Guide to ETFs: Understanding Exchange-Traded Funds
Learn how ETFs track indices, their liquidity advantages, and how they compare to unit trusts in Singapore.
How ETFs Track Indices
Exchange-traded funds (ETFs) are designed to track indices. Even when two ETFs aim to track the same underlying index, they can be structured in different ways. One common structure is the cash-based ETF.
Liquidity and Fees
ETFs offer liquidity advantages compared to other investment vehicles. In Singapore, ETFs are often compared to unit trusts. Index-tracking ETFs typically have fees and charges that are usually lower than those of actively managed investment funds. This is because ETFs have lower management fees, and there is usually no sales charge, although you may incur costs when buying and selling.
Check with Your Financial Institution
If you are considering an investment product, check with your financial institution whether the product you are evaluating is an ETF or another type of fund.