Your simple answer, lies in FEES. If you were to compare a similar ETF to a similar Unit Trust, they have a rather similar allocation/holding. Hence returns will most likely be rather similar. The difference lies in whether you want better than market returns or satisfied with market returns (after fees). If your horizon is long term (10 years at least), fees really do add up.
Unit Trust's fees will be around 1.5%-4% on average and these are fees you pay on a RECURRING basis regardless of fund performance.
ETFs fees (expense ratios) will range around 0.03%-0.5% on average and are fees that you pay to the ETF manager on a RECURRING basis regardless of ETF performance.
That said, 80% of Unit Trusts out there will not beat the market the longer the time horizon. So if you are a long term investor, going with ETFs will almost always beat Unit Trust simply because of lesser recurring fees and charges. (Provided you choose the right ETFs and the right time horizon)
Personally, I was researching on this recently and chose to shape my portfolio with a mix of both instruments as both have their advantages:
Both: Compared to buying a single stock, ETFs and UTs can hedge against Company Specific Risks involved in owning single shares.
Advantage of ETFs: Generally lower fees compared to UT.
When you have identified some stocks which you'd like to buy and hold for the long-term, owning them via a low-cost ETFs can help maximise your units held, thereby reaping larger gains compounded over long-term (5-10 yrs) due to lower Expense ratios involved.
Advantages of Unit Trusts: Gives Exposure into special/restricted instruments like bond funds or country-specific funds that not all ETFs can buy into.
Also, many UTs providers provide hedging to SGD, thereby reducing some currency rate flucuations. Lowers volatility.
Great local articles (for further reading):
Hey! thanks for asking, it's a layered question that needs a lot more context. So I'll try my best t...
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