#68: ETF pricing and side hustle tax

The Fat Wallet Show from Just One Lap

The Sygnia World and Satrix World exchange-traded funds (ETF) both track the MSCI World Index. ETFs are priced on their net asset value. That means the share price is calculated by adding up the prices of the shares within the ETF to arrive at a fair value. Unlike ordinary shares, ETF unit prices are not subject to the forces of supply and demand to the extent that ordinary shares are. When there is demand for ETF units, the market maker produces more units at fair value. When there is too much supply, the market maker buys back units.

How is it then that the share price movements of the SYGWD and STXWDM aren’t equal, asks listener Gerhard Jacobs this week. Simon and I discuss the impact of dividend reinvestment on price, as well as the unreliable nature of the closing auction price.

Aiden Whitaker not only inspired young listener Ernst Jordaan to start making his dreams a reality, his question also got Kenneth Collett and De Wet de Villiers thinking about tax efficiency for a side hustle. Kenneth suggested registering a small business corporation to reduce his effective tax rate from 27.4% to 24.8%. De Wet finds a way to reduce that amount even further, to 21.08%. We discuss this voodoo in this episode.

Links and sources

If you are a South African living abroad, you might want to pay attention to the proposed changes to the 185 day tax resident rule. Thank you to Kim for bringing our attention to this Moneyweb article.

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