ETF: Finding the right ETF

In ETF Blog, Latest by Kristia van Heerden

“What should I buy?” This is the question we hear most often from first-time investors. It’s an understandable impulse to leave the choice up to somebody else, but it matters that you make this decision on your own.

Investing is about your financial security. You work for your money, and then your money works for you. We have our own opinions on the matter, but it’s unlikely that we’ll be around to account for our decisions when you need that money. You should always know why one you’re choosing one ETF over the other.

In this post we’ll share a few things you can try to find an ETF that’s a perfect fit for your lifestyle and temperament.

Undress it

Like great relationships, ETFs are all about disclosure. You can find easily find the following information about each ETF available on the JSE. This website is a great place to go hunting for information. 

For a single ETF, this information is interesting, but not worth much. When you start comparing ETFs using this information, however, you suddenly get a clearer picture of your options.

Think about fees

ETF fees don’t begin and end with the total expense ratio (TER). While this ratio affects the performance of your ETF, account and brokerage fees also eat away at your returns. Be circumspect about where and how you buy your ETFs. We explain what brokers are and how they work here. When it comes to ETFs, look for a brokerage that doesn’t charge a monthly or annual account fee. Among those with no account fees, go for the one with the lowest brokerage.

Diversify

We wrote about asset class exposure in this post. There are great ETFs in the market that give you exposure to different asset classes. The alchemy lies in deciding how much exposure you should have to each asset class. That depends on your financial circumstances, which means you are ultimately responsible for the decision. 

Just start

Sometimes things seem harder from the outside. If you can afford a R100 investment, find a brokerage that allows R100 investments and bite the bullet. Buy your first ETF. If it’s a disaster you lose R100. At worst, it saved you from eating take-out for one day. It doesn’t have to be intimidating. An ETF doesn’t have to be a lifetime commitment. If you make the right choice at the beginning, you can easily remedy it later by selling the ETF you had or by simply contributing to a new one.

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