Episode 007 - How do I invest in ETFs

My last blog post was back in May 2021, and thanks to the pandemic it feels like it was 2020, we all blinked and then boom we were in 2023. I am quite excited to be writing again, especially on my new website. For those who had been following my old blog posts, welcome back and for those who are new, its an absolute privilege to have you here.

True to the name of the page I thought maybe let's start with the basics of ETF investing. Many people out there are curious to learn about investing, but the topics and products sold to them seem complex and very hard to make sense of. Let me make things simple for you.

Without any further ado let us get into the topic for today; Investing in ETFs. Its's a cool buzz word, and more people are trying to understand what they are. I want to make sure that by the time you get to the close of this blog entry, you are clear or at least have a bit of knowledge on what they are.

What are ETFs

For the investment veterans out there this part might bore you to death, but there are millions out there who really have no idea what ETFs are so this step is important.

Imagine you had money to invest and you also had a broker account that enables you to send through orders to buy individual stocks. This means that you would, at your own time buy stocks like Shoprite (SHP), Naspers (NPN), Gold Fields (GFI), Absa Group (ABG) and so on. This you would do through a stock broker at any time that the JSE stock market is open (usually between 9am and 5pm weekdays) and then you build your portfolio of a long list of stocks. What if I told you there was a much simpler way of buying stocks to build up a portfolio, queue in ETFs. The acronym stands for Exchange Traded Funds, in other words it is a Fund that you can Trade straight from the Exchange, hence the name. ETFs allow you to buy an entire basket of shares/stocks in one transaction, instead of buying stocks one transaction at a time. ETFs are traded on stock exchanges similar to individual stocks, meaning you can buy and sell them throughout the day at market prices. They are a popular and convenient way to invest in a broad range of assets with lower fees.

Examples

• The Satrix Top 40 ETF: This ETF allows you to buy a basket of the biggest 40 companies that are listed in the JSE, all in one transaction. Immediately once you buy this ETF your investment has exposure in companies like Richemont (CFR), Anglo American (AGL), Naspers (NPN), MTN Group (MTN), Sasol (SOL), Standard Bank (SBK) etc.

• The CoreShares S&P 500 ETF: This ETF tracks the performance of the biggest 500 companies in the United States, all with just one transaction.

Selling out of an ETF is as easy as buying into it. As long as the stock market is open, you can issue an instruction to your broker and sell your ETF position, they will trade for you and your money will be available after 4 to 5 working days. Please, remember that part as people tend to sell out of their investment and think that their money will be in their bank account immediately.

The ETF landscape in South Africa

I am actually going to write a separate blog entry for this part, but let me just give you the high-level part. Basically there are around 95 ETFs listed in our stock exchange, where anyone who has a broker account can buy/sell. Just like any industry, there are very known sellers of these products. In the ETF world we call them "issuers". So in South Africa there are 7 big players in the ETF space, who are the issuers of South African listed ETFs. Below are the issuers and the number of ETFs that they have:

• 1nvest 16

• Absa Capital 3

• Cloud Atlas 2

• CoreShares 10

• FNB 8

• Satrix 41

• Sygnia 15

How do I trade ETFs

This is quite easy, you just need to register with either a stock broker or a platform that allows you to buy into ETFs. Satrix and Sygnia have some of the best platforms to trade ETFs, and in order for you to be part of these platforms you need to visit their official websites and register an account. You will be required to send through your ID copies and proof of bank account. This is important as they need to double check that it really is you. EasyEquities is another great platform, where you can trade ETFs, buy into Unit Trusts (which I have discussed in previous blog entries) and individual stocks. Once you have registered, you will be required to deposit money into your account, so that you are able to start trading ETFs.

I hope this blog helps and gives you some understanding of what ETFs are. On the next blog I am hoping to explore more on the ETF landscape, discuss what the different ETFs mean and how you can go through them and choose the one that suit you etc. We will also talk about fees, risks and other interesting topics that fall under ETFs.

If you are keen to interact with me on Social media, be sure to follow this link (Twitter @S_Nomoyi).

See you next time!