The convenience of investing, flexible market access, diversification options, and a low fees tructure have contributed to the adoption of Exchange Traded Funds (ETF) by individual investors, robo-advisers, wealth planners, and institutions as part of their investment portfolios.

What is an ETF?

As its name implies, Exchange Traded Funds are investment funds that trade on the stock exchange. Whilst it is a pool investment instrument like a unit trust, it differs in its investment strategy by tracking a specific index. Thus, through a single ETF trade, an investor gains diversified exposure to all the constituents of the corresponding index. The index constituents are published publicly every day, giving ETF investors the appeal of transparency.

INDEX - The Kuala Lumpur Composite Index, Standard & Poor's 500, and Dow Jones Islamic Market U.S. Titans 50 are examples of indices. An ETF tracking an index aims to mimic the composition and performance of the identified index.

Did you know?

When a company in the ETF index constituent performs poorly, it is replaced with a better performing one by the index provider, following the index criteria. This transition occurs seamlessly, requiring no effort from investors. It reflects the dynamic nature of ETFs, offering a hands-off yet strategic approach for navigating changing market conditions. This periodic review process of the index is known as Index Rebalancing.

Product Comparison
ETFsUnit Trust FundsStocks
Buy / SellTraded via broker on a public marketSold by agents through private channelsTraded via broker on a public market
Investing ObjectiveTo track the performance of a specific index in a particular market, sector or asset classTo maximise returns and outperform the benchmark index through active managementTo achieve capital appreciation and/or income through dividends by selecting individual stocks
Management TypePassively ManagedActively Managed-
Real-timeYes, continuous trading and pricing throughout the trading day.NoYes, continuous trading and pricing throughout the trading day.
Holding TransparencyReported dailyReported monthlyNot Applicable
Annual Management FeesUsually less than 1% of the Fund's NAVUp to 2% of the Fund's NAV-
Entry FeesUsually less than 1% for brokerage fee, clearing fee, and stamp dutyUp to 5.5% of upfront sales feeUsually less than 1% for brokerage fee, clearing fee, and stamp duty
Minimum Investment Amount100 unitsMost Unit Trust Funds require an initial minimum investment of RM1,000.No minimum investment amount