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How a lazy bugger financial advisor could cost you R14,949

by , 01 August 2014

A friend of mine, Isaac, decided that in addition to investing in individual shares he also wanted to save a monthly amount into an ETF. It's a hassle free way to save for the long run with lower risk than a share picking portfolio.

So Isaac contacted his bank and asked his financial advisor which ETFs would be suitable to invest a monthly sum into. His advisor actually gave him a sensible combination, Satrix Top 40, SatrixDivi Plus and the DBX Trackers World ETF for some offshore exposure. NICE.

But hidden in this selection is a very LAZY choice from his advisor. One that'll cost him an extra R14,949 over the next ten years when it is completely unnecessary...

How Isaac's lazy advisor is costing him money

There's nothing wrong with the Satrix 40 ETF. It’s a perfectly good index tracker.

But if you ask me it’s a lazy choice.

To me it shows his advisor picked the very first top 40 index tracker they knew about, or perhaps the ONLY one they knew about...

Why do I say so?

Well, the Satrix 40 is one of the most expensive top 40 index tracking ETFs around. It's cost is 0.45% a year. Sounds small right?

It might be. But there are lower cost ETFs around. For instance the RMB Top 40 ETF.

It will cost you 0.19% a year.

What difference does this make?

Well, if you invest R5,000 a month into the ETF it would end up costing you approximately R25,873 in fees over ten years if you invest in Satrix 40. The RMB Top 40 ETF would cost you R10,924 in fees. And both these ETFs do the same thing. They track the same index and grow the same amount (before fees). Just think about it, this savings alone is more than enough to pay your advisor...

Go do the lazy test today

So, if you have a financial advisor or broker, do the lazy test today. Ask them which Top 40 index tracker they would suggest you should invest into...

If their default answer is the well knownSatrix 40 without reason ask them why not RMB Top 40...

RMB is a well known financial firm so there's no reason not to trust them.

Over the  5 years the RMB Top 40 ETF has actually slightly outperformed the Satrix 40 ETF. And it has lower costs!

In my humble opinion only a lazy bugger wouldn't take the trouble, go to ETFSA for ten minutes and compare the different Top 40 ETFs to each other.

It's not hard work. And while I have no problem paying someone for a service, I have a very big problem paying someone when they're a
lazy bugger who isn't even trying to save you money...

So, do the lazy test. And if you get the answer and it's a 'default' lazy one, I suggest you start shopping around for someone that actually wants to grow your money instead of just suck the commissions from your pocket.

Here's to unleashing real value

Francois Joubert
Editor, Red Hot Penny Shares

How a lazy bugger financial advisor could cost you R14,949
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