Well, we’re calling it quits on the iShares MSCI South Africa ETF (EZA). Why? The risk/reward ratio no longer looks beneficial to us. When we make a decision to invest in an ETF, we don’t go in blindly. We perform our due diligence and if the risk looks worthy of the undertaking, we put the ETF on the list of ETFs we allow ourselves to buy. Once an ETF is put on our list and we have purchased shares of it, we intend to hold that ETF long-term, potentially until death do we part. But, we also know that the investing world is ever changing, so we must evolve with it.
I do believe that the iShares MSCI South Africa ETF (EZA) is still worthy of investment consideration for investors who want to gain more diversification in their portfolio. For us though, we have alternatives to EZA. Primarily, our alternatives to EZA will be through Diversified Emerging Markets ETFs. We have chosen both DGS & DEM for our Diversified Emerging Markets holdings. You can read why we invest in DGS & DEM right here: 4 Best Long-Term Performance Diversified Emerging Markets ETFs 1.3
Our primary consideration on whether or not to invest in an ETF or to continue owning an ETF is long-term performance. Let’s take a look at the long-term performance of EZA as compared to an S&P 500 fund and a Diversified Emerging Markets fund:
EZA vs SPY: March 2003 – March 2020
EZA vs EEM vs SPY: May 2003 – March 2020
Our exit strategy EZA. We intend to keep the majority of our shares of EZA until we can sell them at about the price we bought them for. We purposely buy shares of ETFs when the prices have dropped significantly, so EZA does not need to reach an extremely high price to sell our shares. But with the price so low on EZA, I think we’ll be holding these shares for many months to come. Fortunately, this ETF pays a good dividend for now, so it won’t be all pain while awaiting capital appreciation. Our shares of EZA in our M1 Finance brokerage account will be sold immediately and distributed to our other 31 ETFs in that account.
To any who may have invested in EZA because I have blogged about this ETF, I offer my sincere apologies. Though I don’t believe it was a mistake to invest in EZA, I do believe that even long-term investing requires occasional course correction, and this to me is simply a course correction.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We currently own shares of EZA, and we intend to sell these shares in the future. I am not a professional investment advisor. Please perform you own due diligence or seek the advice of a Registered Investment Advisor before investing in any security mentioned in this article. This website contains affiliate links to M1 Finance and Google AdSense.