ETFs for beginners
What are they?
ETFs are a collection of assets traded as a single unit on the stock market.
These can be an index, commodities or bond or money-market investments, and you essentially own a small piece of these without actually owning any of the underlying shares. They allow you to have a portfolio of shares without buying each share.
ETFs are not meant to beat the market, they simply track it.
Fees are generally much lower than that paid for active managers. Most ETFs attract fees that are a third to a fifth of the fees asset managers charge for unit trusts. Given the size of the industry, fees are very competitive, says etfSA's Mike Brown, adding it is difficult to get fees any lower due to fees charged by the JSE and index trackers.
According to the etfSA website, investors using the etfSA Investor Plan platform to transact in ETFs pay a composite annual fee that covers the administration of their accounts, including: registration and custodianship of ETF securities; reinvestment of dividends; client reporting; issue of tax certificates; usage of the etfSA transaction platform; and compliance. The fees are 0.65% for a total investment per fund of up to R500 000, 0.5% between R500 000 and R1m, and 0.35% for R1m or more.
You pay stockbrokerage fees of 0.08% for buying and selling.