Eswatini's ETF market is still developing, with the local investment market offering fewer ETF choices than larger financial markets. Investors looking for diversification may therefore need to consider both locally available investment products and internationally traded ETFs, depending on their broker and market access.
Available ETF Options
Investors seeking diversified exposure can generally look at ETFs covering different markets and asset classes, such as:
- Broad global equity ETFs
- U.S. equity ETFs
- Emerging-market ETFs
- Regional African ETFs
- Government and corporate bond ETFs
- Commodity ETFs
- Sector-specific ETFs
International ETFs can provide exposure to many companies and markets through a single investment, which can be useful when local investment choices are limited.
Diversification
The main advantage of an ETF is that one fund can hold many securities. A global ETF may spread exposure across countries, industries, and companies.
However, not all ETFs provide the same level of diversification. A technology or energy ETF may hold many companies but still be concentrated in one sector.
Investors should check:
- Number of holdings
- Countries covered
- Industry allocation
- Largest holdings
- Geographic concentration
ETF Performance
Recent performance should not be the only factor used to compare ETFs. Investors should examine:
- One-year returns
- Three-year and five-year performance
- Longer-term results
- Performance against the benchmark
- Volatility
- Previous periods of losses
A fund that performed strongly during one year may have greater volatility or concentration than a broader ETF.
Fees and Costs
ETF costs can reduce long-term returns. Investors should consider:
- Annual management or expense fees
- Brokerage charges
- Trading costs
- Bid-ask spread
- Currency conversion costs
- Account or custody fees
The total cost of buying and holding the ETF is more important than the advertised management fee alone.
Liquidity
Liquidity affects how easily an investor can buy or sell an ETF at a reasonable price.
Important factors include:
- Trading volume
- Bid-ask spread
- Fund size
- Number of buyers and sellers
- How closely the market price follows the value of the underlying assets
An ETF with low trading activity may have wider spreads and make transactions more expensive.
Risk
Different ETFs carry different levels of risk. A broad global equity ETF, government bond ETF, emerging-market ETF, and sector ETF should not be treated as having the same risk.
Investors should consider:
- Market risk
- Currency risk
- Interest-rate risk
- Country risk
- Sector concentration
- Credit risk
- Liquidity risk
For an Eswatini investor, currency movements can also affect the final return when investing in ETFs priced in currencies such as the U.S. dollar or euro.
Conclusion
Eswatini's ETF market is still developing, so investors seeking wider diversification may need to look beyond locally available choices and consider suitable international ETFs. When comparing options, investors should look beyond recent returns and examine fees, liquidity, diversification, currency exposure, volatility, and the risks of the underlying investments. A broader ETF can provide wider market exposure, while specialized ETFs may offer more focused exposure with potentially greater concentration risk.