INVESTMENTS in unit trusts and exchange traded funds (ETFs) by individuals through stokvels or investor clubs is becoming an increasingly popular way of building up savings, according to Johannesburg Stock Exchange representatives.
The JSE, which held an information session last night at the Summerstrand Hotel, Port Elizabeth, for interested parties on how to start investing, said more and more stokvels were educating themselves on the different products available.
Ralph Spiers, retail development officer at the stock exchange, said there were plans to work more closely with stokvels and investment clubs because of the growing interest.
Mike Brown, managing director of etfSA, an information and transaction website that provides solutions for investors looking to understand and manage ETFs, said independent research had shown there was about R40-billion in stokvel and investment club savings in South Africa.
“ETFs are an ideal vehicle for such investor clubs or stokvels as they offer portfolios of blue-chip stocks on the JSE, with the convenience of purchasing a single share. They also offer a high return and are more flexible when it comes to members leaving or joining the club. It is also possible to build up balanced portfolios at low costs and with complete transparency using ETPs [exchange traded products].”
Brown said when an investor bought an ETF, they were buying a portfolio of shares from the top 40 companies listed on the JSE. “It is much like buying a box of chocolates. No two chocolates are the same and it is simply the best way to get involved in the stock market because if one company does not perform the JSE kicks it out and replaces it with a higher performing company, so you are only working with the cream of the crop.”
He said interested stokvels or investment clubs first needed to have a founding document or constitution stating the club’s purpose and a valid bank account in the club’s name.
“You then need to appoint a representative who will act on the group’s behalf as we cannot have input from several people at the same time. Members will then have fun directing the representative and choosing what kind of ETFs to invest in.”
Brown said there were more than 60 different products which investors could choose from, depending on their needs.