ETFs via ABSA or EasyEquities

A

aktor

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Hi again,

My previous thread was getting a little off-topic, so decided to rather create a new one for this question specifically. Also didn't really want to necro the previous EE-threads.

I've been looking into investing (medium- to long-term) in ETF's, and FNB's Share Saver and Share Builder options aren't giving me the options I'd like. Share Investor is way too expensive to justify smaller investment amounts. After much digging, I seem to have narrowed it down between two services: EasyEquities and ABSA Stockbrokers (the TFSA, converting to the ETF-Only when the amounts reach those levels).

Now, I've read through the threads here on EE (and ABSA), and have some questions:

1) With ABSA, when you buy the shares, do you own them or are they held by a nominee account? And does this matter when only trading in ETF's?

2) Same question as above, but for EE. Let me phrase the question this way. If you were to, say, buy shares in MTN - would you personally appear in MTN's shareholders register, or would EE be listed there? (nominee)

3) The fees between the two look extremely close when comparing EE to ABSA's ETF-only (and especially their TFSA). So my question is more about support. How reachable and responsive are they? Can you get hold of them easily?

4) In terms of 5 - 10 years down the line, we know ABSA is probably not going anywhere. But how about EE? Will your ETF and other shares be safe? (this question probably ties in with questions 1 & 2 a bit)

5) Unrelated to either, but does anyone know if Google Finance is shutting down? Google seems to have stopped actively working on it.

6) In the 100+ page thread on EE on this forum, I've read some positives, and many negatives. While I certainly don't want people to go back-and-forth with each other on this thread on the matter, I'm making it a little more simple. If taking the positives and SUBSTANTIATED negatives/dodginess into account, how do EE and ABSA compare? (not interested in the unsubstantiated claims, there will always be those who complain about spreads when the issue was really just a price-delay, etc)

7) And in case I missed one, is there any other online broker other than ABSA / EE that offers the same fee structure as them? Bearing in mind investment amounts will probably not be more than R1k per month.

8) I'm probably by no means a "serious investor" due to the approx R1k per month that I plan to invest, but at the same time this money is serious to ME, and I'd like to know that the service I use is serious and operates in the same way. Not to mention reputable and ethical. This is a big factor, I'm a cautious guy when it comes to trusting others with my money (I know share/ETF investing is risky in itself, but that risk is on me, I'm referring to risks outside my control). If, in a few years time, I want to cash out all my shares and EE (or whoever) is going to make it difficult because of their own liquidity, it's going to be a problem. (Not saying they will, stating a hypothetical).

9) I'd address these questions to the EE forum rep, but I've seen two of them come and go, with no posts since Feb of this year. Unless there's a third one? Figured the community here will be able to answer most of my questions though, as many of you have personal experience with both EE and ABSA, etc.

At the moment I'm completely undecided between the two, the only thing I'm sure of is that FNB is not an option (which is a pity, as I bank with them and have done so for decades). But in the meanwhile I have my first pool of funds earmarked for investment just sitting here and unsure which one of those to go for to start making the money do something.

PS: Something to note, not sure if it has any bearing on anything. While reading up on EE, I phoned their customer line and asked the guy the following question. "If I issue a buy instruction at 2pm today, when is that trade going to take place? Immediately, delayed, when?". He couldn't tell me, but said that the price on the invoice is guaranteed. I then said sure, but when will that trade actually be performed on the JSE - to which he replied "it can take up to 5 days". What? How...what? How can it take up to 5 days and I "own" the share right away? Makes me wonder if I'm even buying these shares off the JSE, or from EE's own "pool" of shares. Probably doesn't matter, if I become the full owner of the share. But that answer was really strange?
 
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When you buy an ETF you physically own the shares within it. So if either ABSA or EE goes bust your ETFs are safe and can be transfered to another platform like Standard Bank or whatever. The only issue with EE is your partial shares (minimal)...not sure how that'll work.

ABSA going bust? Extremely unlikely.
EE going bust? Well, they are new and apparently heavily subsidising the first three years of costs to the client to try make it profitable. They'll probably still be around for a long time but I wouldn't rate their chances of success versus the likes of ABSA.

I've never had issues with support from either, but EE seems more "eager" to help. Ask the guy who sat next to me two weeks ago and he'll give you a completely different view.

How do the two compare?
  • If we ignore the fact that EE's site looks ridiculous we can safely say that they cater for very different types of clients. EE makes use of value and bulk orders which means they automate a lot of the stuff involved in share trading to make it as easy as possible for you. You have very little control over bid offer prices etc. and basically "take what you get" with their platform. Click the button and you buy the shares at the price they gave you, click the other button and you sell at the price they gave you.
  • If EE caters more for the average guy then ABSA caters for "power users". You have full control over your bid/offers and make use of limit orders. You can't just say "I want R5000 worth of STX40" as with EE, instead you place an order like "I want 120 STX40 shares and willing to pay R41 for one of them any time between now and next week Friday" (whole shares only).

That's the fundamental difference. EE adds niceties like debit order scheduling/auto buying meaning you can put your investments on autopilot. ABSA is a lot more manual. Because EE prescribes the selling price you technically never get the best deal but also don't have liquidity issues.

Other than going for unit trusts and making sure you pick the right ones, I'm not aware of any other stockbroker giving you as good a deal as ABSA (ETF Only Account) or EE for investing/trading in ETFs. The rest are crazy expensive unless you get staff rates. I stand to be corrected on this though.

As for your last point regarding when the trade is placed via EE - that's most likely the bulk ordering I mentioned. They collect all the trades placed by their users and place it as a whole when it suits them to keep costs down. Remember, every transaction on the JSE incurs costs. FNB's Share Saver does the same - you would've noticed that it is much cheaper to make use of the "first trade day" functionality than placing an order in the middle of the month. They place the trades in bulk, it is seen as one massive transaction on the JSE and FNB/EE is charged for one trade meaning they don't charge you the full amount.
 
Further to that - I make use of both ABSA and EE. I don't particularly like either and I'll tell you why - they make it too damn easy to fsck up.

I've been doing a lot of my own investments for quite some time most of it through ETFs. Given that the "glory days" of STXIND and DBXWD giving us close to 30% a year are over for the time being investing has become more difficult because you tend to have a lot more losing days than you used to 3 years ago. And back then with everything going well it wasn't difficult to invest at all - buy ETF, see it grow, smile and be happy. Not so much these days and that's the problem - your portfolio's performance is in your face all day and it is way too easy to make an emotional decision and execute it on these platforms especially on EE.

Think about it this way (especially if you are new to this): the base/foundation ETF you are invested in is ASHT40 - a regular Top40 like Satrix's one, the oldest and the classic South African ETF. Growth is not that great, you read up and find out there is another type of Top40 - the SWIX!

You like what you read, compare the graphs, see it performs way better and move you investment to it. As time goes by you realise that SWIX is fundamentally flawed and what they intended to fix with it just created a similar problem in another area... you get this uneasy feeling and read up some more and low and behold: CTOP50!

Now CTOP50 is great - it gives you the top 50 instead of 40 stocks (and people are saying that is way more an accurate representation of our market) and caps the weighting of a share to 10% (which is great because that is exactly the problem with the previous two). You move your investment to it and cross your fingers that the markets will start doing well. It's time to make some money! :cool:

...oh look, they just changed the way the NFEMOM ETF works starting September 2016. They don't focus on just the top 40 stocks either, take everything into account, look for shares that show real momentum and shortlist them. Interesting. You get hold of the ABSA NewFunds guys, he sends you awesome info about the ETF and it actually looks pretty damn good. Instead of investing in an index and hoping for the best you can use this smart beta ETF that applies logic (developed by WITS nogal) and be invested in 20 shares that's been showing growth momentum for the last couple of months. FANTASTIC! And it's a NewFunds ETF and not a CoreShares own (schweet!) and total returns... LET'S DO THIS! And you move again.

...

The above might sound ridiculous but I currently own NFEMOM. And if I tally up the costs of moving every time I can see that I've made some real mistakes. Investing in ETFs can become addictive and watching their performance on Google Finance and Bloomberg all day consumes your life.

So that's why I told my financial advisor that I want to stop, move these to unit trusts when the time is right and signed debit orders to do so. Those are out of my sight, on "autopilot" and I can carry on with the rest of my life - work, relationship, holiday!!
 
Thanks Hamster, appreciate the detailed reply!

It's the conclusion I came to as well. Still leaves me at a bit of a crossroads in terms of which one to choose. From a coldly logical perspective, I'd say ABSA (safer, relatively speaking), but from a risk-reward perspective I'd say EE (as you can invest in some select shares - invest, NOT day-trade). I suppose you can't really go wrong with EE, as long as you are absolutely 200% guaranteed that your whole shares are owned by you and that you personally appear on the shareholders register at the various instruments.
 
Hamster said:
As for your last point regarding when the trade is placed via EE - that's most likely the bulk ordering I mentioned. They collect all the trades placed by their users and place it as a whole when it suits them to keep costs down. Remember, every transaction on the JSE incurs costs. FNB's Share Saver does the same - you would've noticed that it is much cheaper to make use of the "first trade day" functionality than placing an order in the middle of the month. They place the trades in bulk, it is seen as one massive transaction on the JSE and FNB/EE is charged for one trade meaning they don't charge you the full amount.
Click to expand...

Sure, but here's a hypothetical. If I buy 200 shares in XYZ company, I immediately "receive" them on EE. They add it to their next bulk order which will happen, say, 2 days from now. But tomorrow morning I want to sell those 200 shares again at a slightly higher price (not that I would, as I'm not day-trading, but again - this is a hypothetical). So now I need to receive the funds for those 200 shares at their new sell price, but the shares haven't been bought yet in the first place. Would EE front this money, or would they decline the trade?
 
aktor said:
Sure, but here's a hypothetical. If I buy 200 shares in XYZ company, I immediately "receive" them on EE. They add it to their next bulk order which will happen, say, 2 days from now. But tomorrow morning I want to sell those 200 shares again at a slightly higher price (not that I would, as I'm not day-trading, but again - this is a hypothetical). So now I need to receive the funds for those 200 shares at their new sell price, but the shares haven't been bought yet in the first place. Would EE front this money, or would they decline the trade?
Click to expand...

You as a client shouldn't worry about the bulk ordering or whatever EE is doing in the background to make their stuff work. Just buy and sell as you see fit. It's never been an issue for me using their platform. To you everything will seem instant.
 
Good point, as long as they guarantee it. Still curious about the whole-shares ownership (not talking about the endless 17-page debate on true owner vs beneficial owner), think I'll email them to get confirmation on that.

Quick question regarding the TFSA with them though:

Let's say the following happens:

Year 1: Deposit 30k into the EE TFSA from my FNB account, use all of it to buy shares.
Year 2: Same as above, 30k again.
Year 3-10: Each year, same as above.
Year 11: Total holdings at EE is now 300k (purchase value). Sale value is 320k.

Now I want to sell all my shares and bring the money back in to my FNB account. However, the TFSA lifetime limit is now at 300k / 500k. Selling 320k would put it over the limit (620k / 500k). How would one handle this? Can you instruct EE to sell the shares but put the proceeds in the EE account instead of the TFSA account?

Second question: What actually counts towards your annual and lifetime limits? Money moving into the TFSA from other bank accounts (movement either way, in & out), or also money moving from the TFSA to shares and back?
 
The limits apply to money going into the TFSA/TFIA account. What you do with it inside of the account doesn't matter. You can withdraw as much as you like though but you'll never be able to replace it.

The R30k limit is the annual limit, the R500k is the lifetime limit. Any growth or loss inside of the account does not affect that. So if you end up with a total of R12,000,00 in your TFIA after 30/40 years you can withdraw it all.
 
Hamster said:
The limits apply to money going into the TFSA/TFIA account. What you do with it inside of the account doesn't matter. You can withdraw as much as you like though but you'll never be able to replace it.

The R30k limit is the annual limit, the R500k is the lifetime limit. Any growth or loss inside of the account does not affect that. So if you end up with a total of R12,000,00 in your TFIA after 30/40 years you can withdraw it all.
Click to expand...
Sorry Hamster - that part has me confused :P
 
aktor said:
Sorry Hamster - that part has me confused :P
Click to expand...

Year 1: Deposit R30k. It grows @10% so you end up with R33k. You can withdraw R33k.
Year 2: Deposit R30k. It grows @20% so you end up with R36k. You leave it.
Year 3: Withdraw R16k from previous year's growth. Balance is now R20k. Deposit R30k for the year...

Make sense?
 
Hamster said:
Year 1: Deposit R30k. It grows @10% so you end up with R33k. You can withdraw R33k.
Year 2: Deposit R30k. It grows @20% so you end up with R36k. You leave it.
Year 3: Withdraw R16k from previous year's growth. Balance is now R20k. Deposit R30k for the year...

Make sense?
Click to expand...

I think so. So only deposits into the account count towards the limits, not withdrawals. Also not proceeds from share sales?
 
aktor said:
I think so. So only deposits into the account count towards the limits, not withdrawals. Also not proceeds from share sales?
Click to expand...

Exactly. That's why you pump it into instruments for maximum growth and one day when you retire you switch it to income producing instruments (dividends, REIT, interest) and have that pay out to your account quarterly or whatever as an extra "paycheck" over and above your RA.
 
Gotcha thanks, makes good sense now.

Also just had a call from EE in response to my mail with questions (pretty much the same questions as above). They seemed quite knowledgeable and eager to help. Specifically in response to my question "if I buy whole shares in Naspers, for instance, is my name reflected on their shareholders register, or is your name reflected on there"... to which he answered "your name". But he said he'll confirm that to be sure. So we'll see. Not sure it matters all that much, but, yknow.

I've noticed you asked this question (EE vs ABSA) back in February too, so from a personal point of view, which platform do/would you use? :)
 
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I use both. TFSA I'll keep with EE for now until I decide what exactly I want to do with it.

ABSA ETFs I'll keep until they turn a decent profit and then move them to the appropriate unit trusts. By the looks of things, I'll probably have to keep them for another year or two
 
Not to get too far off-topic, but using ABSA Stockbroker's demo system now. After buying a share, where on earth do you see the value that you bought it for? "Today's order book" just shows the current value.
 
You have to wait for it to trade. The market value must match the price you are willing to buy at. After that it'll show on your portfolio overview...the first page you see
 
On the demo account it seems to trade immediately. It's on both my portfolio and on my "today's order book". Just not clear what value the trade actually went through as, although it does seem (according to my portfolio page) that the average price for ASHT40 during that trade was R60 :wtf: Indicates a 25% loss.

Think I need to delve into some manuals or something, heh.
 
@aktor you know that once you withdraw from a TFSA that you lose access to that amount? So if you had 300k in there and you took it out but did not transfer it to another TFSA (which can only be done from November), you lose the ability to reinvest that 300k, which means your lifetime limit is now reduced to 200k.

Just in case you did not know. Because at the current time there is no ability to transfer these things to another company/vehicle. Treasury is set to revise this is November so that we can transfer without having it reduce our lifetime limit.
 
Maverick154 said:
@aktor you know that once you withdraw from a TFSA that you lose access to that amount? So if you had 300k in there and you took it out but did not transfer it to another TFSA (which can only be done from November), you lose the ability to reinvest that 300k, which means your lifetime limit is now reduced to 200k.

Just in case you did not know. Because at the current time there is no ability to transfer these things to another company/vehicle. Treasury is set to revise this is November so that we can transfer without having it reduce our lifetime limit.
Click to expand...

Thanks Maverick. Yes, the way I understand it:

- Deposits use up the limit of 30k / 500k.
- Withdrawals don't use up the limit, but rather change the actual limit (reduces the total limit by the amount you withdraw).
- You can withdraw any amount (even if it's grown to a million) from the TFSA without incurring the 40% penalty. (am I correct here?)

Not sure how you are taxed on what you withdraw, however. Anything over 500k, I would assume.
 
aktor said:
Thanks Maverick. Yes, the way I understand it:

- Deposits use up the limit of 30k / 500k.
- Withdrawals don't use up the limit, but rather change the actual limit (reduces the total limit by the amount you withdraw).
- You can withdraw any amount (even if it's grown to a million) from the TFSA without incurring the 40% penalty. (am I correct here?)

Not sure how you are taxed on what you withdraw, however. Anything over 500k, I would assume.
Click to expand...

As far as I understand it you can contribute 30k per year up to a lifetime limit of 500k. Any growth that you have inside the TFSA does not contribute to those limits as only deposits directly from you contribute. Then the growth and any withdrawals are 100% tax free.
 
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