A simple way to use your money to invest offshore

I gave a very broad description of what they are and how they work, as well as some of the benefits of these investable instruments.

The main point I tried to get across is that they are an easy way to spread your investment risk around at a relatively low cost.

This week I’d like to introduce you to the concept of how you can use exchange traded funds to get exposure to offshore markets while keeping your money right here at home.

The ETFs I am talking about are the Deutsche Bank Tracker Funds.

These are called DB X-trackers.

In the current fragile state of our economy and the political uncertainty in which we find ourselves, many investors are worried about future returns on their investments.

When this sentiment prevails it is often prudent to try to get exposure to more developed markets for some kind of security or “risk diversification”.

Investing in more developed markets means that you are sacrificing potentially higher gains for more subdued, but stable, growth.

The DB X-trackers listed on our stock exchange are a great way to buy into overseas markets while staying local with your cash.

Here’s how they are listed:

DBXUS: If you want to own an entire basket of American stocks, this ETF is a perfect way to spread your risk across a market cap-weighted index which represents about 618 of the largest companies in the USA.

DBXUK: If you’d like exposure to the FTSE 100 Index, this market cap-weighted index represents the 100 largest companies in the UK.

DBXEU: This ETF allows you to spread your investment across Europe. The EuroStoxx50 Index is a market cap-weighted index which represents the 50 largest companies in the Eurozone.

There are also DB X-trackers on Japan and even the MSCI world index, and all of these are listed on our exchange.

In fact, anyone with an ordinary, plain vanilla share account should be able to trade these ETFs.

I, personally, own some in my retirement fund, as I believe in not concentrating my investments all in one place.

This also means that I don’t have to track each and every individual share on the US stock market, for example.

I know that, by owning the DBXUS ETF, I own all the big companies in the US in one basket, for which I paid one price.

I have now owned it for around three years and today it’s trading around R30 per share.

These DB X-trackers are a great low cost way to achieve offshore exposure and reduce a little bit of currency risk.

As usual, I am always happy to engage with you, so if you need any information or guidance, you can reach me through benonicitytimes@caxton.co.za

Also read:

Exchange traded funds laid bare

Take advantage of new listings

Pick up some gold and profit

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