Diversification is the name of the game and worth noting EasyVestors. The Intellidex Core ETF Portfolio is showcasing a wide range of asset allocations to curb expected volatility. - EasyResearch
The Intellidex Core ETF Portfolio
Adequate diversification is still key in the times ahead as volatility is expected. Globally, our core equity and bond holdings remain the following: Satrix MSCI World ETF; Satrix MSCI Emerging ETF; FirstRand US Dollar Custodian Certificate; and CoreShares S&P Global Dividend Aristocrats.
As part of the international core holdings, an allocation to Satrix MSCI China ETF may be useful for diversification purposes. Our internal research shows that the Shanghai composite index exhibits low correlation with other equity markets. In addition, exposure to a quickly recovering Chinese economy will boost the overall portfolio.
Locally, we think that an allocation to SA’s cheap banking shares may be useful in our recovery scenario. An uptick in economic activity combined with positive news related to a Covid-19 vaccine towards year-end would send SA share prices higher. Importantly, this catalyst would be one that is independent of our own doing – it does not depend on our politicians!
The JSE-listed Satrix FINI ETF provides financial sector exposure and is dominated by weightings in SA’s listed banks.
Commodities Portfolio completion
Gold and some platinum group metals (PGMs – platinum, palladium and rhodium) have performed strongly YTD, with rhodium being the best at 101.3%. We believe that the prospect of interest rates being lower for longer may continue to support the gold price. Platinum has been the worst performer of the PGMs, down 4.2% YTD.
However, with palladium having soared on stronger demand due to tighter emissions regulations in the automotive industry, a recovery in platinum may ensue given the vast price difference between the two metals. Both are used mainly in the automotive industry and one can be used as a substitute for the other. Importantly, palladium is a by-product of other PGMs in the mining process.
Recent rand strength may present an opportunity to increase offshore investment allocations at a cheaper cost. Given the higher chance of better fortunes offshore, rand weakness may return – bolstering offshore investment performance.
Background: Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents
If you thought this blog was interesting, you should also read:
This research report was issued by Intellidex (Pty) Ltd. Intellidex aims to deliver impartial and objective assessments of securities, companies or other subjects. This document is issued for information purposes only and is not an offer to purchase or sell investments or related financial instruments. Individuals should undertake their own analysis and/or seek professional advice based on their specific needs before purchasing or selling investments. The information contained in this report is based on sources that Intellidex believes to be reliable, but Intellidex makes no representations or warranties regarding the completeness, accuracy or reliability of any information, facts, estimates, forecasts or opinions contained in this document. The information, opinions, estimates, assumptions, target prices and forecasts could change at any time without prior notice. Intellidex is under no obligation to inform any recipient of this document of any such changes. Intellidex, its directors, officers, staff, agents or associates shall have no liability for any loss or damage of any nature arising from the use of this document.
The opinions or recommendations contained in this report represent the true views of the analyst(s) responsible for preparing the report. The analyst’s remuneration is not affected by the opinions or recommendations contained in this report, although his/her remuneration may be affected by the overall quality of their research, feedback from clients and the financial performance of Intellidex (Pty) Ltd.
Intellidex staff may hold positions in financial instruments or derivatives thereof which are discussed in this document. Trades by staff are subject to Intellidex’s code of conduct which can be obtained by emailing email@example.com.
Intellidex may also have, or be seeking to have, a consulting or other professional relationship with the companies mentioned in this report.