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How to own the market

A Fin24 user is keen to invest in Satrix 40 and wants to know more. He writes:

1.    Which companies make up the Satrix 40?
2.    Is it cheaper to invest in Satrix 40 via a broker or direct with Satrix?

Brett Landman, CEO of Satrix Managers, responds:

The investment objective of the Satrix 40 exchange-trade fund (ETF) is to replicate, as closely as possible, the performance of the FTSE/JSE Top 40 index. The Top 40 index comprises the top shares on the JSE by market capitalisation.

The Satrix 40 ETF achieves its investment objective by holding the same shares held in the index in the same weighting as they appear in the index.

We publish on the Satrix website on a daily basis, under the heading "basket constituents", and in our fact sheets (published on the website) the shares that are held by the Satrix 40 ETF.           

Satrix securities can be acquired through the Satrix Investment Plan or through a stockbroker/online trading account. Each offers different functionality and has different cost implications.

Investors would therefore need to compare the costs applicable to an investment in Satrix through the Satrix Investment Plan to the costs charged by their stockbroker/online trading account (these vary), to determine which route is most cost effective given their specific circumstances.

The answer will generally depend on the size and frequency of the trades.

Notably, the Satrix Investment Plan allows a monthly debit order of a minimum R300 per month and the "automatic" reinvestment of distributions (if the investor elects the reinvestment option). This facility is not available through a stockbroker or online trading account.

In conclusion, the investor should select the option that best suits their specific requirements and their pocket.

Why you should own Satrix 40?


The major companies on the JSE included in the Top 40 index account for the majority of the JSE's trading. By investing in this index, you are closely duplicating the performance of the entire market.

Over the past number of years, the JSE has performed very well and comfortably ahead of inflation.

For investors looking to generate capital growth on their savings over extended periods of time, the JSE has in the past provided an outstanding record of long-term growth.

Then there is the issue of portfolio diversification. Buying one share can be extremely risky; buying a few reduces the risk.

Satrix 40 provides a well-diversified portfolio of large capitalisation companies, and diversification reduces risk. The Top 40 companies include resources, industrial, retail, telecommunication and financial companies - a wide spectrum of counters which ensures consistent performance and strong rand hedge qualities.
    
So in essence, if you buy one security, you own the market.

 - 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. 

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