Investing in Exchange Traded Funds

It’s time I started investing, I know I’m late but better late than never right?. Initially I was planning on investing in Unit trusts (because I think passive investments would be good for a beginner such as myself)  however since I found out that fees for exchange traded funds (ETFs) are relatively cheap, I’m now headed in that direction.

ETF’s are securities that track an index, commodity or bonds. They trade like common stock on the stock exchange, experience price changes throughout the day and can be bought and sold easily. Finweek described them as a collection of assets traded as a single unit on the stock market and they allow you to have a portfolio of shares without buying each share. The first ETF in South Africa was launched in 2000. According to an article by Simon Brown in the JSE quarterly magazine, “R1000 invested in the top 40 ETF in 2000 would today be worth almost R6000, and that excludes the dividends”.

I will start my investment portfolio with a fund that tracks the JSE top 40 index, they provide diversification and stable returns in the long term. Top 40 ETF’s include, Stanlib Top40, Satrix Swix top40,  Ashburton Top40 portfolio, etc. My preferred fund? Ashburton Top40.

Source: ashburtoninvestments.com (19 September 2017)

Simon Brown suggests that 50% of a portfolio in ETF’s is the absolute minimum and for novice investors or those who do not want to invest in individual shares, 100% in ETF’s is perfect for wealth creation. So for now, this will do, but in future I definitely see myself investing in individual shares.

 

 

 

 

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