in a nice low-cost en­vi­ron­ment. The min­i­mum monthly debit is R300 and lump sum is R1 000. The trans­ac­tion fee is 0.1% plus VAT if done on the first day of the month, oth­er­wise any other day costs 0.6% with a min­i­mum of R80 plus statu­tory fees and taxes. The monthly ad­min fee is a slid­ing scale de­pen­dent on the port­fo­lio size and starts at 0.4% plus VAT per an­num on port­fo­lio value, grad­u­ally low­er­ing as your port­fo­lio in­creases to above R250 000.

The Share Builder and Auto Share In­vest are the more dif­fer­ent prod­ucts, but first let’s step back a mo­ment.

At t he top end of i nvest­ing we have buy­ing in­di­vid­ual shares via a stock­bro­ker, with be­tween R5 000 to R15 000 per trans­ac­tion be­ing the ideal min­i­mum due to the cost of trans­ac­tion and de­pend­ing on the bro­ker’s fee struc­ture (such as min­i­mum bro­ker­age fee). At the low end are ETFs, which are great lowlow-cost prod­ucts, but they of­fer you a bask bas­ket of shares (in some cases in­di­vid­ual com­modi­ties c or cur­ren­cies) and here we h have the monthly debit min­i­mum of R30 R300 or lump sum min­i­mum of R1 000. But w what if you want to only in­vest a small amou amount ev­ery month (say R1 000-R5 000) but w want in­di­vid­ual shares rather than the bask bas­ket of­fered by the ETFs? That’s where Share Builder and Auto Share In­vest come in, as they of­fer smaller trans­acti tion sizes but for in­di­vid­ual shares.

Share Builder has a pre-se­lected list of 22 large-cap stocks and ETFs listed on the JSE (the prod­uct also of­fers Kruger R Rands) with a monthly fee of R19 and a trans­ac­tion fee of 2% (R50 min­i­mum) plus VAT per trans­ac­tion. This is a great way to build a port­fo­lio of in­di­vid­ual shares not­with­stand­ing one is lim­ited to 22 stocks and ETFs – but it is still a great place to start. The 2% trans­ac­tion fee is rea­son­able com­pared to the FNB Share In­vestor prod­uct (its full-ser­vice online trad­ing prod­uct) where the fee is 0.6% (min­i­mum of R80) plus statu­tory fees and taxes.

Stan­dard Bank’s Auto Share In­vest is slightly dif­fer­ent: first, it op­er­ates via its In­ter­net bank­ing plat­form, so you need to be a Stan­dard Bank client with In­ter­net bank­ing. Its prod­uct range is around 100 shares and ETFs (no Kruger Rands) and pur­chases are done monthly on the 25th (or on the next busi­ness day if the 25th is a hol­i­day or weekend) and sales are done ev­ery Fri­day. The trans­ac­tion cost is 1% plus R20 in­clud­ing vat and there are no monthly fees if you trans­act at least ev­ery two months. If you do not trans­act over a two-month pe­riod you will be charged R25 in­clud­ing VAT for the two months. Again, this is a great way to build a port­fo­lio of in­di­vid­ual shares at lower costs.

Com­par­ing the fee struc­ture be­tween the two a R1 000 trans­ac­tion will cost R30 with Auto Share In­vest, while Share Builder will cost R57. At R2 500, Auto Share In­vest costs R45 and Share Builder still costs R57, while at R5 000, Auto Share In­vest costs R70 and Share Builder R114 (all ex­clud­ing monthly fees). So Auto Share In­vest is cheaper and has a larger range but you can only buy once a month, whereas Share Builder of­fers more f lex­i­bil­ity.

Si­mon Brown is a Fin­week con­trib­u­tor and heads ju­s­tonelap.com, a free re­source of fi­nan­cial in­for­ma­tion and in­vest­ment ed­u­ca­tion.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.