Is It Better To Buy An ETF That Tracks An Index Or Not?
Every exchange-traded fund on the JSE falls into one of two buckets: it either tracks an index (passive) or it doesn't (active). An index can be a public benchmark like the FTSE/JSE Top 40, or a proprietary index built by the ETF provider itself using a fixed rule book. Either way, if there is a set of rules the manager follows mechanically, it is passive. Out of 126 TFSA-eligible ETFs on our platform, 54 track a known public index and 72 either track a custom proprietary index or are actively managed. But what does "tracking an index" actually mean, and why should it matter to your investment choices?
What is an index?
An index is a set of written rules that defines which stocks to include in a group and how much weight each stock gets. Think of it as a recipe. The recipe says: "include these ingredients in these proportions." The index provider writes the recipe. The ETF manager just follows it.
Take the S&P 500 index as an example. Its rules include:
- Profitability. A company must have positive earnings in the most recent quarter.
- Liquidity. A stock must have enough trading volume. If nobody is buying and selling it, it can't be in the index.
- Market capitalisation. Companies below a certain size are excluded. The threshold determines which companies are added and which are dropped.
Other indices have different rules. The FTSE/JSE Top 40 tracks the 40 largest companies on the Johannesburg Stock Exchange by market cap. The MSCI World tracks large and mid-cap stocks across 23 developed countries. Every index has its own rule book.
Reweighting happens on a schedule
Indices do not change every day. They rebalance on a fixed calendar - usually quarterly or semi-annually. When the index provider announces which stocks are being added, which are being removed, and how the weights are shifting, the ETF manager must take action. They buy the new stocks, sell the ones that fell out, and adjust positions to match the new weights.
This is entirely mechanical. There is no creativity, no speculation, no attempt to outsmart the market. The manager simply follows the rules. That is why it is called "passive" investing.
Some passive ETFs track custom rule sets
Not every index is a broad market benchmark like the Top 40 or the S&P 500. Some indices track custom rule sets. For example, "high dividend yield companies" or "companies that meet ESG criteria" or "the top 50 companies by revenue." These are still passive because the rules are fixed in advance and the manager follows them mechanically. The difference is that the investor chose a narrower recipe.
A real example is the Satrix Value ETF (STXVEQ). Its mandate is to track the "Proprietary Satrix Value Index" - an index built by Satrix itself using a set of value-based rules (low price relative to earnings, book value, and other fundamentals). This is still passive. Satrix does not pick stocks discretionally. The index rules decide which stocks qualify, and the fund manager simply buys and holds them in the correct proportions, rebalancing quarterly. Dividends are collected and paid out to investors. Even scrip lending to reduce costs is done mechanically within set parameters. No manager is sitting at a desk deciding "this stock looks cheap today."
Other examples include STXQUA (Satrix Quality, which screens for quality metrics), STXMMT (Satrix Momentum, which follows a momentum-based index), and STXSHA (Satrix Shari'ah Top 40, which tracks the FTSE/JSE Shari'ah Top 40 Index screened for Shari'ah compliance). Each uses a fixed rule book. None involve discretionary stock picking.
Distributing versus accumulating: dividends matter
Even when two ETFs track the exact same index, they can still behave differently. Some ETFs pay out dividends to investors in cash (distributing). Others reinvest dividends automatically back into the fund (accumulating). In an accumulating ETF you never see a cash payment -- the fund simply grows larger because it buys more of the underlying stocks with the dividend money.
A good example is the three South African ETFs that track the S&P 500 index: CSP500 (CoreShares) and SYG500 (Sygnia) are both distributing ETFs -- they pay cash dividends to your brokerage account. Meanwhile, STX500 (Satrix) is an accumulating ETF -- it reinvests dividends automatically, giving you a true total return without any cash hitting your account. All three track the same index and hold similar stocks, but STX500's structure means you won't see a dividend payment.
Does this matter for your TFSA? In a tax-free account, there is no tax difference between receiving a dividend and having it reinvested -- both grow tax-free. But accumulating ETFs can be slightly more convenient because you don't need to manually reinvest cash dividends yourself. The growth is automatic and frictionless.
Passive versus active: beta and alpha
Passive ETFs track an index. Their goal is to match the index return as closely as possible. That return is called beta - the market return. If the JSE Top 40 rises 15% in a year, a Top 40 ETF should rise roughly 15% too (minus a small fee).
Active ETFs do not track an index. Their goal is to beat the market. That extra return is called alpha. Active managers pick stocks, time sectors, and make discretionary bets. They hope to earn more than the index, but they also might earn less.
Active funds charge more for this effort, because research and portfolio management cost money. The question is whether the extra return justifies the extra cost.
What our data shows
We compared every TFSA-eligible ETF on our platform, grouped by whether they track an index or not. Here is what we found:
Why this matters for your TFSA
Fees matter more inside a tax-free savings account. You cannot deduct fees from tax inside a TFSA the way you might in a retirement fund, so every rand paid in fees is a rand that cannot grow tax-free for decades. The compounding drag of a 0.7% fee versus a 0.3% fee adds up significantly over 30 or 40 years.
Index-tracking ETFs give you market returns at low cost. Active ETFs cost more and on average have delivered less. Some active managers consistently add value, but identifying them in advance is difficult even for professionals.
Full ETF breakdown
Every TFSA-eligible ETF on our platform, showing whether it tracks an index and which index:
Show all 122 ETFs
| Symbol | Name | Index tracked |
|---|---|---|
| 27FGMF | 27four Global Multi-Factor Equity AMETF | Active (no index) |
| 27FGSE | 27four Global Shariah Equity AMETF | Active (no index) |
| 27FLCE | 27four Large Cap Equity | Active (no index) |
| 27FSMF | 27four SA Multi-Factor Equity AMETF | Active (no index) |
| 91DINC | Ninety One Diversified Income Prescient Feeder AMETF | Active (no index) |
| 91GINC | Ninety One Global Diversified Income Prescient Feeder AMETF | Active (no index) |
| AAGEET | Anchor EasyETFs Aspirant Global Equity Actively Managed ETF | Active (no index) |
| AASAET | Anchor EasyETFs Aspirant SA Equity Actively Managed ETF | Active (no index) |
| APACXJ | 10X All Asia Actively Managed Exchange Traded Fund | Active (no index) |
| AQUA | Numoro AQUA Global Multi-Asset Prescient Actively Managed ETF | Active (no index) |
| ASIETF | Arysteq Short-Term Income AMETF | Active (no index) |
| CARTBL | Cartesian EasyETFs Balanced Actively Managed ETF | Active (no index) |
| COGCAP | Coronation Global Capital Plus Prescient Feeder AMETF | Active (no index) |
| COGEM | Coronation Global Emerging Markets Prescient Feeder AMETF | Active (no index) |
| COGES | Coronation Global Equity Select Prescient Feeder AMETF | Active (no index) |
| COGMAN | Coronation Global Managed Prescient Feeder AMETF | Active (no index) |
| COGOE | Coronation Global Opportunities EQ Prescient Feeder AMETF | Active (no index) |
| COOPTI | Coronation Global Optimum Growth Prescient Feeder AMETF | Active (no index) |
| COUSDI | Coronation Global Strategic USD Income Prescient Feeder AMETF | Active (no index) |
| CSGOVI | 10X Wealth GOVI Bond Exchange Traded Fund | JSE All Bond |
| CSP500 | 10X S&P 500 Exchange Traded Fund | S&P 500 |
| CSPROP | 10X South African Property Income Exchange Traded Fund | SA Property Income Index |
| CSYSB | 10X Yield Selected Bond Exchange Traded Fund | Active (no index) |
| CTOP50 | 10X S&P South Africa Top50 Index Exchange Traded Fund | S&P South Africa 50 |
| EASY3 | EasyETFs CPI + 3 Actively Managed ETF | Active (no index) |
| EASY5 | EasyETFs CPI + 5 Actively Managed ETF | Active (no index) |
| EASY7 | EasyETFs CPI + 7 Actively Managed ETF | Active (no index) |
| EASYAI | EasyETFs AI World Actively Managed ETF | Active (no index) |
| EASYBF | EasyETFs Balanced Actively Managed ETF | Active (no index) |
| EASYGE | EasyETFs Global Equity Actively Managed ETF | Active (no index) |
| ETF500 | 1nvest S&P500 Index Feeder ETF | S&P 500 |
| ETF5IT | 1nvest S&P500 Info Tech Index Feeder ETF | S&P 500 Info Tech Sector |
| ETFBND | 1nvest SA Bond ETF | S&P SA Sov Bond 1+ Yr |
| ETFEMA | 1nvest MSCI EM Asia Index Feeder ETF | MSCI Emerging Markets Asia Index |
| ETFGGB | 1nvest Global Government Bond Index Feeder ETF | Active (no index) |
| ETFGRE | 1nvest Global REIT Index Feeder ETF | FTSE EPRA/NAREIT Global REIT |
| ETFSAB | ETFSA Balanced Foundation Prescient AMETF | Active (no index) |
| ETFSAP | 1nvest SA Property ETF | FTSE/JSE SA Listed Property |
| ETFSRI | 1NVEST MSCI World Socially Responsible Investment Index Feeder ETF | MSCI World SRI Red Fossil Fuel |
| ETFSWX | 1nvest SWIX 40 ETF | JSE SWIX 40 |
| ETFT40 | 1nvest TOP 40 ETF | JSE Top 40 |
| ETFUSD | 1nvest ICE US Treasury Short Bond Index Feeder ETF | Active (no index) |
| ETFWLD | 1nvest MSCI World Index Feeder ETF | MSCI World |
| FNB500 | FNB S&P 500 Feeder ETF | S&P 500 |
| FNBEMG | FNB MSCI EM Feeder ETF | MSCI Emerging Markets IMI |
| FNBEQF | FNB Global 1200 Equity Fund of Funds ETF | Active (no index) |
| FNBMID | FNB MidCap Exchange Traded Fund | Active (no index) |
| FNBT40 | FNB Top40 Exchange Traded Fund | JSE Top 40 |
| FNBWDM | FNB MSCI World Feeder ETF | MSCI World |
| FNBWGB | FNB World Government Bond ETF | Active (no index) |
| GLOBAL | 10X Total World Stock Feeder Exchange Traded Fund | Active (no index) |
| GLODIV | 10X S&P Global Dividend Aristocrats Exchange Traded Fund | S&P Glbl Div Aristocrats Blend |
| GLPROP | 10X S&P Global Property Exchange Traded Fund | Active (no index) |
| INCOME | 10X Income Actively Managed Exchange Traded Fund | Active (no index) |
| IVYAI | Ivy EasyETFs AI Innovation Actively Managed ETF | Active (no index) |
| ORBIGG | Oribi Global Growth Prescient AMETF | Active (no index) |
| OYSTER | ETFSA Oyster Global Balanced Prescient AMETF | Active (no index) |
| PANDA | Prescient China Balanced Feeder AMETF | Active (no index) |
| PBLNCD | Prescient Balanced Feeder AMETF | Active (no index) |
| PIPETF | Prescient Income Provider Feeder AMETF | Active (no index) |
| PMXINC | PortfolioMetrix Active Income Prescient AMETF | Active (no index) |
| PREGIP | Prescient Global Income Provider Feeder AMETF | Active (no index) |
| RFFI | RealFin Fixed Income Actively Managed ETF | Active (no index) |
| RWAGP | Reitway Global Property Prescient AMETF | Active (no index) |
| RWDVF | Reitway Global Property Diversified Prescient ETF | Active (no index) |
| RWESG | Reitway Global Property ESG Prescient ETF | Active (no index) |
| RWGPR | Reitway Global Property Prescient ETF | Active (no index) |
| RWINC | Reitway Global Property Income Prescient ETF | Active (no index) |
| STX40 | Satrix 40 ETF | JSE Top 40 |
| STX500 | Satrix S&P 500 ETF | S&P 500 |
| STXCAP | Satrix Capped All Share ETF | Active (no index) |
| STXCHN | Satrix MSCI China Feeder Portfolio | MSCI China |
| STXDIV | Satrix DIVI ETF | FTSE/JSE Dividend Plus |
| STXEME | Satrix MSCI Emerging Markets ESG Enhanced ETF | MSCI EM ESG Enh Focus CTB |
| STXEMG | Satrix MSCI Emerging Markets ETF | MSCI Emerging Markets IMI |
| STXESG | Satrix MSCI World ESG Enhanced ETF | MSCI World ESG Enh Focus CTB |
| STXEUR | Satrix Stoxx Europe 600 ETF | STOXX Europe 600 |
| STXFIN | Satrix FINI ETF | FTSE/JSE Financial 15 index (J212) |
| STXGBD | Satrix Global Aggregate Bond Feeder Portfolio | Bloomberg Global Aggregate Bond |
| STXGLB | Satrix Global Balanced Fund of Funds | Active (no index) |
| STXGLP | Satrix Global Property Feeder ETF | FTSE EPRA Nareit Developed |
| STXGOV | Satrix SA Bond Portfolio | S&P SA Sov Bond 1+ Yr |
| STXGVI | Satrix GOVI ETF | JSE All Bond |
| STXID | Satrix Inclusion and Diversity ETF | Active (no index) |
| STXIFR | Satrix Global Infrastructure Feeder ETF | Global Infrastructure |
| STXILB | Satrix ILBI Portfolio ETF | FTSE/JSE Inflation-Linked Govt |
| STXINC | Satrix Income Actively Managed ETF | Active (no index) |
| STXIND | Satrix Capped INDI ETF | Active (no index) |
| STXJGE | Satrix JSE Global Equity ETF | Global Equity |
| STXJPN | Satrix MSCI Japan ETF | MSCI Japan |
| STXLVL | Satrix Low Volatility ETF | Active (no index) |
| STXMMT | Satrix Momentum Portfolio | Active (no index) |
| STXNAM | Satrix S&P Namibia Bond ETF | S&P Namibia Sov Bond 1+Yr Top10 |
| STXNDA | Satrix MSCI India Feeder ETF | MSCI India |
| STXNDQ | Satrix Nasdaq 100 Feeder Portfolio | NASDAQ 100 |
| STXPRO | Satrix Property Portfolio ETF | S&P SA Composite Property Capped |
| STXQUA | Satrix Quality South Africa Portfolio ETF | Active (no index) |
| STXRAF | Satrix RAFI 40 ETF | FTSE/JSE RAFI 40 |
| STXRES | Satrix RESI ETF | FTSE/JSE Capped Resources 10 |
| STXSAI | Satrix SA Inc AMETF | Active (no index) |
| STXSHA | Satrix Shariah Top 40 ETF | FTSE/JSE Shari'ah Top 40 |
| STXTRA | Satrix TRACI 3 Month ETF | Active (no index) |
| STXVEQ | Satrix Value Equity ETF | Active (no index) |
| STXWDM | Satrix MSCI World ETF | MSCI World |
| STXWIS | Satrix MSCI World Islamic ETF | Active (no index) |
| SYFANG | Sygnia Itrix Fang.AI AMETF | Active (no index) |
| SYG4IR | Sygnia Itrix 4th Industrial Rev Global Equity ETF | Active (no index) |
| SYG500 | Sygnia Itrix S&P 500 ETF | S&P 500 |
| SYGCN | Sygnia Itrix New China Sectors ETF | MSCI China |
| SYGEMF | Sygnia Itrix MSCI Emerging Markets 50 ETF | MSCI Emerging Markets 50 |
| SYGESG | Sygnia Itrix S&P Global 1200 ESG ETF | S&P Global 1200 ESG |
| SYGEU | SYGNIA ITRIX EUROSTOXX50 | Euro Stoxx 50 |
| SYGH | Sygnia Itrix Solactive Healthcare 150 ETF | Active (no index) |
| SYGJP | SYGNIA ITRIX MSCI JAPAN | MSCI Japan |
| SYGP | Sygnia Itrix Global Prop ETF | S&P Global Property 40 |
| SYGT40 | Sygnia Itrix Top 40 ETF | JSE Top 40 |
| SYGUK | SYGNIA ITRIX FTSE100 | FTSE 100 |
| SYGUS | SYGNIA ITRIX MSCI US | MSCI USA |
| SYGWD | SYGNIA ITRIX MSCI WORLD | MSCI World |
| TBIGTF | TBI Global Targeted Yield UCITS ETF | Active (no index) |
| TBIMAI | TBI Actively Managed ETF | Active (no index) |
| VUNGLE | Vunani Global Equity Prescient Feeder Actively Managed Exchange Traded Fund | Active (no index) |
The bottom line
If an ETF tracks an index, you know exactly what you are getting: the market return minus a small fee. If it doesn't track an index, you are betting that a manager can beat the market. Both approaches can work, but the data leans toward low-cost index tracking for most long-term investors.
Browse all TFSA-eligible ETFs, filter by index-tracked or active, and compare their fees and performance side by side.
Browse ETFs → Compare ETFs →Also read: How A 1% Fee Difference Can Cost You A Fortune Over 40 Years - the tyranny of compounding costs explained. And Wisdoms Of Jack Bogle for the philosophy behind low-cost index investing.
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