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Why you should invest in the 'ETF Killer'

by , 05 December 2013

It's easy to understand why ETFs are a hot investment - and it's no secret that I'm a huge fan of them.

They have minimal fees, require small contributions and on top of all that they give you a fairly diversified investment.

But here's the thing...

I've found a new investment that I call the 'ETF Killer'. Not only does this ETF Killer offer even lower fees, it gives you even more diversification and potentially higher returns all in one neat bundle!

Let me explain...

Why the ETF Killer is making leaps
A few months ago the National Treasury released documents about retirement reform…
And one of the things it highlighted was the enormously high costs of retirement products.
It showed how the industry charged an average of about 3% in fees. Now 3% in fees may not sound like much, but it is a big deal!
Because, let’s say you were saving for your retirement through a retirement fund. If you were to cut the charge from 2.5% to 0.5% you would have a 60% greater retirement benefit over a 40 year period!
So in order to bring down these costs, Treasury has urged South Africans to use things like ETFs…
Because some ETFs have an all-inclusive fee of just 1.35%, which includes management and administrative costs. 
But using the ETF Killer you’ll only pay a mere 0.4% in fees!
What exactly is this ETF Killer and how can they be so much better?
The ETF Killer is a special unit trust offered by Sygnia Financial Asset Management. These guys have been offering their products to institutional investors. But now, they’re taking their products to people like you and me. 
They have a whole range of products to choose from… But the one that caught my eye was the 'Skeleton' funds.
Basically, these are funds in which the costs have been stripped to the bone. 
There are a couple of reasons why they’re able to smash down these costs. 
Firstly, the funds use more automated processes lowering the labour costs. 
Secondly, it’s part of the company’s strategy. They’re offering lower fees and making less money on each person… But by doing so they’re able to get more people which means greater profits in the end. 
And thirdly, they’ve spent very little on marketing costs which would normally be passed on to the client.
All of these factors allows Sygnia to change up the retirement game!
What these funds can do for you
Each of these Skeleton funds has a different asset allocation depending on your preference.
The one that caught my eye is the 'Sygnia Skeleton Balanced Fund'. The asset allocation for this fund gives you a great mix of local and foreign equities, bonds, listed property and money market assets and offers the 0.4% in management fees.
To get a full breakdown of the fund and where to find it, click here.
This makes it fully diversified and lowers your risk compared to buying just a single share or some ETFs that only track a single index.
Like many of their funds, if you want to invest in it, you can start with a lump sum of R50,000 or you can just pay a small debit order of R1,000.
As an added bonus you can use these funds as a retirement annuity and get great tax benefits! I show you how to do this in the blueprints of the Unconventional Millionaire.
One final note: The fund is more for long term investors. The benchmark for the fund I mentioned is CPI + 5%, which is roughly 12% return per year... But because they’ve just started they don’t have a track record yet.
Thrive in your possibilities,
Jonathan Bachrach

Why you should invest in the 'ETF Killer'
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