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. They offer liquidity advantages and are often compared to unit trusts in Singapore. One key feature is their method of tracking an index, which can vary in structure even when the objective is the same. For example, a cash-based ETF is one possible structure, though other approaches exist.
Fees and Costs Compared to Actively Managed Funds
Index-tracking ETFs generally have fees and charges that are usually lower than those of actively managed investment funds. This is partly due to lower management fees, and there is typically no sales charge. However, if you buy and sell ETFs, there may be costs involved, so it is worth reviewing the fee details with your financial institution.
How to Verify What You Are Buying
Before investing, it is important to confirm with your financial institution whether the product you are considering is a Securities Investment Product (SIP). This helps ensure you understand what you are purchasing and its associated costs.