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
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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