What are ETFs?

Exchange-traded funds, more commonly known as ETFs, are a type of financial asset that incorporates the flexibility of stocks with the diversification of mutual funds. ‘Exchange-traded’ in the name refers to how these assets are both bought and sold on the market, similarly to stocks, while ‘funds’ refers to how ETFs provide easy access to a diverse portfolio.

ETFs and the JSE

The Johannesburg Stocks Exchange (JSE) celebrated 20 years since ETFs were first listed. Since then, ETFs have become a popular investment vehicle available to both retail and institutional investors. The popularity of ETFs is quite intricately linked with the simplicity and affordability of these assets.

ETFs track the performance of a ‘basket’ of shares, bonds or even a single commodity, otherwise referred to as indices. ETFs can be bought or sold in the same way that ordinary shares are done. ETFs allow a variety of investors to grow their wealth and gain easy access to investment opportunities through stock exchanges. ETFs first made it to the JSE on November 27, 2000, through the introduction of Satrix Top 40. This became the first pioneer ETFs listing of the bourse, with its initial public offering one of the largest on the JSE at the time. ETFs experienced gradual growth. Today, they have become an integral part of investors’ portfolios. They have harnessing potential in the stock market in a way that is both easy and cost-effective. ETFs continue to be an attractive investment for investors young and old.