08 Apr 2015 Focus on ETFs – here are the basics
What is an ETF?
An ETF is a type of fund which owns the underlying assets (shares or equities, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. Shareholders do not directly own or have any direct claim to the underlying investments in the fund; rather they indirectly own these assets.
ETF shareholders are entitled to a proportion of the profits, such as earned interest or dividends paid. The ownership of the fund can easily be bought, sold or transferred in much the same was as shares of stock, since ETF shares are traded on public stock exchanges. Liquidity is guaranteed by the ETF issuer, it means they will always be a buyer and seller at a small spread around the actual value of the underlying asset price. You never have to worry about finding a buyer or seller in the market.
Advantages of ETFs:
By owning an ETF, investors get the diversification of an index fund. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you’d pay on any regular order.
The Satrix Fini:
The Satrix Fini provides investors with the price performance of the FTSE/JSE Financial 15 index and also pays investors all dividends received from companies in the index, net of costs, on a quarterly basis. Here are the basket constituents and top 10 shares in the Satrix Fini ETF:
The Satrix Indi:
The Satrix Indi is an index tracker portfolio and provides investors with the price return of the FTSE/JSE Industrial 25 index, plus each quarter the dividends received for the shares in the index are paid over to investors, net of costs. Here are the basket constituents and top 10 shares in the Satrix Indi ETF:
Over the last 3 years the Satrix Fini had a return of 88% with dividends reinvested and the Satrix Indi more than doubled, 109%: