Exchange Traded Funds VS Unit Trust


In my last post, I've shared some insights on Exchange Traded Funds. Since then, many people have been asking the differences between buying ETFs compared to traditional Unit Trust or Mutual Funds. In this post, I'll be making a comparison of the two by summarizing the differences.

3 Things You Must Know About Mutual Funds / Unit Trusts

First, do take note that you will never know the actual price of the funds that you buy or sell because a mutual fund's Net Asset Value (NAV) is only known a few days after buying or selling.

Second, mutual funds are generally sold through Banks, Financial Planners, Financial Advisers and in some countries, Unit Trust Agents. In Malaysia, there are agents who made their millions by selling unit trust alone. So, you can imagine how many people are investing into mutual funds or unit trust in Malaysia due to the lack of awareness of ETFs.

Third, when you invest into mutual funds or unit trust, you are paying high sales charges and annual management fees of up to 5-8%!

3 Things You Must Know About Exchange Traded Funds

First, ETF's price is updated throughout the day because it acts like a stock. Therefore, you will know exactly the price you are buying and selling at.

Second, because ETF is bought and sold like any other stock, there is an ease of transaction when you buy or sell. You can do it through your broker. I prefer using an Online Broker for lower brokerage fees.

Third, besides the normal brokerage fees that is charged when buying or selling, you generally pay between 0.7% – 1% per year for management fee, trust fee and maintenance fee combined.



Source by Jonathan Quek