ETFs are an innovative investment vehicle that has received a lot of attention in recent years, revolutionizing the way wealth managers and portfolio managers approach building individual stock portfolios.
Michelle North, head of financial intermediation at 10X Investments, said the firm's ETF product line has seen strong inflows due to the strategic integration of ETFs within equity portfolios. South Africa's most sophisticated portfolio managers use ETFs alongside traditional stock selection to enhance diversification and address macroeconomic changes.
The increasing adoption of ETFs locally has highlighted the benefits of incorporating ETFs into personal stock portfolios. It offers investors simplicity, accessibility and cost-effectiveness and is suitable for all types of investors.
The approximately $12 trillion global ETF industry is experiencing rapid growth, and it's important to understand their role in enhancing portfolio diversification and managing risk.
After decades of high interest rates in the United States and an evolving market environment, ETFs have emerged as a fundamental component of building a diversified stock portfolio. ETFs can provide simple, long-term exposure to an entire asset class, geographic region, sector, or theme. The advantage of ETFs is that an investor can purchase a wide range of securities in his single transaction.
This versatility allows investors to proactively adapt to macroeconomic changes and take advantage of new opportunities, especially in bond markets that were previously difficult to access.
Achieve AMETF of 10x income
Actively managed ETFs, known as AMETFs, are a recent addition to South Africa's investment landscape, with 10X becoming the first ETF of its kind to list early last year. Some market participants may be confused by ETFs as they have always been associated with index-tracking (also known as “passive”) investment strategies, but new regulations have made it possible to replace ETFs with multi-asset solutions, traditional active mandates, etc. , and many other types of strategies are allowed to be listed. An efficient and convenient ETF fund format, labeled as AMETF.
The innovative 10X Income AMETF (with the memorable stock code ICOME) is co-managed by the veteran duo of Anton Iser and Chris Eddy, offering investors a comprehensive managed income solution in a listed format. Masu.
Strategic asset allocation diversifies investments across domestic and international money markets, government bonds, and corporate credit. This fund is designed to provide returns that exceed inflation by 2.5 percentage points over a three-year rolling period, while controlling volatility and ensuring smooth operation. With a duration of up to three years and a current yield of 9.7%*, this ETF offers an attractive opportunity for investors seeking stable, low-risk returns while navigating the complexities of fixed income markets.
The integration of ETFs, particularly bond ETFs, into traditionally stock-heavy portfolios reflects a notable trend.
This strategic allocation approach emphasizes the importance of blending individual stocks and ETFs to achieve optimal diversification and risk management. By combining the stability and income potential of bond ETFs with the growth potential of individual stocks, investors can create a balanced portfolio that balances risk and return.
Note: The 10X Income Strategy is available both as an AMETF listed on the JSE and as a traditional unit trust via a linked investment service provider (Lisp) (for intermediaries) or the online My10X portal (for self-directed investors). available. Flexible access to all types of investors. Nearly R13 billion* has been invested in this strategy.
10x S&P Global Dividend Aristocrat ETF – High Quality Global Allocation
One way to achieve a defensive stock allocation is to look for companies that have shown reliable returns through cycles.
An established index franchise aimed at capturing these companies is the S&P Dividend Aristocrat series, and 10X manages the 10X S&P Global Dividend Aristocrats ETF (stock code: GLODIV). This strategy selects companies with a long history of paying dividends and growing. These businesses are strong, cash-generating, or “cash cows” as Boston Consulting Group calls them, and are well-positioned to weather tough economic times.
This ETF is a useful and attractive “building block” to add to your local stock portfolio for a diversified, high-quality global stock allocation.
Reliable dividend payer
Many investors prioritize cash flow metrics above all else when analyzing companies. Companies that generate cash tend to have disciplined management teams, proven business models, and low-level financial gear. This signifies quality and makes it an attractive asset. Additionally, cash flow is very difficult to manipulate, so cash flow difficulties are usually one of the earliest warning signs that a business is in trouble. These companies are usually reliable dividend payers.
Planned company selection
An index that selects stocks based on dividend payment history is comparable to many dividend-focused active mandates, but is instead delivered through a low-cost indexing solution. Thanks to data and index technology, the index is transparent and allows us to systematically screen thousands of companies with these attractive dividend characteristics.
The 10x Global Dividend Aristocrats ETF is ideal for investors who want to participate in the stock market with a defensive stance due to the quality and robust nature of the companies that make up the strategy.
Additionally, the 10x Global Dividend Aristocrats ETF is highly liquid, transparent, and well-diversified. Nearly R2.5 billion has been invested in this ETF. With a historical dividend yield of 1.9%, the ETF has posted an average annual return of 14.4% since his inception six years ago (versus his 13.1% for the Asisa Global Equity general category).
In summary, ETFs have become an essential tool for investors navigating today's complex investment environment. Its simplicity, accessibility and cost-effectiveness make it a valuable asset in building a diversified stock portfolio.
As the ETF landscape evolves, including ETFs in your stock portfolio will become essential to achieving superior results in your personal investments. By staying informed and leveraging the benefits of ETFs, investors can achieve long-term success in an ever-changing market environment.
*Yield to maturity as of January 23, 2024. Assets under management are as of the end of December 2023. Past dividend yield and his 2023 net performance as of the end of December 2023. Performance is calculated using NAV (Net Asset Value) versus NAV figures and includes lump sum investments and distributions before deduction of applicable taxes due to retail investors. Past performance is not indicative of future performance.
For more information, please visit www.intermediaries.10x.co.za.
10X Fund Managers (RF) (Pty) Ltd is authorized by the Financial Sector Conduct Authority as a manager of collective investment schemes in securities under section 42, section 45 of the Collective Investment Schemes Management Act 2002.
The content here is provided for general information only. It is not intended to be, and does not constitute, financial, tax, legal, investment, or other advice.
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