Guide to ETFs: Understanding Exchange-Traded Funds
Learn how ETFs track indices, their liquidity advantages, and how they compare to unit trusts in Singapore.
What Are ETFs and How Do They Track Indices?
Exchange-traded funds (ETFs) are investment products that track indices. This guide from MoneySense explains how ETFs track indices, their liquidity advantages, and how they compare to unit trusts in Singapore.
Fees and Charges: ETFs vs. Actively Managed Funds
Index-tracking ETFs have fees and charges that are usually lower than those of actively managed investment funds. This is because ETFs have lower management fees – there is also usually no sales charge, although if you buy and sell, other costs may apply.
Checking the Product Structure
Before investing, check with your financial institution whether the product you are considering is an SIP (Securities Investment Product). There are different ways to structure an ETF even if its investment objective is to track the same underlying index – for example, a cash-based ETF. Understanding the structure helps you make an informed choice.
Frequently Asked Questions
How do ETFs compare to unit trusts in Singapore?
According to MoneySense, ETFs track indices, offer liquidity advantages, and can be compared to unit trusts. Their fees and charges are typically lower than those of actively managed funds.
Do ETFs have sales charges?
Usually, there is no sales charge for ETFs, although management fees are lower than for actively managed funds. However, buying and selling may involve other costs.
What should I check before investing in an ETF?
You should check with your financial institution whether the product you are considering is an SIP, and be aware that ETFs tracking the same index can be structured differently.