Satrix 40 growth

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mbza

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Recently I decided to start investing some of my disposable income, but I’m still a newbie when it comes to investing. I’ve only heard good things about the Satrix 40 so that convinced me to invest my max TFSA contribution in it in the last tax year (through EasyEquities).

Now it’s been almost 3 months and the growth has been up and down. Currently my investment has grown 1.53% from my original contribution, but it was ~6% at some point. Now, I realise that the nature of these investments is inherently volatile and that’s fine. However on EE it shows the historical returns of the Satrix 40 and apparently it’s -2.04% over the last year and +5.67% over the last 4 years. These numbers are quite underwhelming given what I’ve read about the fund and its projections. That, or I don’t understand how the numbers work. It seems that a fixed deposit would give much better returns.

I‘m ready to invest more money but I’m hesitant about putting it in the Satrix 40 again if after 4 years the growth is less than 6%. Once again, I know that growth is not linear but I would think that over a 4 year period things would tend towards a better rate. Note, this is intended to be a long term investment (possibly for retirement).

So I guess I’m just looking for reassurance that putting my money in the Satrix 40 through EE is a good choice, and that other people are doing the same.
 
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You're not supposed to be looking at it that short term. In general, equities beat most other asset types over the long term, which is how you should be looking at it. The past few weeks have unfortunately seen very poor returns locally due to the economy.
 
There are a whole host of considerations to what's best to invest in. E.g, you mention a fixed deposit - tax, depending on what you individual situation is, would usually be higher on interest income than on the mix of capital gains and dividend income that you get from equities.

But generally, over the long run equities provide higher returns. However, something that you might consider is diversifying part of your portfolio to international equities. Satrix 40 is heavily exposed to the ups and downs of the SA market, which as you've noticed, is quite volatile. You can easily diversify with the Satrix MSCI World or S&P500 ETFs. That will tend to reduce your portfolio volatility, and give a partial rand hedge.
 

The return on the JSE over the past few years have not been the best indicator of long term performance, over the past 3 year the All share index seems to be up something like 3.8% total if I look at a simple chart. Long term stocks have delivered something around 5% real term (so after inflation), so it could be that the next few year it will revert to the mean and deliver above average returns, or it might not.

Also remember the SA stocks are something like 1% of the world stocks so you don't need to put all your egg in one basket, you can also buy some international exposure, for example your could buy a S&P500 ETF which is the 500 largest companies on the US stock market, or you could buy a EFT that tracks the MCSI World index which is a market cap weighted stock market index of 1,649 stocks from companies throughout the world. Then there are eft covering Japan, Euro Stoxx 50 which covers the 50 largest and most liquid blue-chip in the Eurozone, or the FTSE100 which cover the 100 largest companies in the UK.

Personally I hold reasonable amount of the MCSI World for diversification, and also S&P500 as I believe the US market will continue to perform better than most, this I believe has gotten me better performance over the past few year than if I were invested in the top 40.

Just remember if you invest in foreign shares it introduce additional risk such as exchange movement which could be positive or negative depending on how the ZAR moves against other currencies.

But as they always say past performance is no guarantee of future performance, historically shares have over the longer term delivered better returns than for example cash, so we could expect that to continue to hold true but there is no guarantee.
 
https://satrix.co.za/products/product-details?id=44

Look at the long term figures, 7 years shows 9.94%, 10 years shows 14.3% and since inception shows 13.85%. If you are investing long term, these are the figures you consider. With equities you are betting that over a long time period (at least 7 years) you are hoping to get a decent return.

If you are worried about what the value will be in one year, get a fixed deposit because then you know in 1 year you'll get 7%, but after 20 years it will still be 7% each year. With equities you might see -5% in a year and 20% in another. But at the end of 20 years you are hoping to see around 12-14% a year annualized.

Remember that you are not investing in the performance of the instrument, being the Satrix top 40. You are actually investing in the top 40 companies on the JSE. So by investing in the satrix top 40, you are betting that the top 40 companies will perform well and grow, leading to their share prices hopefully following suit. Given the size of these companies, their performance is also largely driven by the SA economy, which has been terrible the past few years, hence, terrible JSE performance. If you believe the SA economy will do well and so will the top 40 companies, then you invest in the top 40.

It's also good to diversify, so as others have suggested, get some international markets, and some other asset classes. This way you reduce your exposure to any one market, just like investing in the top 40 reduces your exposure to any one company.

Don't look at the short term figures if its for retirement. You'll get emotions involved and get worried, like you are now.

Again, past performance does not guarantee future performance, so things will be different to historic performance. But the safety net of the top 40 is that it is well diversified and linked somewhat to the overall economy, so it should be a good bet over the long term unless the SA economy tanks and the companies go with it.
 
I had done exactly this: a set investment in the Satrix top 40 over the last 4 years with contributions increasing by 5% annually. Over that period it was up and down (but largely down) and delivered an average real return of just under 4%. So yes, I might have had better performance in a money-market. However rather than cashing out my intention is to do as other posters have suggested and move a percentage into an S&P 500 or MSCI World.

Long term I expect better growth, but I'm fully aware that it's not guaranteed: you're investing in a massive scheme that is ruled by people's emotions after all (all the language around stock market movements confirm this - 'bearish', 'bullish','uncertainty', 'positive sentiment'). That said, it is a good idea on a personal level to try and distance yourself emotionally from 'how is my investment doing today?!'.
 
donal said:
I had done exactly this: a set investment in the Satrix top 40 over the last 4 years with contributions increasing by 5% annually. Over that period it was up and down (but largely down) and delivered an average real return of just under 4%. So yes, I might have had better performance in a money-market. However rather than cashing out my intention is to do as other posters have suggested and move a percentage into an S&P 500 or MSCI World.

Long term I expect better growth, but I'm fully aware that it's not guaranteed: you're investing in a massive scheme that is ruled by people's emotions after all (all the language around stock market movements confirm this - 'bearish', 'bullish','uncertainty', 'positive sentiment'). That said, it is a good idea on a personal level to try and distance yourself emotionally from 'how is my investment doing today?!'.
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This. https://www.moneyweb.co.za/investing/the-jse-is-not-an-outlier/

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Ask yourself this - is the SA economy going to grow 5%+ in the next 5 years? No?

then buy international indexes:

S&P500, BNDX, MSCI World etc. and put your max (Around R300 000) into a 5 year fixed deposit at 9%+ (guaranteed).

But don't invest one cent if you still have debt. Repaying debt is a guaranteed risk free return.
 
What nonsense to say that holding only STX40 is having all your eggs in one basket. You have 40 eggs in that basket. That is the same as holding 40 different stocks.

What I don't like about the STX40 is that it is not equally weighted so the performance of ABInBev, British American Tobacco and Naspers will determine the growth of the ETF. If one fails as Steinhoff did then the ETF will follow suite.

We also forget that when we say the ETF has only performed by 1% over the past year it does not include the dividend. That could bring it up to 4%.

After the crash of 2008/9 the markets were in a bull mode for 5 years. We all made good money but a correction was due but no catalyst to make it happen appeared. Zuma was not enough but did manage to stop the up surge. Since 2014 the JSE has been flat and this is as good as a correction. It will not continue for much longer.
 
marco said:
What nonsense to say that holding only STX40 is having all your eggs in one basket. You have 40 eggs in that basket. That is the same as holding 40 different stocks.

What I don't like about the STX40 is that it is not equally weighted so the performance of ABInBev, British American Tobacco and Naspers will determine the growth of the ETF. If one fails as Steinhoff did then the ETF will follow suite.

We also forget that when we say the ETF has only performed by 1% over the past year it does not include the dividend. That could bring it up to 4%.

After the crash of 2008/9 the markets were in a bull mode for 5 years. We all made good money but a correction was due but no catalyst to make it happen appeared. Zuma was not enough but did manage to stop the up surge. Since 2014 the JSE has been flat and this is as good as a correction. It will not continue for much longer.
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The baskets they refer to is the baskets of countries, not the baskets of companies. SAs basket is under 1% size of the baskets out there.

There is the CoreShares Equally Weighted Top 40 ETF for your Equally Weighted needs, as well as other Top 40 Equally Weighted unit trusts.
 
Thanks for the responses. They've made me realise there's a shitload I don't know about investing so if anyone has a good resource for a beginner like me, let me know :) Can be articles, blogs, podcasts, etc. That's priority 1 before I invest any more of my allowance of 33k in any vehicle.

For some reason I didn't think Satrix 40 was dependent on the SA economy, which is why I put money in it lol. But I guess it's good to have that for the sake of diversity, as I'm probably gonna invest in the MSCI or S&P500 next (based on the responses in this thread).
 
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