Exchange Traded Products are growing rapidly in popularity around the world because they make investing simple and cost effective.
Traditionally, investing on the share market has meant searching for individual shares or products like unit trusts that, investors hope, will do better than the market. This is known as active investing. It requires skill and that skill comes at a price. Strange as it may seem, it is this price that results in a large number of actively-managed unit trusts underperforming, not outperforming, the market.
When it comes to simplicity, one of the best investment portfolios you can own doesn’t try to pick the winners, but invests in all the shares of a market index. For instance, it is possible for you to own the top 40 shares on the Johannesburg Securities Exchange with one simple investment. Because there is very little skill involved in investing like this, the costs are lower. Exchange Traded Funds are a popular Exchange Traded Product. ETFs are low-cost unit trusts that invest in all the shares of an index. Because they are traded on an exchange, you can buy or sell them whenever the market is open. For your peace of mind, Exchange Traded Funds are subject to the regulations of the Johannesburg Securities Exchange and Collective Investment Schemes. Exchange Traded Funds don’t try to do better than the market, but because of their lower costs they often end up beating the funds that try.