A look at alternative ve ways to buy ETFs
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.