In this week’s episode of The Fat Wallet Show, we discuss how to put together your own ETF portfolio. Within tax-free investment vehicles, you are only allowed to invest in ETF products. This prevents investors who are new to the market from taking on too much risk. The tax-free accounts are designed to build wealth in the long term. Risky investments have been known to scare investors away from the stock market forever.
ETFs make great first investments, because a single share buys you access to the performance of many companies. Think of it as a lucky packet: you pay one price for many treats. However, not all ETFs buy the same underlying companies. Some are designed to buy the biggest companies that are listed on the JSE, while others only invest in certain sectors. Some ETFs only invest in shares, others in property, some in bonds and one or two even invest in cash.
While there are certainly fewer ETFs to choose from than individual shares (for the moment), you still have to make a choice about which ETFs are most likely to deliver the returns you are after. If you only have five years to invest, for example, you would make different ETF choices than someone who is planning to invest for 20 years.
This might seem overwhelming if you are new to investments. How on earth is anybody supposed to know this? Luckily for you, we hold your hand through the process.
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