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A Fin24 user is curious about the difference between ETFs and the shares on the JSE. He writes:
I would like to know the difference between exchange-traded funds (ETFs) and the shares of listed companies on the JSE.
Mike Brown, managing director of etfSA, responds:
ETFs are securities listed and traded on the JSE, like other company securities.
Where they differ is that the ETF gives the investor exposure to an entire portfolio (fund) of shares and not just to a single company, as in company securities.
The advantage for the investor is that when they buy an ETF, they own a little bit of each of of the companies covered by that ETF.
For instance, when an investor buys a top 40 ETF (like Satrix 40 or RMB Top 40 ETFs), they own a little bit of each of the major 40 blue chip shares on the JSE.
In South Africa ETFs typically cover the major indices on the local and other markets.
As indices measure the performance of only the largest and most tradable shares in the market, an ETF will only give exposure to quality securities.
This provides a measure of security and quality control for the investor.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
ETFs are also a low cost route for investors.
For instance, should the investor purchase the top 40 securities on the JSE independently, they would pay brokerage and JSE/Strate settlement charges 40 times, as well as securities transfer tax (STT) on each transaction.
If you buy a top 40 ETF, you get exposure to the same 40 companies, but only pay brokerage and settlement charges once. No STT taxation is payable for transacting in ETFs.
Investing in portfolios of shares through ETFs reduces the investors’ risk by diversification and avoids the volatility associated with single stocks, plus lowers costs.
ETFs, like other securities on the JSE, can be purchased or sold through any JSE member stockbroker or through specialised ETF investor platforms.
The etfSA Investor Plan, for example, allows investments from as low as R1 000 for lump sums and R300 per month for debit orders.
I would like to know the difference between exchange-traded funds (ETFs) and the shares of listed companies on the JSE.
Mike Brown, managing director of etfSA, responds:
ETFs are securities listed and traded on the JSE, like other company securities.
Where they differ is that the ETF gives the investor exposure to an entire portfolio (fund) of shares and not just to a single company, as in company securities.
The advantage for the investor is that when they buy an ETF, they own a little bit of each of of the companies covered by that ETF.
For instance, when an investor buys a top 40 ETF (like Satrix 40 or RMB Top 40 ETFs), they own a little bit of each of the major 40 blue chip shares on the JSE.
In South Africa ETFs typically cover the major indices on the local and other markets.
As indices measure the performance of only the largest and most tradable shares in the market, an ETF will only give exposure to quality securities.
This provides a measure of security and quality control for the investor.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
ETFs are also a low cost route for investors.
For instance, should the investor purchase the top 40 securities on the JSE independently, they would pay brokerage and JSE/Strate settlement charges 40 times, as well as securities transfer tax (STT) on each transaction.
If you buy a top 40 ETF, you get exposure to the same 40 companies, but only pay brokerage and settlement charges once. No STT taxation is payable for transacting in ETFs.
Investing in portfolios of shares through ETFs reduces the investors’ risk by diversification and avoids the volatility associated with single stocks, plus lowers costs.
ETFs, like other securities on the JSE, can be purchased or sold through any JSE member stockbroker or through specialised ETF investor platforms.
The etfSA Investor Plan, for example, allows investments from as low as R1 000 for lump sums and R300 per month for debit orders.
