Satrix has been in the market for over 16 years and has developed a strong brand for low-cost passive investing, but a year ago it launched a new platform, SatrixNow (satrixnow.co.za), which dramatically reduces the administration costs of investing. This has allowed the company to offer investments with no minimum investment amount.
This means you can start investing in the stock market for as little as, well nearly zero. For example, if you just have R100 to invest or want to pay R20 into the account on an ad hoc basis when you have a bit of extra cash, you can.
In November, SatrixNow added on a debit order facility so you can automate your payments, again with no minimum investment amount, and you can open the account as a tax-free investment account.
Because there are no minimums to start an investment, they have also included a voucher system allowing you to give a Satrix investment voucher as a gift. The cost of the voucher is 1% plus VAT – so, for example, if you wanted to give a child a R100 Satrix voucher, it would cost you R1.14 in fees.
SatrixNow is offered purely as an online offering and the system is managed by online stockbroker EasyEquities. If you have access to the internet or are generally an online convert, the application process is easy and efficient.
Unfortunately, as I have learnt from experience, when opening an account for a child, there is more paperwork involved and it is not quite so seamless. This in line with current Fica laws.
The usual Satrix Investment Plan is still available for individuals who are not comfortable with online applications, but because of the human interaction it is more expensive and it has minimum investment amounts of R300 per month or a R1 000 lump sum.
WHAT IS SATRIX?
Satrix is a range of index-tracking funds offered both as exchange-traded funds and unit trusts. The funds give you the return of the underlying index in which it is invested. For example, you can track the return of the 40 largest companies in South Africa, or the companies with the highest dividend yields or even just the 15 largest financial services companies. As these funds are not actively managed, the costs of running them are much lower than actively managed unit trust funds.
SatrixNow currently only offers exchange-traded funds, but there are plans to include its range of unit trusts, such as its Satrix Balanced fund, on the platform.
SHOULD YOU SWITCH TO SATRIXNOW?
If, like me, you are a long-time client and have funds through the Satrix Investment Plan, you may want to consider transferring to SatrixNow to reduce costs.
The Satrix Investment Plan has an annual platform fee starting at 0.6% per annum with a transaction charge of 0.08% each time you invest.
SatrixNow has no annual platform fee, but charges 0.25% each time you invest as well as a 0.2% administration fee for a debit order. So you pay more for the initial transaction fee, but less ongoing.
As this is a long-term investment, the annual fee has far more impact than the initial fee.
A comparison of a R1 000 lump sum investment shows that the total platform fee for SatrixNow would be R3.70 in the first year compared with R7.81 for the Satrix Investment Plan. In the second year, no investment fee would be applicable, so the difference would just be the platform fee of R6.76 charged by Satrix Investment Plan.
On larger amounts, say R50 000, you would be saving R300 per year on platform fees by year two. Over time, that is a lot of money – so it is definitely worth the switch. Even for a monthly debit order where the higher transaction fee would play a bigger role, within 18 months, the cost benefit goes in the favour of SatrixNow.
In order to transfer, you need to first open a SatrixNow account and then send an instruction to transfer your funds from your existing Satrix Investment Plan.