5 things to know about index investing

What does this mean for investors? For starters, it is almost certain that a substantial portion of your savings are invested in an index fund, be it one covering the JSE top 40 or the largest firms on Wall Street.

5 things to understand about index-tracking funds

1. Invest in top global companies in rand: Index funds consist of a purposefully constructed group of assets called an index. For example, the JSE Top 40 comprises the 40 largest shares on the JSE, and a fund like our 1nvest Top 40 ETF includes all 40.
   In the US, the S&P500 includes the 500 largest companies, and our 1nvest S&P500 Index Feeder Fund covers them.
   Some are more specific. The MSCI EM Asia Index includes large and medium-sized companies in countries like South Korea, India and China. We launched the 1nvest MSCI EM Asia Index Feeder ETF for investors who want exposure to emerging tech markets.

This is why we call index tracking funds wrappers. They enable us to contain a bundle of assets with a very broad theme or a more specific one.

2. Know your passive from your active index funds: Index tracking funds are sometimes called passive funds. This is to distinguish them from actively managed funds. The main difference is that index tracking funds aim to replicate an index exactly, while active funds aim to outperform an index.
   But this doesn’t always map onto reality. Active funds are not a guarantee of consisten performance, and they do come with additional costs.
   Index tracking funds also aren’t as passive as some suggest. These products require skilled investment professionals to build and maintain

3. Index tracking funds are simple and cost-effective. Fund managers follow a formula to replicate an index and ensure all local and international laws and regulations are followed. This allows a relatively small team to manage very large funds efficiently, thus keeping fees relatively lower. down.
4. Your index fund is totally transparent. As the investor, you know precisely which shares, bonds and/or commodities are contained in your product at any given time, as well as all the fees that apply.
5. Index tracking funds can be ETFs or unit trusts. The differences are subtle, but each performs the same basic function of packaging assets so that you can easily buy your chosen bundle at low cost, with full transparency and at the click of a button.

To make it easy for investors, 1nvest has curated an array of ETFs and unit trusts that give access to everything from the world’s major tech businesses to gold to South African property.

All our funds can be accessed via:

• Shyft
• EasyEquities;
• Standard Bank Online Share Trading; or
• ask your financial advisor how 1nvest’s index-tracking products can benefit your investment strategy.