Many retail investors are bombarded with ways to invest through exchange traded funds (ETF), most of which passively track an index.
The ETF platforms highlight how cheap they are, but in actual fact they aren't cheaper. If you have more than R80,000 in the account, its expensive. The ETF platforms charge between 0.35% and 0.65% ex VAT just for annual admin fees. That's on top of the other fees and the ETF's internal costs.
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How to use low cost ETF platforms to your benefit
You should be accumulating assets on ETF platforms only once you have exceeded your Tax-Free savings account limit. If you are contributing lump sums you should ideally go through your current stockbroker or online trading platform as you already pay an account fee.
This way you aren’t duplicating fees. And as a longer-term investment your trading costs will be lower.
Save over 90% of the fees by moving to the correct account
There are investors with over R1 million invested in ETFs on the various ETF platforms, they don’t realise they are paying more fees than they have to. All they need to do is move their ETF holdings once it’s over R100,000 to an existing share trading account.
You can easily transfer your ETFs from a platform to your current stockbroker and trading platforms and reduce your fees instantly. All you will pay is a low transfer fee ranging from R100 to R300.
ETF platform accounts are the lowest cost option while your account is under R80,000 but after that they could be very expensive.
Contact your stockbroker or trading platform to see if it makes sense to move your ETFs into your current account.
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The week ahead:
• Local: CPI, SARB Conference (23/10)
• Local Releases Due: AGL (22/10); AEE, CTK, FBR (23/10); CLS, L4L (24/10)
• LDT (22/10): IMRP5
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For investors looking for simple offshore exposure with downside protection and pre-determined returns, there are three new “Safe Haven” investments available to investors.
These are the latest Auto call structured products from Investec, for investors looking for downside protection, offshore exposure and possibly benefit from Rand depreciation. An auto call structured product allows investors to make a profit in year 1 if the index is flat or positive, if it’s negative, then it will roll over for up to 5 years. Each time, it provides for the positive return to be multiplied. All fees are built into the price so you get exposure to 100% of your investment amount and all returns are quoted net of fees.
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