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Finweek English Edition - - INSIDE -

JO­HAN NEL WRITES VIA EMAIL: I’d like to get com­ments from you about my port­fo­lio. It con­sists of or­di­nary shares, ap­prox­i­mately equally di­vided in terms of value. It con­sists of the fol­low­ing shares: BHP Bil­li­ton, Stein­hoff, Sa­sol, Bid­vest, Richemont, FirstRand, Reinet, EOH, Naspers, PSG, Rem­gro, Wool­worths, Pallinghurst, and cash – 5% of port­fo­lio value.

At the mo­ment the mar­ket is mov­ing from one record to the next, our econ­omy does not show ro­bust growth, which makes me feel un­easy. I reg­u­larly see ad­ver­tise­ments and ar­ti­cles on ex­change­traded funds (ETFs), but I know lit­tle about them.

Must one eval­u­ate ETFs in the same way as lo­cal shares to in­vest in them? Do you have gear­ing when you in­vest in them? With shares you have to pay 100% of the pur­chase price. Is it the same for ETFs?

SIMON BROWN RE­SPONDS: ETFs are in­deed ungeared. In other words, one pays the full price. They are dif­fer­ent to share se­lec­tion as they track en­tire in­dices so rather than a view on a par­tic­u­lar share, they of­fer a view of an en­tire in­dex, com­mod­ity or geog­ra­phy.

As for more in­for­ma­tion, we have run a few ar­ti­cles in Finweek if you have back is­sues ly­ing around. If you can’t, the dif­fer­ent ETF is­suers, et­fSA (www.et­fsa. co.za) and my own web­site JustOneLap (www.justonelap.com) all of­fer ad­vice on them. The last point re­gard­ing ETFs is that the Deutsche Bank ETFs are by far the eas­i­est way to get in­ter­na­tional ex­po­sure.

As for your port­fo­lio, it looks great. It’s di­verse across sec­tors with a good mea­sure of in­ter­na­tional ex­po­sure and largely the win­ning stocks in each sec­tor – some­thing that I al­ways ad­vo­cate. Pallinghurst is the only one that jumps out at me, but ev­ery port­fo­lio needs a spice and Pallinghurst is yours.

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