Choosing single stocks to Invest in or include in a portfolio can feel daunting for DIY investors due to the risks and complexity of selecting the right investments.
Stock picking requires in-depth research and analysis of companies, industries, and market trends.
When selecting individual stocks, DIY investors should know how to read and understand financial statements. They should also review a listed company’s quarterly and annual reports to evaluate the management teams and their approach when picking the best companies with the most potential for future growth and investment returns.
Investors also need to stay up to date on economic and geopolitical news and events that could impact the company’s performance. This level of research is often time-consuming and complex for self-directed investors.
For those who want to embark on their DIY investing journey but are unsure where to start, exchange-traded funds (ETFs) offer a simpler approach to getting started, because time in the market is often more important than timing the market.
Everything you need to know about ETFs
An ETF is a type of investment fund and exchange-traded product that holds a collection of assets, such as stocks, bonds, commodities, or other securities.
ETFs are designed to track the performance of a specific index, sector, or asset class, and they trade on stock exchanges much like individual stocks.
Accessing ETFs via an online trading platform like Clarity, by Investec, offers investors a more efficient means to gain broad exposure to the best-performing local and global investment opportunities across asset classes, sectors, regions and themes.
These passive investments are easy to understand, offering a simple and cost-effective way to get your share of the markets while benefiting from baked-in diversification.
As ETFs hold a bunch of investments, they leverage economies of scale to charge lower fees compared to buying individual stocks. It’s like enjoying a bulk discount for your portfolio!
Low fees and minimums allow investors to start investing with small amounts of discretionary capital – Clarity, by Investec has no monthly fees and requires a minimum investment of only R25 to start investing.
ETFs are also liquid investments, allowing investors to access their capital at any time, with the option to buy and sell shares throughout the trading day at market prices. This provides greater liquidity compared to mutual funds like unit trusts, which are only traded at the end of the trading day.
Moreover, most ETFs regularly disclose their holdings, which lets investors see the underlying assets in the fund, providing transparency.
The ETF benefits in a nutshell:
- Invest across asset classes, sectors and themes.
- Benefit from baked-in diversification with exposure to a range of stocks.
- Liquid investments that let you buy and sell on demand.
- A cost-effective way to get your share of the market with no fees and low minimums.
Don’t know what to buy?
Clarity offers a range of almost 100 ETFs on the platform, which you can view here. These ETFs include 20 JSE-listed indexes available from your ZAR account, and 80 ETFs that offer global exposure.
Clarity, by Investec clients can easily gain exposure to the biggest companies in the world via your USD account, with easy access to developed markets like the US, Europe and UK via ETFs that track major stock indices, including the Vanguard S&P 500 ETF (VOO-NASQ), the iShares FTSE 100 ETF (ISFL-TRQX) or the SPDR Euro Stoxx 50 ETF (FEZ-NASQ).
Investors can also take a thematic view, gaining exposure to hyper-growth sectors and industries where innovation is driving major trends, like the tech sector via the iShares US Technology ETF (IYW-NASQ) or the dynamic healthcare sector via the Health Care Select Sector SPDR® Fund (XLV-NASQ).
The platform also offers options to invest in indices that provide exposure to China, the second-largest economy and the most prolific emerging market in the world.
For instance, the iShares China Large-Cap ETF (FXI-NASQ) tracks the biggest listed Chinese companies while the KraneShares CSI China Internet ETF (KWEB-NASQ) provides easy access to one of the fastest-growing sectors and investment themes, Chinese internet companies.
Investors looking to diversify the assets in their self-directed portfolios can invest in fixed-income securities via ETFs like the iShares High Yield Corporate Bond ETF (HNY-NASQ) or iShares Treasury Bond ETF (IEI-NASQ), with the option to include commodities like gold via the iShares Gold Trust (IAU-NASQ).
How do I invest in an ETF in Clarity?
Investing in a ZAR ETF or USD ETF via the Clarity platform is very easy. Simply deposit money into your ZAR account and search for the JSE-listed ETF you want to invest in or convert your ZAR to USD if you want to buy a USD ETF.
Here’s an example of how investing in USD ETFs can deliver solid returns. If you deposited R1,000 onto Clarity on 1 Jan 2024 and converted it to USD at R18.30 to the US dollar, you would have $54.67.
If you took advantage of the fractional share trading available on the Clarity platform to buy a portion of the Vanguard S&P 500 ETF (VOO-NASQ), which was $430.00 at the time, you would have purchased 0.13 lots of the index.
A year later on 1 January 2025, the price of the index had grown 27% to $545, which meant your initial $54.76 investment was now worth $69.26.
If you sold out of your position and converted your $69.26 back to ZAR at the prevailing exchange rate (R18.70/$), you would’ve made a 30% total return on your R1,000, pocketing R1295.
While potential returns are market-dependent and investing means holding your position for the long term despite market fluctuations, investing in ETFs ensures you actively participate in the market with a diversified investment that can deliver solid returns over time.
So don’t wait, jump into an ETF now to start your DIY investment journey!
