Efficient investing for Stokvels

By Wendy Hlatshwayo A stokvel is a type of informal savings or investment group, commonly found in South Africa. Members of a stokvel contribute a set amount of money regularly (e.g., weekly, monthly), and the pooled funds are then...

ETFSA

ETFSA

14 January 2025

Efficient investing for Stokvels

By Wendy Hlatshwayo

A stokvel is a type of informal savings or investment group, commonly found in South Africa. Members of a stokvel contribute a set amount of money regularly (e.g., weekly, monthly), and the pooled funds are then distributed in turn to each member, typically on a rotating basis. This system helps individuals save money or access lump sums they might not be able to accumulate on their own.

Stokvels are highly valued in many communities due to their ability to provide financial support, foster a sense of solidarity and encourage saving due to the nature of feeling accountable to other members.

Exchange traded funds (ETFs) have, for a long time now, provided a simple and seamless, yet safe way for investors to reap the benefits of stock market returns. This makes them a good candidate for the thousands of Stokvels operating in SA by diligent and caring savers. Exchange-Traded Funds (ETFs) are a low-cost and highly liquid investment vehicle.

ETF portfolios could form an ideal solution for stokvels wanting to build a well-balanced investment portfolio.

Some tips on how to invest:

Investing efficiently for stokvels requires a strategic approach that balances risk, returns, and liquidity while ensuring the goals of the group are met. Here are some key strategies to ensure efficient investing for your stokvel.

The first step in this process is for members to set clear objectives and investment goals. Understanding the collective aims of the stokvel, whether it is for accumulating long-term wealth or to assist with burials, it is essential for the group  to determine whether the investment will be short-term (e.g. 1- 3 years) or long-term (e.g. 5-10 years), as this will influence the type of investment vehicles selected.

Assessing the group’s willingness to take risks is equally important, as some stokvels may prefer low-risk, stable investments, while others may be comfortable with higher-risk options for potentially higher returns. Diversifying the portfolio is also key to managing risk, and reaching out to professionals, such as ETFSA advisors, can provide valuable guidance in this area. It is essential to establish clear guidelines on contributions, withdrawals, and investment decisions to prevent misunderstandings. Regularly assessing the performance of the investments ensures they remain aligned with the group’s financial goals. Lastly, educating all members about the investment process, the associated risks, as well as the importance of discipline in achieving financial objectives will help foster a sustainable and successful investing strategy.

Stokvels investing in ETFs benefit from the following aspects:

ETFs as an investment vehicle of choice, aligns well to the powerful simplicity of stokvels. ETF portfolio policies can start from as little as R300 per month and investors are immediately diversified over entire stock markets.

Stokvels investing in ETFs benefit from the following aspects:

  • Low cost: ETFs have very low fee structures, meaning less of the return is eroded by cost.
  • Diversification: ETFs generally track indexes, meaning the investor, in this case the Stokvel, is immediately diversified over whole markets and not exposed to one share that may do badly.
  • ETFs and investment market returns compound through time.
  • Governance and safety, ETFs are highly regulated as both collective investment schemes and listed securities, and whilst the value of the investment may vary depending on markets the risk to fraud or malmanagement is very low.

ETFSA already has a number of registered Stokvels making use of its simply platform (the Investor Hub) to aggregate investment into the ETF market. As such we understand the unique requirements of these savings schemes and value the unique role they play in the South African society. We have a dedicated servicing team looking after such clients.

When starting the process, it is important to have all your Stokvel information, such as founding documents and FICA documents at hand.

For more information contact: hub@etfsa.co.za

Urgent Alert

Please beware of fraudulent Whatsapp and Facebook accounts pretending to be ETFSA and ETFSA staff members to solicit clients for money.

If you receive any direct message from these accounts – please report and block these accounts immediately and DO NOT provide any personal information.

ETFSA and its staff members will never reach out to clients via direct message on any social media platform unless we are responding to your message.