In my last article, I shared some insights about exchange-traded funds. Since then, many people have been asking about the difference between buying an ETF and a traditional unit trust or mutual fund. In this article, I will compare the two by summarizing the differences.
3 things you must know about mutual funds/unit trusts
First, please note that you will never know the actual price of the fund you bought or sold, as the mutual fund's net asset value [NAV] is known only a few days after buying or selling.
Second, mutual funds are usually sold through banks, financial planners, financial advisors, and unit trust agents in some countries. In Malaysia, some agents earn millions of dollars by selling unit trusts separately. Therefore, you can imagine how many people invest in Malaysian mutual funds or unit trusts due to lack of knowledge of ETFs.
Third, when you invest in mutual funds or unit trusts, you pay up to 5-8% of high sales fees and annual management fees!
3 things that exchange-traded funds must understand
First, the price of the ETF is updated throughout the day because it acts like a stock. Therefore, you will know exactly what your buying and selling price is.
Second, because ETFs buy and sell like any other stock, trading is easy when you buy or sell. You can do it through your agent. I prefer to use online brokers to reduce brokerage fees.
Third, in addition to the normal brokerage fees charged at the time of purchase or sale, you typically pay a management fee of between 0.7% and 1% per year, trust and maintenance fees.
Orignal From: Exchange Traded Funds VS Unit Trust
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