Earlier today, JSE-listed property group Rebosis announced that its group Chief Executive Officer Andile Mazwai would unexpectedly step down with immediate effect. The shares dropped more than 8% on the day with roughly 5 million shares changing hands by midday.
While we will wait to see whether there is more to this story or not, it is a blow to the JSE property sector which was already reeling from the negative news associated with the Resilient property group. Over the past 12 months, Resilient has lost 45% of its value while Rebosis is off 36% with the current sell-off.
When individual shares fall sharply like this, investors can be discouraged from building sustainable long-term portfolios. This is unfortunate as you can lose out on the power of compounding and having dividends re-invested on a regularly basis.
This is where an Exchange Traded Fund (ETF) can be particularly useful.
On the graph below, I plotted Rebosis (Blue), Resilient (Red) and the Coreshares “PropTrax” ETF which tracks the FTSE/JSE SA Listed Property Index (SAPY) in orange. This index invests in the 20 most liquid property shares on the JSE.
At the end of February 2018, the “PropTrax” ETF only had 1.2% exposure to Rebosis, so the impact of this sell-off should be minimal.
What I like about this particular example is that it highlights an easy way to reduce investment risk by simply “buying the index”. You don’t need to be a specialist property investor to get your feet wet in property investments through an ETF. On top of that, you get to enjoy a 7% historical dividend yield, which is a nice way to start compounding wealth over the long-term.
Each investors circumstances will be unique and it is important to consult a qualified advisor around your investment goals but you shouldn’t let the fear of “picking the wrong share” discourage you from building a sustainable long-term investment portfolio.