Investing in ETFs: When Is the Best Time to Start?

What happened

Many South Africans looking to grow their savings or start investing often wonder when the best time to invest in ETFs (Exchange-Traded Funds) might be. Should they wait for a market correction—when prices drop—to get a bargain? Or should they invest immediately, regardless of market conditions? This debate is common worldwide but has specific implications for South African investors, including employees, job seekers, and small business owners.

A market correction refers to a short-term drop in stock prices, usually by at least 10%, often seen as a chance to buy at lower prices. However, timing the market accurately is very difficult, even for professional investors.

Why it matters

ETFs are popular investment tools in South Africa because they offer diversification, typically have lower fees than unit trusts or mutual funds, and are accessible to everyday investors via local platforms like EasyEquities or SatrixNOW. They track a basket of assets—such as shares on the JSE (Johannesburg Stock Exchange)—and can offer exposure to whole sectors or the broader market.

Given the economic challenges South Africa faces, including high unemployment rates, inflation pressures, and political uncertainty, many people are tempted to wait for a “perfect moment” to invest. But markets are inherently unpredictable. Waiting for a correction that doesn’t come quickly might mean missing out on long-term growth potential. Conversely, investing a large lump sum just before a market drop can lead to substantial short-term losses.

What this means for South Africans

For ordinary South Africans, including employees saving for retirement, young professionals starting to build wealth, or small business owners looking to use surplus funds effectively, a phased approach to investing is often more practical. Instead of investing a large amount all at once, which can expose you to market timing risks, investing smaller amounts regularly can reduce the impact of volatility.

This strategy, known as "dollar-cost averaging" (though in South Africa it’s in rand), means you buy more units of an ETF when prices are low and fewer when prices are high. Over time, this can lower your average purchase price and smooth out your investment journey.

Impact on consumers, jobs and small businesses

For consumers, disciplined investing—even in smaller amounts—helps build a financial buffer and grow wealth slowly but steadily. This is important in a country where many struggle with debt or lack emergency savings.

For job seekers, learning about investment basics and starting early, even with minimal funds, can improve financial knowledge and set a foundation for future financial security.

Small business owners might be tempted to keep all money in the business or cash due to uncertainty. Yet, gradually investing excess cash in ETFs can diversify their risk and provide additional income sources. However, they should ensure they maintain enough liquidity to manage day-to-day operations.

Risks and limitations

While a phased investment approach has benefits, it’s not without risks. Investors still face market risk—investments can lose value. ETFs, though diversified, track underlying markets and can decline during recessions or economic downturns.

Also, fees and taxes must be considered. Buying many small amounts could increase transaction costs, especially if using platforms with fixed fees per trade.

South African investors should also consider currency risk if investing in offshore ETFs, as fluctuations in the rand exchange rate can affect returns.

Lastly, market conditions can remain unpredictable, and no strategy guarantees profits. Educating yourself, starting with an emergency fund, and aligning investments with your financial goals is crucial.

Conclusion

For South Africans eager to start investing but wary of market timing, a structured, phased approach to buying ETFs can be a smart choice. It reduces the stress of trying to predict the market, spreads risk over time, and aligns well with typical South African economic realities.

Remember, investing is a long-term game. Starting small, staying consistent, and focusing on your goals usually beats waiting for a perfect moment that may never come.

(Source: Adapted from financial experts’ advice on ETF investing strategy)

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