CNA Money Mind | ETFs (Exchange Traded Funds) vs. Mutual Funds (or Unit Trusts)

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Similarities and Difference between ETF (Exchange Traded Fund) and Mutual Fund (or Unit Trust)

Link (if video embed doesn’t work): Money Mind 2024/2025 – Ep 7 ETFs vs Mutual Funds – mewatch


🏦 Structure:


·      Both ETFs and mutual funds pool money from multiple investors to invest in a diversified portfolio of assets (e.g., stocks, bonds, or commodities).
·      ETFs trade on stock exchanges throughout the day, similar to individual stocks.
·      Mutual funds are priced once daily based on their net asset value (NAV) and can only be bought or sold at the end of the trading day.



👨‍💼Management Style:


·      ETFs are typically passively managed, tracking market indexes or specific sectors. Mutual funds can be actively managed by fund managers who aim to outperform the market.
·      Mutual funds’ performance depends on the expertise of their portfolio managers. ETFs rely on passive tracking of indexes, reducing the need for active management.
·      However, there are actively managed ETFs and index-based mutual funds available as well.



💰Cost and Liquidity:


·      ETFs tend to be more cost-effective due to lower expense ratios and the ability to trade throughout the day. Mutual funds may have higher fees and only allow transactions once daily.
·      On average, mutual funds have a higher minimum investment requirement than ETFs. Some mutual funds have no minimum investment, but typical retail funds require between $500 and $5,000.
·      ETFs have no specific minimum investment requirement.



👍👎 Pros and Cons:


·      ETFs: Pros include liquidity, diversification, and low costs. Cons include potential tracking error and lack of active management.
·      Mutual funds: Pros include professional management and regulatory oversight. Cons include higher fees and less liquidity.

See the interview on CNA’s Money Mind 2024/2025: ETFs vs Mutual Funds
https://lnkd.in/gsrcqnxy


For Investment Portfolio Planning or Investment Portfolio Review, besides ETF and Mutual Funds, stocks and bonds, I am licensed to advise other types of alternative investments such as Private Credit Lending, Trade Financing, Digital Assets, M&A Private Equities, Pre-IPO Private Shares, BTC trackers, Capital Guaranteed Structure Protect, Downside & Cap Upside Indexed UL.

Each investment solutions serve different financial objectives of Wealth Preservation, Wealth Accumulation, Retirement Funding, Regular Passive Income Stream, Legacy or Estate Planning.

Let’s chat over a coffee 🍵!
https://lnkd.in/dmZYJyiS

 

Kenny Loh is a Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingCNA Money Mind | ETFs (Exchange Traded Funds) vs. Mutual Funds (or Unit Trusts)

5 Reasons Young Singaporeans Invest in Exchange-Traded Funds

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Investing is a great way of setting up a better future for yourself. Many young people in Singapore are actively looking into different investment options that will allow them to passively grow their hard-earned money. If you’re in the same boat, you’ve probably heard of exchange-traded funds. ETFs are investment funds that are listed and traded on an exchange, much like stocks. Just like mutual funds, ETFs offer pooled investment options to investors. Unlike traditional mutual funds, however, ETFs can be traded throughout the day, not just at the end of the trading day.

Many young professionals look at ETF Singapore trading opportunities because these investment instruments have qualities that complement their lifestyle and financial situation. ETF trading allows investors to enjoy the following:

Relatively Lower Cost

The lack of substantial funding is one of the common barriers that prevent young professionals from checking out various investment channels. Newbie investors in Singapore will be delighted to know that ETFs have lower fees compared to mutual funds, making them more accessible to those who want to gain exposure to different investment channels without spending a lot of money. Additionally, many online brokers who mainly deal with ETFs offer opportunities for commission-free trading, and they even extend this service to investors with small accounts. This is a clear advantage considering that fees and commissions can deduct a significant amount from a beginner investor’s account balance.

Opportunities for Diversification

Because investing in ETFs is more affordable, traders can easily explore the different types of ETFs that they can include in their portfolio. The most popular types of ETFs are stock, commodity, and bond. Stock ETFs are often meant for long-term growth, commodity ETFs refer to raw goods that can be bought or sold like coffee and gold, while bond ETFs provide the investor with regular cash payments. There are also international ETFs for those who want to try their hand at building a diverse portfolio that includes foreign investments, and sector ETFs that allow traders to invest in specific companies belonging to different sectors and industries.

Trading Flexibility

One thing that differentiates ETFs from mutual funds is that the former allows investors to buy and sell throughout the day. Investors don’t need to wait at the end of the day to find out exactly how much they paid for the shares they bought and how much they received for the shares they sold. If a young investor spots a losing investment, for example, they can exit in a snap and preserve their capital. There’s no need to wait until the end of the business day to cut this losing asset from one’s portfolio. In turn, the ease of completing ETF transactions makes a lot of difference when it comes to how one manages their investments.

Different Management Structure

By using ETFs, investors can easily shift from one type of asset to another within the same day or hour. Those who want to trade more actively even have the option of fine-tuning the allocation of assets in their portfolio throughout the day if they so choose—though this strategy is not usually recommended. The bottom line is that ETFs give young investors, particularly those who are not familiar with the intricacies of how exchanges work, room to grow and change up their portfolio management style as they become more acquainted with the trading environment. This, in turn, makes it easy for newbie investors to explore and adopt strategies that will help them grow their money.  

Inclusion of Innovative Products

ETF issuers, in general, are quick to embrace new products and innovations. They’re not ones to shy away from presenting investors with opportunities to invest in up-and-coming sectors. In 2020, many ETF issuers in Singapore were presenting options in the biotech sector, which is expected to draw in a lot of investors this year as biotech companies continue to make strides in developing and rolling out COVID vaccines. Technology is another hot topic among investors, particularly now that many companies are making the transition to remote work setups. The awareness that many ETF issuers are showing when it comes to in-demand sectors continues to attract forward-looking investors of all ages.

Is ETF the Best Option for You?

Take note that just like all investment instruments, an ETF also comes with its drawbacks. It can still be affected by social and economic instability, and depending on the scope of one’s investments, it can still be prone to volatility. Investors who are interested in checking out ETFs would do well to take the time and effort to get to know the limitations that come with this type of investment fund.

If you’re a new trader who’s looking for an affordable means of checking out how the market works, though, investing in ETFs is a great way to do your research. With experience, strategy, and a bit of luck, there’s no stopping you from growing your money using this investment channel.

Continue Reading5 Reasons Young Singaporeans Invest in Exchange-Traded Funds