Is this the best ETF in the world?

S&P 500 IT Index

Dear Investors,

I might have found the best Exchange Traded Fund (ETF) in the world.

This ETF tracks the S&P500 information technology sector.

It is no secret that US technology stocks have been booming over the past decade. Because of that, you would think that there would be many versions of this ETF available around the world.

Surprisingly, there is only one and it is traded on the Johannesburg Stock Exchange in South Africa.

Sincerely, Raj

Today’s menu:

  • The ETF

  • Performance

  • Outperformance forever?

  • Top 10 holdings

  • Conclusion

The ETF

The ETF I’m referring to is called the 1nvest S&P500 Info Tech Index Feeder ETF.

That’s a mouthful. Let’s break it down.

The company that offers this ETF is called 1nvest. The product is an ETF based on the S&P500 information technology index. That is a subset of the S&P 500 index. Feeder means that you buy and sell this ETF in Rands. They convert the Rands to Dollars and buy the underlying US stocks.

For their company name, 1nvest are using the digit “1” instead of the letter “I”. It seems clever, but it's a tad problematic. How does one say their name?

Is it an Nvidia type deal? Do we say Nnn-vest or do we say Onen Vest? I have no idea. Which is why I will sometimes use the ETF’s ticker “ETF5IT”.

You can find it on the Johannesburg Stock Exchange with that ticker. If you want to look it up on Yahoo, you will find it under ticker "ETF5IT.Jo”.

A Onen Vest billboard

Performance

I know that time is money for you capitalists, so lets cut to the chase with the numbers. The graph below is the ETF5IT vs the S&P500 vs the Nasdaq 100.

Because ETF5IT is listed in Johannesburg, it is traded in Rands (ZAR), so we are using Rand denominated Nasdaq and S&P ETFs for comparison. If we don’t do that, we will be comparing South African Rand performance to US Dollar performance. Then currency movements can skew things. We also need to be aware that ETF5IT consists of 69 stocks that are in the S&P500, so the S&P500 benefits from those stocks’ performance.

That’s all very nerdy, so let’s leave Nerd-ville and look at the performance. As you can see, ETF5IT is annihilating these two very popular indexes.

ETF5IT vs. STXNDQ vs SYG500

The table below shows returns as compound annual growth rates (CAGR). You can think of that like you think of the interest rate on your savings account.

ETF5IT was first listed in March 2018. Since then it has returned almost 31% per annum (7 years). That is amazing performance. It left the Nasdaq in the dust at 27% p.a. and the S&P500 is even further back at 21% p.a. (despite also containing all the IT stocks).

Index (ZAR)

1-year (%)

3-year (%)

5-year (%)

Since March 2018 (%)

ETF5IT

34.3

25.1

29.0

30.8

Nasdaq 100

27.0

19.1

25.4

26.9

S&P 500

25.7

17.5

19.9

21.2

Outperformance forever?

At those rates of growth, R1 million invested 7 years ago would be worth:

  • ETF5IT: R6.55 million

  • Nasdaq 100: R5.29 million

  • S&P500: R3.84 million

Before you sell the family farm and put your entire fortune in this index, let’s be clear that all these indexes have seen unusually high performance in the past 7-years. These performances are way ahead of their long-term averages. The 20-year return for the Nasdaq 100 is closer to 14.8%, while the S&P500 is closer to 10.5%.

So temper your expectations. 

If you have been following the markets, you will know that many US stocks are selling at very high levels. Stocks are at their most risky when they are selling at expensive prices, because that is when they can fall the most. But high prices don’t mean they have to fall. Anything can happen, it can go up, down or sideways. No one knows.

Top 10 holdings

Based on Onen Vest’s November 2024 fact sheet, the top 10 holdings are:

Stock

Percentage of fund (%)

Apple

23.37

Nvidia

19.20

Microsoft

18.82

Broadcom

5.70

Oracle

1.93

Advanced Micro Devices

1.89

Salesforce

1.88

Adobe

1.63

Accenture

1.57

Cisco Systems

1.52

Note that if you do purchase this ETF, two-thirds (67%) of your exposure will be to the top four stocks and 78% will be to the top 10 stocks. That means the remaining 59 stocks in the index only get 22% of your investment.

This fund exposes you heavily to the Apple, Microsoft and Nvidia.

Take note if you already own these stocks elsewhere.

Fees

What does Onen Vest charge?

The official charge is an annual fee of 0.205%. There is no performance fee.

That’s actually pretty reasonable. And no performance fees - which we like.

But… there’s always a but!

Because this is an ETF, which you buy on a stock exchange, you have to pay brokerage charges, fees and taxes as you would with the purchase or sale of any other stock. These costs will add to the cost of buying the ETF and will reduce the proceeds that you receive when you sell the ETF.

There are some other hidden costs when trading stocks. We can talk about them in a future newsletter. If you are interested, vote below.

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Conclusion

As you can tell, this ETF has performed amazingly. But that is not a guarantee of future performance.

If you are investing, think about buying it bit-by-bit over time. That way you can benefit from the average price.

Overall, well done Onen Vest. Nice product, good pricing.

As always, before you make any investment, do your own due diligence (DYODD).

Here’s the link to 1nvest’s website.

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