With the world opening up from the 600 shares on the Johannesburg stock exchange to the tens of thousands across the globe, how do South African do-it-yourself investors pick their first international stocks? Consider starting off with global Exchange Traded Funds (ETFs), say stockbrokers .

With an enormous choice of shares now easily available to you thanks to the easing of exchange controls, setting up your first portfolio can be daunting.

Just because everyone is piling into Apple  (AAPL:US) shares amid excitement about the tech company producing the first Apple car  doesn’t mean you will make a good return if you do the same. In fact, you are fully aware you could be buying at the top of a cycle along with the investment herd.

On the other hand, you may get into Proctor & Gamble  (PG:US) just before its smartphone-connected toothbrush  takes the world by storm and, in so doing, boost its share price. You will undoubtedly enjoy watching your P&G counter edge, or even, soar up the stock performance charts.

Your pleasure will be all the sweeter when you convert your foreign currency denominated gains back to rands – if the rand continues to fall in value.

Before you start snapping up shares in New York or Sydney. bear in mind that many investors on the other side of your trades will be professionals with vast experience and more tools at their finger tips to analyse stocks.

If they are buying, they think they are going to make money off you – and if they are selling, there could be something they have spotted in a company that they don’t like.

Throughout the night, your Google, Facebook and Amazon  shares will be constantly shifting in price while investors on the other side of the world re-arrange their portfolios.

In the next in a series on international share investing for Biznews global investing section, Biznews.coms Jackie Cameron outlines the benefits of a common starting point for novice international traders: global ETFs.

Gambles on glamorous global stocks are what keep the adrenalin pumping for many share traders. And, if you’re really daring, you can trade on margin  or play in the foreign currency markets.

However, you obviously want to make good returns without any worries. Above all you don’t want to lose money, if you can help it.

International share investing: South Africans warm up with global ETFs

Start by keeping your investing simple, is the recommendation to novice do-it-yourself (DIY) global investors from Fatima Essop Mohamed, of South Africa’s newest international share trading platform, Standard Bank Webtrader .

Although Webtrader doesn’t offer advice to its clients, it suggests – as do other brokers – that new investors start with more conservative investment plays in the form of ETFs.

These are passively managed investment funds that trade in the same way as traditional shares. However, they offer you a basket of securities so you are effectively buying a ready-made diverse portfolio, says Essop Mohamed.

It is cheaper to buy an ETF than it is to build your portfolio of shares separately. This is because you pay brokerage and other charges on one ETF share transaction rather than on a number of separate trades.

There are many different types of ETFs. The most popular ones among South African international share investors tend to be those that track performances of major stock market indices, say South African stockbrokers.

Anthony Ginsberg, managing director of GinsGlobal Index Funds, says: “Asset allocation is certainly shown to be the determining factor in portfolio returns globally – so much so that many IFAs (independent financial advisers) have given up altogether on finding start fund managers (who frequently change jobs).”

Instead financial advisers are increasingly using index unit trusts, or mutual funds, and ETFs to create the necessary asset allocation – using index building blocks, says Ginsberg.

The S&P 500. which lists the biggest 500 companies on the New York stock exchanges, the Russell 2000  –  which measures the performance of the US small-cap segment – and the MSCI Emerging Markets indices are among the world’s most heavily traded .

A big advantage of opting for a market index tracker is that you do not need to be an expert on specific companies. Instead, you can invest based on where you think a specific market, like the US or Europe, is heading.

You don’t need to fret when your chosen index ticks down because sooner or later it will most likely head up again. If one of the index constituents is a dud, it won’t hammer your portfolio as much as if you had stocked up on this share separately.

You can also opt for an ETF that tracks a specific sector or investment style. The ETF market is mushrooming, with ETFs available for every investment taste – from betting against the NYSE Arca Gold Miners Index  to taking a punt on an index of natural gas futures .

It’s probably best to find your feet with a standard ETF, though, as the more sophisticated ETFs are inevitably riskier. And, many of the shares you will find out there on other stockmarkets are lower risk than some ETFs.

The very big listed companies have larger market capitalisation values than some stock markets. Apple  is a case in point.

Buying Apple is like buying a basket of markets because its performance in different regions will impact on the share price. So, not too different from an ETF that tracks established companies.

Also on  Biznews.com : more about investing in the world’s markets from the South African perspective, plus special reports on global companies and other securities you might want to consider for your portfolio, in our  Global Investing  section. 

Send an email to  Jackie Cameron .

If you are interested in building an international share portfolio from your laptop in South Africa, you may also be interested in these articles on Biznews.com

Do-it-yourself international share trading takes off in South Africa among the wealthy set

Buying international shares from your laptop in South Africa: How to get started