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A Fin24 user and three friends are looking for the best way to start investing together. She writes:
We are three friends who want to start investing. We have decided that we will each contribute R350 per month.
However, we would like to know what is the best way to do this together?
Should we opt for Satrix 40 or what other options for maximum returns should we be considering?
Mike Brown, managing director of etfSA, responds:
You wish to know if you and your friends can set up monthly debit order investments and which products to use. You suggest that the Satrix 40 might be a good option.
As three people are involved with a R350 per month investment each - that is R1 050 in total - you and your friends could either invest in one unit trust or ETF or choose three different products in order to get a spread amongst various asset classes and markets.
This diversifies your risk and enhances long-term performance potential.
The table below shows the value of a R1 050 per month investment into the Satrix 40 and into three ETFs – Satrix INDI 25 ETF, DBX Tracker MSCI World ETF and Proptrax Ten ETF, over periods of one and three years.
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(Source: etfSA)
As the table shows, there is some benefit in performance by spreading the risk of the investment to other equity markets (DBX World) and to other asset classes (Proptrax Ten).
Please note, the performance data is based on the actual returns in the market for the past one and three years for the period ended January 8 2015 and there is no certainty that future investment performance will replicate past investment performance, so this is indicative only.
You and your friends could also consider doing this investment through unit trusts, but they are more expensive than ETFs with more volatile performance, so for relatively small investments, ETFs are typically preferred.
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