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 an underlying index. In Singapore, they offer liquidity advantages compared with unit trusts. It is important to understand these features when evaluating an ETF.
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 is one possible structure.
Fees and Charges
Index-tracking ETFs typically have fees and charges that are usually lower than those of actively managed investment funds. This is because ETFs tend to have lower management fees, and there is usually no sales charge, although transaction costs may apply when you buy and sell.
Before investing, check with your financial institution whether the product you are considering is an ETF or another type of investment product.