Sygnia Itrix MSCI USA Index ETF
The Sygnia Itrix USA Index ETF provides broad exposure to US equities. The S&P 500 is in a technical bear territory as it is down by more than 20% year to date. Covid-induced supply chain disruptions coupled with the Russia-Ukraine war elevated food, soft commodities and gas supply shortages, necessitating a spike in inflation.
The high inflation caught the Federal Reserve Bank off guard and left the federal open market committee members with no choice but to hike interest rates aggressively, thus spurring uncertainty in the market. High interest rates increase interest payments for companies and debt-burdened consumers. In addition, the valuation metrics such as risk premiums or discount rates for companies increase, leading to a lower equity valuation. The US economy also took a beating at the hands of higher interest rates and inflation. The world’s largest economy experienced two consecutive declines in the first two quarters of 2022.
The ETF has a heavy weighting in the tech, healthcare, consumer discretionary and staples sectors. The tech industry is dominated by FAANG companies: Meta (formerly Facebook), Amazon, Apple, Netflix and Google have deep pockets and are worth more than $1tn individually. The industry helped the world navigate through the pandemic by rapidly accelerating digital transformation. However, the tech sector has had its fair share of challenges. Some of the challenges, which range from supply shortages to regulatory tightening in China, were prevalent during the pandemic and were magnified post major lockdowns.
The Sygnia Itrix MSCI USA ETF aims to replicate the price and yield performance of the MSCI USA Index. The fund is costly though as it has a total expense ratio of 0.64% but it has a very low tracking error of 0.06%, suggesting that it is rebalanced frequently.
Fund suitability
- This ETF is ideal for investors seeking exposure to US equities and who are willing to tolerate higher volatility and short-term losses. The fund is concentrated to the US, therefore it can be used as part of a diversified investment strategy rather than as a sole equity investment.
Fees
- The fund has a total expense ratio of 0.87%.
Top holdings
- The underlying index holds companies with a total market cap of about $14tn.
Sygnia Itrix MSCI USA Index ETF (JSE:SYGUS)
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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
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