The Satrix Momentum ETF (JSE code: STXMMT) works on the assumption that companies doing well in terms of share price and earnings will continue to do well in the future. Factor-based investing is index investing 2.0. Companies are included based on certain shared characteristics. In the case of the STXMMT, that characteristic is an upward trajectory.
To construct the index, the top 100 companies listed on the JSE are considered. Companies whose share prices and earnings have risen in the period under consideration are included. Conversely, companies whose share prices and earnings have fallen are excluded from the index. Since share prices change all the time, this index is rebalanced more than indices weighted by market capitalisation. The constituents of this index change eight times per year. Naturally, rebalancing comes at a cost, which is why this is one of the more expensive Satrix products, with a total expense ratio (TER) of 0.4%.
Indices weighted by market capitalisation, like the Satrix 40, gives you the return of the market, minus fees and tax. For most people this is a great way to grow wealth with minimum effort. Factor-based investing introduces a greater level of decision-making for more advanced investors. It affords investors an opportunity to attempt to grow their investments by more than the stock market average.
As always, it’s important to only invest in products you understand fully. Due to the nature of a momentum strategy, the share price of this ETF will likely go up and down more often than a vanilla ETF. If you aren’t used to short-term share price movements in your investments, you might not enjoy holding this ETF. Due to its volatile nature, this is not an ETF for short-term investments.
|Satrix Momentum ETF
|17 November 2018
|Total expense ratio
|Satrix Momentum Index
|Tax-free savings account
|ETF major holdings
|Naspers, Compagnie Fin Richemont, Gold Fields, Firstrand, Anglogold Ashanti, Absa Group, Glencore, Investec, Reinet Investments, Anheuser-busch Inbev
| 1 year -3.98%
3 years +12.56%