If you have to invest in ETFs, invest in the best ETF South Africa has to offer. We will look into the top 10 best ETFs in South Africa to get you started.
Exchange Traded Fund (ETF) is a pool investment security traded on the stock exchange and operates like a mutual fund. An ETF tracks a given commodity, sector, index, or asset. However, unlike a mutual fund, ETF can be traded on the stock exchange just like stocks.
ETF can be designed to track a:
- Diverse securities/asset collection,
- Price of a single commodity,
- Unique investment strategies, or
- Anything you need to keep tabs on
ETFs expose investors to a diverse collection of assets (basket of securities) without necessarily having them buy each individual asset. For instance, an ETF could hold currency, stock, bonds, and commodities. An example of a South African ETF is STX40 which tracks the performance of the FTSE/JSE Top 40 Index.
In South Africa, ETFs invest in a wide range of asset classes based on their mandate. They may invest in alternatives, fixed income, equities, and commodities.
South Africa has seen an increase in the uptake of ETFs in the recent past. This trend continues to grow due to their (ETF) ease of trading, low cost, and access to a diverse asset class. As of 2023, the ETF had a market capitalization of R123 billion. Let’s take a look at the best ETF in South Africa.
Best ETF South Africa
When choosing the best ETF in South Africa, you have to take 5 main points into account. These are tax efficiency, expense ratio, asset class, liquidity, and expense ratio. We will delve deeper into these in the final part of this article. Let’s look into the 10 best ETFs in South Africa.
Satrix 40 ETF
The Satrix 40 ETF, JSE code STX40, tracks FTSE/JSE top 40 index. The FTSE/JSE top 40 index features the top-performing companies on Johannesburg Stock Exchange (JSE) rated based on their investable market cap. This ETF purposes to replicate the FTSE/JSE top 40 index accurately by featuring all the assets in the specific index weighting.
Sygnia Itrix MSCI World ETF
Sygnia Itrix MSCI World ETF tracks MSCI World Index as closely as it possibly can. MSCI World Index is a weighted index featuring companies from developed countries (23 to be specific) across the world.
This ETF is a passively managed, high-risk index tracking asset aimed at replicating the yield performance and price of the MSCI World Index. It achieves this by having a portfolio with securities similar to the basket of securities making up the index as well as in the weightings of the index.
Sygnia Itrix MSCI World ETF is a high risk asset. It is structured to measure the performance of world-developed market equity which represents companies whose total market cap is estimated to be US30 trillion. It is ideal for an investor who is:
- Tolerant to high volatility
- Looking for higher returns
- Seeking long-term investment opportunities
- Looking for a cost-effective investment to maximize potential returns
Based on its structure, you should not have Sygnia Itrix MSCI World ETF as your only equity investment. Instead, it should be a part of your diversified investment plan.
Satrix Indi 25 ETF
Satrix Indi 25 ETF, JSE code STXIND, is ideal for an investor who is looking to invest in an ETF with high industrial sector exposure. This ETF tracks FTSE/JSE Capped Industrial 25 Index that features the biggest industrial companies on JSE (rated by investable market capitalization).
NewFunds S&P GIVI ETF
NewFunds S&P GIVI ETF tracks S&P GIVI South Africa Index – a composite index measuring South African companies listed on JSE and featured on S&P Global Broad Market Index.
ABSA NewGold ETF
ABSA NewGold ETF is a product that allows South Africans to invest in gold. It holds actual gold in safe storage and tracks the price of spot gold. It offers security at prices equivalent to 1/100th an ounce of gold. Both retail and commercial traders can safely invest in ABSA NewGold ETF and consequently in physical gold.
It provides an alternative for investors to hedge against geopolitics and inflation. The product is also Shariah-compliant.
Satrix MSCI World ESG ETF
Satrix MSCI World ESG ETF, JSC code STXESG, tracks the MSCI World ESG Enhanced Focus CTB Index. The index is structured to enhance exposure to ESG – environmental, social, and governance – metrics. It features companies that meet given ESG criteria. This ETF is ideal for investors who would like to invest in companies that have a positive effect on society across the globe.
NewFunds SWIX ETF
NewFunds SWIX ETF tracks the FTSE/JSE SWIX All Share Index – a market cap-weighted index featuring companies appearing on JSE. This ETF tracks the performance of SAs equity market.
ABSA NewPlat ETF
ABSA NewPlat ETF gives investors access to the platinum market. It is a simple and cost-effective way for investors to put money in actual platinum. Essentially, this ETF keeps tabs on the platinum spot price.
Investors can buy the listed instrument where the security price is equal to about 1/100th ounce of actual platinum. The ETF is backed by a holding of actual platinum in the NewPlat Custodian.
Ashburton Africa Equity ETF
Ashburton Africa Equity ETF keeps tabs on the S&P Pan Africa High Dividend Low Volatility Index. This index is a division of the S&P Pan Africa Index featuring companies from all over Africa with low volatility and has historically paid high dividends.
Satrix Rafi 40 ETF
The Satrix Rafi 40 ETF follows the performance of the FTSE/JSE RAFI 40 Index. The FTSE/JSE RAFI 40 Index is a weighted index featuring the 40 biggest companies appearing on JSE. The index is weighted based on a company’s dividends, cash flow, and sales and not its market capitalization.
What to Consider When Looking for the Best ETF in South Africa
Essentially, you need to look at 5 major things when finding the best ETF in South Africa. These are:
Overall, ETF are more tax efficient than mutual funds and other forms of investments. By design, ETFs do not create capital gains as shares are traded between investors. However, all the gains made are transferred to investors who then have to pay taxes on them.
Typically, ETFs invest in certain asset classes like stocks, commodities, currencies, and bonds. Each of these asset classes poses a unique set of risks. You must learn the strengths and weaknesses of the asset classes and how they fit into your general investment strategy.
Essentially, tracking error is the quantification of how close an ETF keeps tabs on the performance of the primary benchmark. An ETF with a lower tracking error is good since it indicates the effectiveness of the ETF in tracking the underlying benchmark.
The expense ratio is the yearly fee charged to ETF shareholders. Find an ETF with a lower expense ratio to get more out of your invested money. A lower expense ratio means more of your invested money goes into the invested instead of wasting away on fees.
Liquidy influences the availability of opportunities when trading ETFs. Typically, ETFs with high trading volumes and low spreads are deemed to have high liquidity. ETFs with high liquidity make it easy for investors to sell and buy shares of the ETF.
How Do You Invest in ETF in South Africa
Like any investment, for you to invest in ETF in South Africa, you must begin by learning the tricks of the trade. Do this by reading extensively on the subject. Consult professionals and get an advisor who will guide you as you invest.
To begin actual invest you:
Have to find a certified JSE Equity member and open a brokerage account with them
Open your investment plan. Alternatively, you can use an online ETF platform, with an ETF provider or financial services provider (FSP).
People Also Ask
What are the top 5 ETFs to buy?
Invesco Solar ETF (TAN), SPDR S&P Semiconductor ETF (XSD), First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), VanEck Semiconductor ETF (SMH), iShares Semiconductor ETF (SOXX).
What is the top-performing index fund in South Africa?
Satrix. According to Morningstar, Satrix was the top index tracking service provider in South Africa in 2022.
What is the best ETF platform in South Africa?
AvaTrade – it is South Africa’s leading trading platform offering a wide range of products to trade. It offers CFDs on Forex, Stocks, Indices, Cryptocurrencies, ETFs, and Options.
How do I choose a good ETF fund?
Choose the best ETF South Africa based on exposure. You should ask yourself the type of exposure an ETF has, how effectively the ETF offers this exposure and how well can you take advantage of the ETF. Do this by assessing the ETF’s benchmark.
Putting your money in ETF is a great way to invest in different products without buying individual assets in the basket. However, you need to invest in ETFs that appeal to your individual investor personality. This piece on the best ETF South Africa will get you started.