Regular Shares Savings Plans (RSS/RSP)
Asked 3w ago
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 to help.
Short answer (Affiliate link to amazon)
I read this dummies guide book that covers ETF & Unit Trust(Also known as mutual funds) https://amzn.to/38cc89H, as well as lot of personal finance guides and generally the consensus is that ETFs are much better much generally, the fees are significantly cheaper, like 1-2% per annum versus 0.3% or less for ETFs.
ETFs also has a much better liquidity because it's traded publicly on the stock market unlike unit trusts. However, ever unit trust and ETFs are different so you really need to dig deep to understand it like what CH as said, but like i said above, GENERALLY, etfs are cheaper, tit for tat.
If you're interested to start learning how to passively invest, you can borrow the book from any lib(it's a quick read actually, like within 3-5 hours can finish I recall) or support my amazon link.
Or go and Youtube 'Index investing millionaires' and you'll learn how to invest in index funds etfs or mutual funds.
P.S If you found this helpful, please show some love cause my livelihood depends on it ;) In the meantime, stay safe during covid!
This might sound cliche, but it depends on your circumstances. not all ETFs are created equally and not all unit trusts are bad as some might want you to think. few factors to consider:
your own objectives.
fund investment thesis/objective
underlying fund manager
fund manager fees
platform fees / commissions
passive or active management
trade or not traded on exchange
minimum amount to start (lump sum vs DCA)
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