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Investment: Why it pays to know your ETF from your EFT


Investment: Why it pays to know your ETF from your EFT

Many people still confuse exchange traded funds with electronic fund transfers or index funds

Stephen Cranston

Nerina Visser, along with Mike Brown, runs etfSA, a broker that specialises in exchange traded funds (ETFs). She faces two problems in the market. One is that many people still confuse ETFs with electronic fund transfers (EFTs), or internet-based money transfers. The other is that the term ETFs is often used interchangeably with index funds. Some advisers believe they have access to all the index products they need through standard unit trusts.

What makes ETFs different is that they are traded on the JSE. While unit trusts are priced just once a day, bids and offers for ETFs are taken throughout the trading day. The problem has been that this has been the preserve of stockbrokers. Financial advisers, who invest the vast majority of private money, are rarely qualified to deal in securities (and rightly so). But these are not common or garden securities – they pool a portfolio of shares, making them conceptually no different from unit trusts.

One practical difficulty is that few ETFs are available on unit trust platforms such as Investec and Momentum – even Sanlam’s Glacier only offers four of the ETFs marketed by sister company Satrix...

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