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ETF Education

ETFs for Beginners: A Complete Introduction

Learn what ETFs are, how they work, and why they're perfect for TFSA investing. A beginner-friendly guide to Exchange-Traded Funds.

3 min read•12 January 2026

What is an ETF?

An ETF (Exchange-Traded Fund) is like a basket that holds many different investments. When you buy one ETF, you instantly own a small piece of dozens or hundreds of companies.

Think of it like buying a fruit salad instead of individual fruits. One purchase gives you variety.

How ETFs Work

ETFs trade on the stock exchange just like regular shares:

  • You can buy and sell during market hours
  • Prices change throughout the day
  • You need a brokerage account to trade them
Most ETFs track an "index" – a list of companies selected by specific rules. For example:
  • Top 40 ETF: Holds the 40 largest JSE companies
  • S&P 500 ETF: Holds the 500 largest US companies
  • MSCI World ETF: Holds companies from developed markets worldwide

Why ETFs are Great for Beginners

1. Instant Diversification

One ETF can give you exposure to hundreds of companies. This spreads your risk – if one company fails, the others can compensate.

2. Low Costs

ETFs typically have much lower fees than traditional unit trusts. A TER (Total Expense Ratio) of 0.10% to 0.50% is common.

3. Simplicity

No need to research individual companies. The index does the selection for you.

4. Transparency

You can always see exactly what's in your ETF. Holdings are publicly disclosed.

5. Liquidity

Buy or sell whenever the market is open. No waiting periods.

Types of ETFs

Equity ETFs – Hold shares/stocks

  • Local (SA) equity
  • International equity
  • Sector-specific (tech, healthcare, etc.)
Bond ETFs – Hold government or corporate bonds
  • Lower risk than equity
  • Regular income
Property ETFs – Hold REITs (Real Estate Investment Trusts)
  • Exposure to commercial property
  • Dividend income
Multi-Asset ETFs – Mix of shares, bonds, and other assets
  • One-stop diversification

Understanding TER

TER (Total Expense Ratio) is the annual fee you pay for holding an ETF.

  • TER of 0.10% means you pay R100 per year on a R100,000 investment
  • TER of 1.00% means you pay R1,000 per year on a R100,000 investment
Over 20+ years, even small TER differences compound significantly. Always check the TER before investing.

How to Buy Your First ETF

  1. Open a TFSA account with a broker (EasyEquities, Satrix, etc.)
  2. Deposit funds into your account
  3. Search for the ETF code (e.g., "STX40" for Satrix Top 40)
  4. Enter the amount you want to invest
  5. Confirm the purchase
That's it! You're now an ETF investor.

Popular Beginner ETFs

For SA Exposure:

  • Satrix 40 (STX40) – Top 40 JSE companies
  • Satrix SWIX (STXSWX) – Shareholder-weighted Top 40
For Global Exposure:
  • Satrix MSCI World (STXWDM) – Developed markets
  • Sygnia MSCI World (SYGWD) – Low-cost world tracker
For Dividends:
  • Satrix Dividend Plus (STXDIV) – High-dividend SA shares

Common Mistakes to Avoid

  • Chasing performance: Past returns don't guarantee future results
  • Over-trading: Buy and hold beats frequent trading
  • Ignoring fees: Small TER differences matter over time
  • No diversification: Don't put everything in one ETF type
  • Timing the market: Consistent investing beats trying to time ups and downs

Your Next Steps

  1. Explore our ETF Database to compare options
  2. Use the ETF Finder Wizard for personalized recommendations
  3. Start with a simple, diversified ETF
  4. Set up regular monthly investments
  5. Be patient – wealth building takes time
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