Unfortunately this question was from anonymous and I have to provide my answer in public rather than in person. Perhaps it is a good thing because the debate about Index tracking funds like Satrix vs Actively managed unit trust funds is in the spotlight again.
When the market as a whole is down, the market as a whole will bounce backup as we saw after the crash of 2008. It is more cost effective to be in an index tracking fund like Satrix in those circumstances.
Currently the JSE is close to its level prior to the 2008 crash and not very cheap so an Active Fund Manager's fund like Coronation Top 20 can perform better than the Satrix fund because even though the market as a whole re-rated upwards, some quality shares might have stayed behind. A good fund manager will be able to identify such shares and outperform the Index.
If you have decided to go for Satrix anyway, I would rather invest in the "Smart" Satrix funds like Satrix Divi and Satrix Rafi because the companies in the portfolio are not included purely on size.
Hope this helps!
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2 comments:
Thank you for this excellent post!
I am currently new to investing and have an extra R3000-R5000 per month that I would like to invest in Coronation top 20.
In addition, I have around R18 000 per month that I can safe (keep in cash and might need in the next 3 years.
I am new to equity investing and am currently 31 years old. Do you think that investing in the Coronation Top 20 is at this stage perhaps a better move than SATRIX Rafi? Or would it be wise investing in both funds - for example; R3500 per month Coronation top 20 and R1500 Satrix Rafi?
The reason I am asking is because I am working in Korea and do not receive an an income in S.A. Therefore it doesn't make sense (unless I am missing something) to me to invest in an RA or similar retirement scheme as I will be investing with after tax money i.e. income received in a foreign country.
I really enjoy your blog - please keep it up as it is extremely informative.
Looking forward to hearing from you.
Blessings for the new year
Nick Gouws
Hi Nick
Thanks for the question. Given the current uncertainty in world markets I would back fund managers who do active share selection to outperform Satrix on a risk adjusted basis. So I do believe that investing in Coronation Top 20 is a better move than Satrix Rafi but would take it further and split the monthly savings between 3 different equity fund managers to get a spread between different longer term investment philosophies. I would choose an even split between Coronation Top 20, PSG Flexible and Nedgroup Investments Rainmaker funds. Investing into these funds using an investment platform would also provide you with the opportunity to change your fund choice in future at no cost. I use the administration platforms of Momentum, Glacier(Sanlam), or Allan Gray. The point you made regarding investing in a Retirement Annuity is valid in the tax sense but you are allowed to accumulate contributions to RA's not allowed for Tax now, for deduction at a later stage when you do generate income in SA. The problem is that the money invested in a RA can only be accessed when you turn 55 years old. So short answer is that you do not need to invest in a RA via the Unit Trust funds now. The R18000pm which you might need in 3 years time should not be invested in Equities. Rather be prudent and earn the little interest on cash until you know how much you can invest for the longer term.
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