When it comes to creating the financial future you want, investing in the stock market is a proven method that has been tried and tested by millions of investors over many years. Of course, for anyone starting out on their investment journey, the myriad options available, both locally and internationally, can be more than a little intimidating. And for those who are already established investors, the markets remain full of surprises, as the investing world has recently been reminded by the significant re-rating of stock markets all over the world.

But irrespective of market ups and downs, with a long-term strategy and a balanced and level-headed approach, investors in listed shares and other financial instruments have the potential to consistently build their personal wealth over time.

That’s according to Samukelo Zwane, Head of Product at FNB Wealth and Investments, who says that the availability of Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) in South Africa has made it easy for anyone to become a global investor, or to enhance and diversify their existing investment portfolio across asset types and geographies.

“ETNs and ETFs (which together are known as Exchange Traded Products, or ETPs) are an incredibly efficient and user-friendly way for any investor to access a wide spectrum of investment assets from around the world,” Zwane explains, “but to derive the maximum benefit from these innovative investment solutions, you need to ensure that you fully understand what they are and how they work – so that you can make educated and informed investment decisions.”

Zwane explains that ETPs are essentially investment products that track the performance of one or more underlying security, financial instrument, or an index made up of many different instruments. So, when you invest in an ETP, you get exposure to the underlying share(s) that it tracks, without having to actually invest in those shares directly.

He says that the main difference between ETFs and ETNs is the way they are structured. While both track the performance of underlying instruments, the ETF actually invests in a basket of those underlying stocks and bonds. Many of these underlying ‘baskets’ are put together around specific themes or indexes, so as an investor, you can make a single investment and get exposure to a range of securities or instruments within that investment theme.

On the other hand, an ETN is a debt instrument rather than an investment fund. “What that means is, when you invest in an ETN, you are essentially ‘lending’ your money to an ETN issuer, like FNB” Zwane explains, “which then promises to give back your money when you want it, along with whatever growth has been achieved by the instruments that the ETN tracks. Of course, if those underlying instruments perform poorly, the value of your ETN investment could also decline.”

Like many of the FNB ETFs, many of the ETNs offered by the bank also have overarching themes. These include ESG-focused ETNs that track the performance of a collection of global organisations that are involved in sustainable development fields like clean energy, water security, and low carbon emissions. “So, when you invest in one of these ESG ETNs, in addition to growing your money over time,” Zwane says, “you are also supporting global sustainable development and climate change efforts.”

Zwane points out that the way ETNs and ETFs are structured means they offer many benefits for investors. For one, they allow an investor in South Africa to invest in a product that tracks the performance of many of the world’s biggest and best listed shares, including the likes of Coca Cola, Amazon, Tesla, Microsoft, Netflix, and many more. ETPs allow you to invest in these shares without having to pay the full price that they are listed for on their overseas stock exchanges. “If you wanted to invest directly in a leading global share, you would have to fork out hundreds, even thousands, of rand just for one share,” Zwane points out, “but with an FNB ETN or ETF, you can invest from as little as R10 and still expose your money to the performance those shares deliver.”

What’s more, when you invest in one of these ETPs, you get access to important geographic diversification of your investments, without having to use any of your foreign investment allowance, because your investment takes place locally, but provides international share exposure.

“Best of all, investing in an FNB ETN or ETF is extremely easy,” Zwane points out, “because you can access these innovative and dynamic solutions using most share trading services or any of the FNB investment platforms. These include FNB Online Share Trading, the Share Saver, Share Builder, Share Investor and Local Trader offerings, and of course, FNB Shares Zero, where you will pay no monthly account fees and zero brokerage when you buy any FNB exchange-traded product.”

You don’t have to be an FNB customer to invest in FNB ETNs and ETFs, or to open a FNB Shares Zero account.

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