ETFs tend to offer lower operating costs than open-end funds (pooling of money from investor and collectively invested in various securities and asset classes). For a prolonged period of time, mutual funds have provided the world with the ability buy diversification instead of constructing a portfolio one security at a time as mutual funds offered professional management, low-cost structure compared to other available vehicles at the time.
WHAT IS AN EXCHANGE-TRADED FUND (ETF)?
An Exchange-Traded Fund (ETF) is a form of a security that is created to tracks an index, commodity, sector, investment style etc. but it can be purchased and sold on a stock/securities exchange in the same way as a regular stock. Providing substantial cost savings to investors as you purchase a diversified group of securities in one single product (ETF).
The major difference apart from lower fees, compared to mutual funds, is the liquidity provided by ETFs. Although mutual funds provide daily liquidity, after trading hours, at Net Asset Value (NAV), ETF units/shares are bought and sold at market prices during trading hours (this might be above or below NAV).
ADVANTAGES OF ETFs
- Broad spectrum of risk categories
- Low cost
ETFs are traded in in every major asset class, currency and commodity. Meaning you are able to invest in specific sectors (such as tech) that contains diversification within the sector itself (semi-conductors, consumer electronics, software – infrastructure). New, innovative ETFs attempt to follow a specific investment strategy. Such as ESG investment strategy, highest yielding currencies, Alternative Growth approaches (Medical Cannabis).
BROAD SPECTRUM OF RISK CATEGORIES
From a basic starting point, ETFs offer well-diversified alternatives to invest in different sectors, currencies and commodities at a lower cost. In some cases, an investor may be over-exposed in a particular sector but is unable to immediately liquidate due to restrictions or tax related reasons. ETFs provides investors now with the opportunity to purchase and ETF that shorts an industry. Effectively acting as a hedge to reduce the risk of the sector on the overall portfolio.
Because ETFs trade on most major stock/securities exchanges, trading costs are lower with a small management overhead expense. Annual expenses are consequently much less than traditional mutual funds and unit trusts.
Who are we?
Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.
What we offer
Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). This means that we have to required licensing to structure full-discretionary portfolios structured to your needs.
This weekly report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.
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Information and content
The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.
Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.
Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).
Author: Francois Nel, BCom (US)