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I assume you mean it's not possible to have the dividends automatically reinvested. In general ETFs don't work like that while unit trusts do. With the ETF you will always have to spend money to re-invest, even if it's set to automatic like some brokerages do.

Fortunately with Easy Equities there's no minimum fee, so it doesn't make a difference whether you're investing a small amount of dividends or a large amount of capital. You pay the 0.25% fee both times.

With a regular ABSA stockbrokers account you'd pay the minimum R120 per transaction meaning a lot of the time you actually lose money reinvesting dividends.

I think we're misunderstanding each other. You're only charged 0.25% of the amount being reinvested, not your total holding, so it makes no difference if you're charged R500 X 0.25% four times a year, or R2000  0.25% once a year.

Got you

however if you paying 0.5 % for an ETF because you are fee adverse but then reinvesting the dividends and paying .25 % ex vat on the dividend amount say once a year when reinvesting

Doesn't it makes sense then to look at some options that are managed and charge say 1%  and all dividends automatically invested?

I guess it comes down to why you use an ETF and for me it was always cost based , but just find I am spending more having to always reinvest than i had initially thought!

I like the idea of my investment compounding , do you think its a strong positive to have this done automatically and included in a TER annual fee ?

It's called a Total Return ETF. NFSWIX and NFEMOM are examples of ETFs that reinvests the dividends for you.

Sent from my LG-V490 using Tapatalk

The total expense ratio of NFSWIX is 0.36% so you are indirectly paying for that reinvestment of dividends.

I have two main goals in investing:
1) Don't screw up. This is the number 1 problem with most people's investing. I avoid this by not picking shares, funds or countries.
2) Don't waste money on fees. Simple, just keep costs as low as possible. But you need to consider all the costs.

The total expense ratio is an annual cost, while transactional costs (fee percentage + spread percentage) happen when you buy and sell. The Easy Equities 0.25% cost is a transactional. That's why when most unit trusts charge 1% they take far more money than an ETF charging 0.4% with transactional costs of 0.25%.

As an example, if you had to buy R100 000 in STX40 (don't do that, you can buy the ASHT40 much cheaper!), and reinvest the dividends, using easy equities, you'd pay about the following for the first year:
EE buying fees (incl VAT): R285
+Spread % (from midpoint, currently 0.17%): R170
+EE Reinvestment fees (3% div assumed): R8.55
+TER: R440
Total costs=R903.55

Your costs are R903.55 of your R100 000 in the first year. With a unit trust charging 1%, you would spend R1000 in the first year, so it's pretty close, but then let's go on to the second year where you invest an additional R100 000, assuming a 10% growth in the first year:
EE buying fees (incl VAT): R285
+Spread % (from midpoint, currently 0.17%): R170
+EE Reinvestment fees (3% div assumed): R17.95
+TER: R924
Total costs=R1396.95

So in the second year, your total costs would be R1396.95, while with the 1% unit trust, they would be R2100. A much bigger difference.

Feel like seeing year 3? Ok
EE buying fees (incl VAT): R285
+Spread % (from midpoint, currently 0.17%): R170
+EE Reinvestment fees (3% div assumed): R28.30
+TER: R1456.40
Total costs=R1939.70

So in the third year, your total costs would be R1939.70, while with the 1% unit trust, they would be R3310. Are you seeing the trend? The TER is the big influencer in the prices. That's the one you really must aim at to keep costs low.

And now, as always there is a caveat. If you can get a unit trust with the same TER and performance as the ETF then the unit trust will be cheaper. In the states you can buy the Vanguard funds through an ETF or unit trust (they call them mutual funds) at the same TER. In those cases the unit trust will be cheaper overall.

Patrick as always.... a rock solid dissection

This is very clear once explained  this way and makes a lot of sense and kind of what i was looking for , thank you

Printing this out and sticking it on the fridge!

regarding Unit trusts having same TER as ETFs ... i am sure its coming ( some guys like coronation and others are trying to capture this ) but still some way to go so I am going to be sticking to ETF's for now!

Did you ever manage to take everything offshore? the $ growth should start seeing some reen now with the Pravin G episode starting today!

What would your views as a decent income growth ETF vehicle for SA?

DIVTRX
CSEW40
CSTOP50
NFEMOM

Patrick , i like your idea of not picking single stoicks for fear of being wrong what would be your choice here? i remember some past discussions on here talking about DIVTRX ... is this still the preferred SA ETF?

I would also like to know. I'm just getting into investing and have a Balanced Fund A Unit Trust from Old Mutual which I see charges 2.17% which feels pretty high.

I'm also using Easy Equities and have some money in Coreshares Global Property and Coreshares S&P 500. Looking at also putting money into DIVTRX.

Help a nooby out ?