TFSAs and ETFs

[notinterested]

Hi everyone.

I have been investing in ETFs through etfsa.co.za for about 5 months. I now want to open a tax-free savings account.

I just read through the TFSA thread [http://mybroadband.co.za/vb/showthread.php/799470-TFSA-(2016)] which links to this video about trading ETFs using a TFSA https://www.youtube.com/watch?v=rd6HHnf_5jY

What i don't understand though is how to actually open a TFSA and decide which etfs i want to put into it. I know you can buy the etfs through etfsa.co.za, but how do i do this via a TFSA?

In the video, simon says you should just do it via your bank. I bank with FNB. they do have a tax free share investment account, but you cannot choose which etfs they buy when you invest. I looked at sygnia and satrix TFSAs as well and they seem to have similair options - ie. you can't choose from the full range of etfs as you can when buying etfs on etfsa.

I'm confused as to how people are investing in ETFs using a TFSA and they seem to have such broad portfolios? Where do you find a TFSA that allows you to access all the ETFs as you can on etfsa.co.za? I have a feeling i'm missing something obvious here.

Thanks for your advice
Cheers

 

[Hamster]

ABSA, EasyEquities, Standard Bank and up to two minutes ago I thought ETFSA as well all have TFSA/TFIA accounts that allow you to buy any of the ETFs allowed.

Personally, I use ABSA and EE because they are the cheapest.

Again, pretty sure ETFSA has one. It's just another account you have to open.

 

[supersunbird]

Many poeple do it via EasyEquities, and you probably won't have access to ALL ETFs in a TFSA, some are excluded by their structure/underlying investment.

 

[notinterested]

ABSA, EasyEquities, Standard Bank and up to two minutes ago I thought ETFSA as well all have TFSA/TFIA accounts that allow you to buy any of the ETFs allowed.

Personally, I use ABSA and EE because they are the cheapest.

Again, pretty sure ETFSA has one. It's just another account you have to open.

Hey thanks for your reply.

I did a google search for a etfsa tfsa and there is a pdf document which describes the account, but i honestly can't find out how to open the account - i'm sure through my own stupidity, but if they're gonna have a product available, i also think they should make it easy to open and find.

Any particular reason why you have two TFSAs? Aren't they all basically the same - besides cost structures?

Many poeple do it via EasyEquities, and you probably won't have access to ALL ETFs in a TFSA, some are excluded by their structure/underlying investment.

I have decided to go with Absa. I took a look at EE, but their site looks very childish and unprofessional - i assume this is because they're trying to target the average consumer, so they want everything to look as unintimidating as possible. Absa's fees also appear to be lower.

 

[Hamster]

Hey thanks for your reply.

I did a google search for a etfsa tfsa and there is a pdf document which describes the account, but i honestly can't find out how to open the account - i'm sure through my own stupidity, but if they're gonna have a product available, i also think they should make it easy to open and find.

Any particular reason why you have two TFSAs? Aren't they all basically the same - besides cost structures?



I have decided to go with Absa. I took a look at EE, but their site looks very childish and unprofessional - i assume this is because they're trying to target the average consumer, so they want everything to look as unintimidating as possible. Absa's fees also appear to be lower.

Because when TFSA's became available I already had an EE account and they just opened the TFSA for me. I have an empty ABSA one because I am thinking of maybe moving my TFSA there one day, just don't want to go through the hassle of opening it one day when I need it.

I agree with you, EE's interface is stupid and feels like Candy Crush Saga for investing. BUT, they are the cheapest overall. For the time being they are subsidising some of the JSE costs which ABSA aren't so even though ABSA's brokerage cost is lower than EE's the overall cost is still a bit more.

But yes, while we are still talking "small" amounts of money the TFSA at EE does not bother me. But come next financial year and we are getting closer to R100k in there I'll definitely reconsider.

 

[notinterested]

But yes, while we are still talking "small" amounts of money the TFSA at EE does not bother me. But come next financial year and we are getting closer to R100k in there I'll definitely reconsider.

Could you explain what you mean by this? I thought that the difference in fees is more apparent the more money you invest?

 

[Hamster]

Could you explain what you mean by this? I thought that the difference in fees is more apparent the more money you invest?

EE's rubbish UI makes it difficult to see the percentage of holding allocations. ABSA feels more like professional and "financial" and I'm more comfortable with using them.

Not really a good reason. Basically what I'm saying is that I'm tired of EE's blocks and pinkness

 

[patrick]

I agree with you, EE's interface is stupid and feels like Candy Crush Saga for investing. BUT, they are the cheapest overall. For the time being they are subsidising some of the JSE costs which ABSA aren't so even though ABSA's brokerage cost is lower than EE's the overall cost is still a bit more.

Wait what is that about subsidies? I just put R30k into ABSA as they are 0.20% vs 0.25%, if you now tell me EE is actually fractionally cheaper I'm going to be sad! Do you have any links on this?

 

[Hamster]

Wait what is that about subsidies? I just put R30k into ABSA as they are 0.20% vs 0.25%, if you now tell me EE is actually fractionally cheaper I'm going to be sad! Do you have any links on this?

I heard it on a radio talk with Ingram. He said that he met with Mark Savage and the rest of the EE team and that they have set aside a certain amount to subsidise etc. stuff for the next three years (IIRC).

I'm assuming you are referring to your TFSA? Check your cost breakdown of the trade. I'll try find one of my EE ones.

 

[Hamster]

Ok, so trading R5000 on:

EasyEquities TFSA / Normal

broker commission - R 10.00
settlement and administration - R 3.75
investor protection levy (ipl) and administration - R 0.01
value-added tax (vat) - R 1.93
total transaction cost - R 15.69
trade value - R 5 000.00

ABSA TFSA

Estimated cost at a limit price of 7 000c - 4 970.00
Brokerage - 9.94
Strate Settlement Charge - 3.85
Investor Protection Levy - 0.01
VAT - 1.93
STT - 0.00
Total estimated cost 15.73
Total estimated cash outflow - 4 985.73

ABSA ETF

Estimated cost at a limit price of 7 000c - 4 970.00
Brokerage - 20.00
Strate Settlement Charge - 11.58
Investor Protection Levy - 0.01
VAT - 4.42
STT - 0.00
Total estimated cost - 36.01
Total estimated cash outflow - 5 006.01

----

So ABSA's TFSA is more or less the same as EE. The subsidies I heard of must be with regards to their normal trading account as the prices are exactly the same as the TFSA's. Comapre that to the cost of the ETF only account on ABSA (Strate costs).

These are all for STXIND

PS: Permission to be fractionally sad

 

[patrick]

Ah ok, cool yeah those numbers pretty much match mine. I think I'll stick with ABSA for my TFSA going forward, though my son's is with EE as ABSA just didn't get their *ss into gear in time.

 

[Hamster]

Yeah, I'll be moving mine at one stage. Only benefit of EE atm are the fractional shares. In that example above there was a full R14.27 I couldn't invest

Might make a small difference early on in a TFSA.