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Interested in investing in ETFs? Here's how and why they're worth considering

by , 10 March 2015

ETFs or exchange traded funds, are a type of collective investment scheme. They work in a similar way to unit trusts, but they are listed on the stock market.

So if you want to invest in ETFs, how can you do it? And why should you consider investing in ETFs?

Read on to find out…


How to invest in ETFs


When you invest in ETFs, you’re buying shares in a fund. These shares are your fractional ownership of the basket of securities that make up the ETF, such as share or commodities.

When you buy and sell ETFs, you’ll generally pay the same broker commissions and fees as you do when you buy and sell shares. As they’re market traded, the price changes through the day as it does with shares in listed companies.

There are some ETFs available that you can invest into on a monthly basis too, from as little as R300.


Why should you consider investing in ETFs?


By investing in ETFs, you can benefit from the low costs of replicating a passive portfolio that tracks the market. This is something that many pension funds do.

Despite many active funds aiming to outperform their benchmark index, many of them fail to do this over the long-term. And this is why passive investing through ETFs can pay off.

Not only that, if the companies that make up the ETF you invest in pay out dividends, you’re entitled to your share of that cash too.

Instead of putting your money into a handful of different shares, ETFs give you instant diversification. Invest in an ETF tracking the JSE’s top 40 companies and you’ll benefit from the price movement of those shares and any dividends they pay out.

So there you have it. How to invest in ETFs and why you should consider them.

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Interested in investing in ETFs? Here's how and why they're worth considering
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