Best Online Brokerages for ETF & Unit Trust Trading 2024

An exchange-traded fund, or ETF, is a type of investment fund made up of a group of securities (like stocks and bonds) that are traded on the stock exchange. ETFs include a variety of securities across several industries, making it a good product for low-risk investors who aren't experienced enough to pick stocks individually but would like to invest in a particular industry like tech. Moreover, many ETFs are managed by ETF fund managers, so passive investors can benefit by allowing their broker or fund manager to make the investing decisions.

For those who prefer to invest over a longer period of time, ETFs are a good option, since factors such as luck and market cyclicality cancel each other out. This alleviates the volatility that typically occurs with short-term investing. That being said, you can simultaneously trade ETFs and other products depending on which brokerage you are working with.

One way to choose ETFs to invest in is by comparing the options offered by your current brokerage. You should consider factors such as the total expense ratio (TER), diversity of the portfolio, prospective returns, bid-offer spreads, taxes and how long you wish to invest in the ETF.

If you decide not to trade an ETF from your current brokerage, there are firms dedicated to supplying ETF trading services. However, if you're looking to trade ETFs and not pay high brokerage fees, check out our recommended online trading platforms to find the best one for you.

ETFs and mutual funds differ slightly. While both allow you to invest in a group of companies, one might be more suitable for you depending on your needs.

For example, mutual funds are traditionally long-term investing funds that people use to accumulate wealth over decades. Because of this, they usually require a higher initial investor fee (around S$1,000 or more). Since you can invest in an ETFs for either a short period of time or a longer period of time, ETFs do not charge as high of an initial amount to open the account.

Moreover, ETFs differ from mutual funds since ETFs are traded throughout the day. Mutual funds, on the other hand, are traded at the end of the day. This means that no matter what time you trade a stock, you will have to pay the end-of-day market price if you trade with a mutual fund.

For those looking to open a trading account on behalf of someone else, a mutual fund might be a better choice. This is because mutual funds are more actively managed by fund managers, allowing you to not worry about day-to-day market prices. If, on the other hand, you prefer to be more active or want to invest for a shorter time frame, ETFs could be ideal for you.

Unit trusts are a type of mutual fund that passes profits directly to the investor rather than reinvesting it back into the fund. They are different from ETFs in that by investing in a unit trust, you are buying a part of the deed to the companies you are investing in. Effectively, you are becoming a beneficiary of the trust.

Unit trusts, unlike ETFs, typically have lower fees since fund managers do not actively trade unit trusts. Instead, securities are bought and sold only when there is a change in one of the company's profiles (i.e., merger or bankruptcy). On the other hand, unit trusts are similar to ETFs in that both invest in a variety of sectors and carry lower risks than if you were to invest completely in individual stocks. Furthermore, both unit trusts and ETFs are managed for you, meaning you can be a "passive" investor.

Thus, while both are similar in the investor's role, the major difference is the structure of the investment. Unit trusts are therefore better for people who are happy to invest with a set group of companies with little change. To understand more, read our article on the differences between unit trusts and ETFs.

Yes. ETFs are indexed, meaning they are lower-risk than other types of investments. Moreover, many ETFs offer diversified portfolios, so if one company that you invested in faces financial hardship, your entire portfolio will not falter as a result.

That being said, leveraged ETFs, which contain options and futures, are traditionally riskier than standard ETFs. It is advisable to read the fund's prospectus to determine whether or not you feel comfortable investing with their products. If you are not sure where to start, look at our guide to investing for beginners.