R36,000 invested on EasyEquities versus SatrixNOW – The winner is clear

Investing R36,000 as part of your tax-free savings account (TFSA) allowance through EasyEquities produced significantly better returns than investing through SatrixNOW.

Satrix specialises in index tracker funds and offers a range of investment products tracking different market segments.

Index tracker funds offer attractive features to investors due to their ease of use, greater liquidity, and lower fees compared to many actively managed mutual funds.

Satrix launched a mobile app, SatrixNOW, to make it easier for investors to buy their products and track their performance.

The app gives investors access to all the Satrix ETFs with the option to invest through a tax-free savings account.

The account allows investors to allocate up to R36,000 per year, to a maximum of R500,000, of which the principal dividends and capital gains would be exempt from any taxes when withdrawn.

The Satrix ETFs are also available through other trading platforms, including Purple Group’s popular EasyEquities.

Like SatrixNOW, EasyEquities offers a mobile app that investors can use to open a TFSA with the same features as the SatrixNOW platform.

Investors can buy and sell the same Satrix ETFs through the EasyEquities mobile app than through the SatrixNOW platform.

The main difference for Satrix ETF investors is the fee structures.

SatrixNOW and EasyEquities’ fee structures differ significantly, which raises the question of which platform offers investors the best returns in the long term.

SatrixNOW and EasyEquities fees

SatrixNOW has trading and platform fees, while EasyEquities only has a trading fee.

SatrixNOW’s platform fee is an ongoing annual fee paid on the total investment amount to use the platform.

The first R500,000 is charged at 0.5%, the next R500,000 at 0.4%, and the investment amount beyond R1,000,000 at 0.3%.

EasyEquities does not charge an ongoing platform fee as the app is free to use. EasyEquities does, however, charge brokerage fees on each transaction made.

SatrixNOW also has brokerage fees on top of its platform charge for each trade, albeit lower than that of EasyEquities.

The table below gives a breakdown of EasyEquities and SatrixNOW’s fees.

Impact of fees on your investment

Daily Investor tracked the performance of R36,000 lump-sum investments in the Satrix Top 40 ETF on SatrixNOW and EasyEquities over 18 years – from 2005 – to compare the results.

Because SatrixNOW has lower brokerage fees, the initial investment for SatrixNOW was R35,927.47 and R35,865.37 for EasyEquities.

After the 18-year investment window, the EasyEquities investment grew to R221,444, and the SatrixNOW investment grew to R200,153.

It means that the platform fees associated with SatrixNOW cost the investor R21,291 in returns over the period.

Investors will, therefore, benefit from buying the Satrix Top 40 ETF through EasyEquities instead of the SatrixNOW app.