Estate Living Magazine The Slow Movement - Issue 39 March 2019 | Page 34

P R O P E R T Y
&
I N V E S T M E N T
THE LONG-TERM
VALUE
OF ETFs
Remember the fable of The Tortoise and the Hare? The
one where the arrogant hare thought that he could so
easily outrun the tortoise that he decided to have a
nap? The slow and steady tortoise just kept going and
ultimately won the race.
ETFs (Exchange-traded Funds) are often thought of as the slow
and boring investment choice and something that is only relevant
to new investors or those who don’t understand the stock market.
These often underrated investments are tenacious little beasts,
though, and will keep going through thick and thin. While the hare
races ahead with Steinhoff shares, thinking that he is bound to win,
he seems to be taking a nap right now. The slow and steady tortoise
just keeps plodding along, and although it’s impossible to predict
the future, your ETF investment won’t let you down.
A brief history
The recent passing of John Bogle on 16 January this year has
brought about a renewed interest and discussion on the value of
index tracking funds for long-term investing. Bogle, who is best
known as the founder and chief executive of The Vanguard Group,
created the first publicly traded mutual index fund in 1976, namely
First Index Investment Trust.
An index-tracking fund is essentially a fund that tracks a market index
such as the JSE All Shares Index (ALSI) or the JSE Top 40 Index. The
calculations and terminology can get tricky, but think of the ALSI as
a weighted average of all companies listed on the Johannesburg
Stock Exchange, and the Top 40 as the weighted average of the top
40 companies. You’re thus able to invest in the average performance
of all major South African companies. That is far safer than trying to
pick your own ‘best buys’.