The price of an exchange traded fund (ETF) is set in the market and depends on the price of the underlying securities in the index or commodity the ETF is tracking.
ETFs don’t have investment minimums like unit trust funds, but you need to pay the price of a full share or multiples of it.
Whatever you invest will be used to buy as many ETFs as you can afford and the balance will kept in your stockbroking account until you invest enough to buy more shares.
Investment plans on ETF platforms bulk transactions from many investors and buy and sell once a day through a single stockbroker to minimise the charges.
These platforms’ investment plans may have minimum such as a R1000 lump sum or a recurring investment of R150 a month.
There are two platforms, one from a provider and one that offers access to a range of ETFs that allow you to invest in fractions of ETF shares until you invest enough to buy the whole share.
This is achieved by way of a contract for difference – an over-the-counter or unlisted contract that gives you access to the same returns as an ETF – or a portion of it – without owning the ETF.
These platforms will allow you to invest any amount and have no minimum investments.
However, be aware that the costs of investing may make it not worth your while to invest very small amounts.
This article was originally published on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (ASISA)
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