having a balanced ETF portfolio

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Dean01

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Hi guys

I would like to invest some of my personal savings in ETFs ( from what i heard its much more affordable and can offer higher returns?)

I have done some research and think I will use easy equities as the platform. They offer many different ETFs from companies such as satrix, coreshares, sygnia and ashburton etc.

Can anyone suggest how I can go about having a balanced portfolio and what ETFs they will recommend?

Is the top 40 for eg the same with either of the companies offering a top 40 ETF?

I am thinking equity- local and international and some property driven one?

Would appreciate any advice.

TIA
 
Yes, all funds following the same index should be the same, go for the cheapest.

I'd personally do:
35% local equity
35% foreign equity
15% local property
15% foreign property
 
supersunbird said:
Yes, all funds following the same index should be the same, go for the cheapest.

I'd personally do:
35% local equity
35% foreign equity
15% local property
15% foreign property
Click to expand...

Thanks, what in your opinion is the cheapest provider of ETFs?
 
All the Top40s are basically the same. CSEW40 being the exception. CTOP50 is a notable "exception" because it tracks the top 50 but also limits shares to max 10% exposure in the ETF.

There are many many ETFs but the "stars":

Local:
CTOP50, NFSWIX, NFEMOM, ASHT40, MAPPSG, MAPPSP

Local Property:
PTXTEN, PTXSPY

Global:
SYGWD, SYG4IR, STXWDM, STXEMG, ASHGEQ

Global Property:
GLPROP

You'll want to build a portfolio from those. Two of the more diversified ETFs among those are:

MAPPSG - 75% equities (NFSWIX), 10% government bonds (NFGOVI), 10% inflation linked bonds (NFILBI) and 5% cash (NFTRCI). Basically four ETFs in one.

ASHGEQ - Contains global equities from bother developed and emerging markets.

So if you went 50:50 MAPPSG and ASHGEQ you're pretty much covered.

Go 45:45:10 on MAPPSG, ASHGEQ and PTXTEN and you've got property as well.

You don't really need much more unless you want to be more in control of the balancing. In that case:

NFEMOM - Local (momentum (factor) investing)
STXWDM - Global developed markets
STXEMG - Emerging markets
PTXTEN - Local property (top 10 equally weighted)
GLPROP - Global property
SYG4IR - "4th industrial evolution"... global shares like Nvidia, Uber, GoPro etc
 
Hamster said:
All the Top40s are basically the same. CSEW40 being the exception. CTOP50 is a notable "exception" because it tracks the top 50 but also limits shares to max 10% exposure in the ETF.

There are many many ETFs but the "stars":

Local:
CTOP50, NFSWIX, NFEMOM, ASHT40, MAPPSG, MAPPSP

Local Property:
PTXTEN, PTXSPY

Global:
SYGWD, SYG4IR, STXWDM, STXEMG, ASHGEQ

Global Property:
GLPROP

You'll want to build a portfolio from those. Two of the more diversified ETFs among those are:

MAPPSG - 75% equities (NFSWIX), 10% government bonds (NFGOVI), 10% inflation linked bonds (NFILBI) and 5% cash (NFTRCI). Basically four ETFs in one.

ASHGEQ - Contains global equities from bother developed and emerging markets.

So if you went 50:50 MAPPSG and ASHGEQ you're pretty much covered.

Go 45:45:10 on MAPPSG, ASHGEQ and PTXTEN and you've got property as well.

You don't really need much more unless you want to be more in control of the balancing. In that case:

NFEMOM - Local (momentum (factor) investing)
STXWDM - Global developed markets
STXEMG - Emerging markets
PTXTEN - Local property (top 10 equally weighted)
GLPROP - Global property
SYG4IR - "4th industrial evolution"... global shares like Nvidia, Uber, GoPro etc
Click to expand...

Thanks for the comprehensive response. Will look into it
 
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daiyaan said:
Thanks, what in your opinion is the cheapest provider of ETFs?
Click to expand...
NFEMOM is probably the most expensive but that's because it rebalances every month and the trading it does costs money.

The ABSA ETFs (NewFunds...all the NF* ones) tend to be the cheapest. So too the Ashburton (ASH*) ones.

Sygnia (SYG*) and Satrix (STX*) are more or less on par.

Global ETFs tend to be more expensive.

It's much of a muchness really. Fees matter but the "huge" differences between these are borderline insignificant IMO.

As far as platforms go: EasyEquities (easiest) or ABSA ETF Only (way more features and control).
 
daiyaan said:
Hi guys

I would like to invest some of my personal savings in ETFs ( from what i heard its much more affordable and can offer higher returns?)

I have done some research and think I will use easy equities as the platform. They offer many different ETFs from companies such as satrix, coreshares, sygnia and ashburton etc.

Can anyone suggest how I can go about having a balanced portfolio and what ETFs they will recommend?

Is the top 40 for eg the same with either of the companies offering a top 40 ETF?

I am thinking equity- local and international and some property driven one?

Would appreciate any advice.

TIA
Click to expand...

The "local" TOP 40 index includes companies that produce most of their revenue in foreign currency and/or own foreign equity. This means that they are not a true representative of locally based companies listed on the JSE that have their core business based in ZA. For greater local company exposure, the ASHBURTON MIDCAP ETF provides an index of the next 60 or so largest companies after the TOP 40, indexed by market cap. after the TOP 40. This index is well diversified, but often sees volatility with commodity companies falling in and out if the index (from top 40 down to next 60 and vice versa). In addition, the current socio-political economic situation means that there is greater uncertainty with local companies and rand risk. Nevertheless, this ETF would be good to diversify a portfolio with rand based stocks.

Steer away from the ABSA GIVI ETFs as these are beta strategies that screen companies based on certain fundamental parameters as opposed to simply market cap. I own the GIVI INDI 25, which had around 12% STEINHOFF allocation around the time of the debacle. Sad story.. What's worrying too is that the TOP 40 and TOP 40 SWIX indexes have high exposure to NASPERS which has huge potential for portfolio damage in the event of a crash in the stock. Therefore, CoreShares TOP 50 which has allocation capped at around 10- 12% for a single stock offers you better diversification for these large JSE stocks, In addition, the TOP 50 adds an additional 10 stocks for more exposure and improved diversification - the ETF components weighting is based on market cap, which is good. Alternatively or in addition to that, the Equally Weighted 40 (EW40) has all 40 stocks in TOP 40 capped at 2.5%, which is more conservative, but will likely have lower return overall.

Finally, international ETFs offer rand hedge opportunity and none are better overall to the MSCI World Index from Sygnia/Satrix which gives exposure to the stock market performance of 1st world countries.

My portfolio allocation in terms of equity ETFs:

Local (Midcap) = 15%
Property (local) = 10%
Local Rand Hedge (Top 50) = 25%
Offshore (MSCI World) = 40%
Commodity Exposure (GOLD/Resource ETF) = 5%
Dividend ETF (Beta strategy) = 5%

My recommendation would be do your research: read books on ETF investing and be content with going with the average returns of the market, which, in the long term (5+ years), will beat inflation and grow your wealth.
 
Found this discussion interesting and would like some perspective.

My original approach to creating my portfolio was to pick shares, however, last year I realised that I don't have the time to properly research. And even when I picked profitable shares, I'd just hold them forever, even when they start to lose value. As such, I've decided to focus on ETF's.

I am slowly selling the individual shares I own and buying ETF's instead (still trying to time the sale as to maximise return or minimise loss).

I am slightly conflicted on whether I need to diversify and buy a few ETF's (say 10) or whether it is fine to focus on 4 or 5 ETF's.

Currently I own: (with percentage of total in brackets)

CSEW40 (12%)
PTXTEN (5%) - bought these 2 days ago after reading this thread
STX40 (38%)
STXDIV (33%)
SYGWD (12%)

At this stage the ETF's above make up 60% of my account with the other 40% still being in shares I picked.

Thoughts?
 
Article on dividend focused ETFs from Coreshares and quoting the part of the International dividend focused ETF they will be launcching:

https://www.moneyweb.co.za/mymoney/moneyweb-personal-finance/the-benefits-of-dividend-investing/

CoreShares is however launching a global Dividend Aristocrats fund that will allow investors to diversify outside of South Africa, but still access the same kinds of quality companies that this strategy delivers.

“Many investors who are buying global strategies are looking for an insurance policy against South African-specific risks,” says Rule. “They are therefore going offshore in a more defensive nature, and this strategy suits that.”

It also offers a diversification benefit for investors who may already be invested in a global market cap-weighted index like the MSCI World.

“The MSCI World Index has a very large technology component, for instance, while Dividend Aristocrats has a very small technology exposure,” says Rule. “So investors will get exposure to different sectors and different companies, and that is great for diversification.”
Click to expand...
 
@PhreakBoy

You need to pick an ETF because of what it focuses on. There is no point in having both CSEW40 and STX40 as both invest in the top 40 shares on the JSE, they just do it differently.

What helps me is to split my portfolio up into high level segments (Local, Offshore, Property) and then satisfy each of those with an ETF or two.

Example:
Local - STX40 (top 40 companies) and ASHMID (midcap...41-100)
Offshore - SYGWD (developed world) and STXEMG (emerging markets)
Property - PTXTEN (top 10 SA property) and GLPROP (global property).

STXDIV is dividend focussed instead of growth like STX40. Personally I wouldn't bother holding both but that is my preference. I like to focus my portfolio on one thing - either growth or income. Other locally focussed ETFs you can consider is NFEMOM, STXQUA, DIVTRX and STXIND.

The portfolio you have there has 83% exposure to local shares (JSE), 5% to property (JSE) and only 12% offshore. I cannot tell you what the correct balance for you is but my TFSA looks like this at the moment:

STXWDM: 40% (same as you SYGWD)
STXEMG: 10% (that makes offshore 50% vs your 12%)
PTXTEN: 15%
STXQUA: 35% (that makes local exposure excluding property 35% vs your 83%)
 
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Net total returns:

1 year: 18.86%
3 years: 7.27%
5 years: 8.82%
10 years: 3.26%

I reckon the rason the 10 year one is so low is because of the 2008 crash. So next year it should look a lot better, yes?

Problem with this ETF in your TFSA is that potentially you'll still lose out on foreign taxes. Regardless, it actually doesn't look that bad if you factor in 2008.
 
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Hamster said:
@PhreakBoy

You need to pick an ETF because of what it focuses on. There is no point in having both CSEW40 and STX40 as both invest in the top 40 shares on the JSE, they just do it differently.

What helps me is to split my portfolio up into high level segments (Local, Offshore, Property) and then satisfy each of those with an ETF or two.

Example:
Local - STX40 (top 40 companies) and ASHMID (midcap...41-100)
Offshore - SYGWD (developed world) and STXEMG (emerging markets)
Property - PTXTEN (top 10 SA property) and GLPROP (global property).

STXDIV is dividend focussed instead of growth like STX40. Personally I wouldn't bother holding both but that is my preference. I like to focus my portfolio on one thing - either growth or income. Other locally focussed ETFs you can consider is NFEMOM, STXQUA, DIVTRX and STXIND.

The portfolio you have there has 83% exposure to local shares (JSE), 5% to property (JSE) and only 12% offshore. I cannot tell you what the correct balance for you is but my TFSA looks like this at the moment:

STXWDM: 40% (same as you SYGWD)
STXEMG: 10% (that makes offshore 50% vs your 12%)
PTXTEN: 15%
STXQUA: 35% (that makes local exposure excluding property 35% vs your 83%)
Click to expand...

Thank you for the insight. As for STX40 vs. CSEW40 - I bought both on a recommendation Warren Ingram made on Twitter. I understand the difference between the Top40 from Satrix and the Equally Weighted one from Coreshares.

I will likely look at getting more units in property and will then likely follow that up with more internationally exposed ETF's. Though I'm not sure I'll follow your 50/50 split on local vs foreign.

Thanks for your thoughts.
 
Warren Ingram is a smart guy, you should read his books. I doubt he'd recommend buying both CSEW40 and STX40 in the same portfolio. You are effectively buying the same shares twice - duplicate trading costs, duplicate yearly costs etc.

Another one you can look at is CTOP50.
 
Hamster said:
Warren Ingram is a smart guy, you should read his books. I doubt he'd recommend buying both CSEW40 and STX40 in the same portfolio. You are effectively buying the same shares twice - duplicate trading costs, duplicate yearly costs etc.

Another one you can look at is CTOP50.
Click to expand...

Have read both books.

You are correct, he may have proposed them in the same category as an either/or and not a both.
 
I think the only person I have ever met that likes CSEW40 was Simon Brown. That was when it was still called Beta something (Nedbank if I'm not mistaken). Since then we've had a ton of new ETFs that compete with it (most notably CTOP50) so things may have changed.
 
Hamster said:
Warren Ingram is a smart guy, you should read his books. I doubt he'd recommend buying both CSEW40 and STX40 in the same portfolio. You are effectively buying the same shares twice - duplicate trading costs, duplicate yearly costs etc.

Another one you can look at is CTOP50.
Click to expand...

Yes, Warren is a smart guy. He actually does recommend CSEW40 in his book "HOW TO MAKE YOUR FIRST MILLION":confused: - suppose you haven't read it:sick:

Quote from warren on JustOneLap:

The CSEW40 is a great hybrid between a normal (pure) index tracking ETF and a more active ETF such as a RAFI or DIVI investment that has an element of decision-making that can impact the investment positively or negatively. The most valid criticism of index tracking investments is that one or two shares could become so large in your investment that you effectively have no diversification. If you try to address that issue, you need to do so without trying to predict what investments will do well. The CSEW40 strikes a great balance because you get the same shares as a normal Top40 but each share gets the same allocation. This means the costs of the ETF can be limited and there are no “active” decisions that might harm your performance. I also like the fact that you get a larger than normal allocation to the smallest companies in the Top40.” - https://justonelap.com/etf-csew40/

STX40 is NOT the same as CSEW40 - Yes, it is the same stocks, but different amounts of exposure and therefore different risk.
 
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