Unit trusts vs ETFs

Gustav Potgieter CFP® of Aurum Trust gives advice to a user who wants to know the difference between unit trusts and ETFs.

Unit trusts are actively managed investments, whilst ETFs are normally tracker funds and only tracks a certain index, for example the ALSI/FTSE 40 that is tracked by the Satrix 40.

ETFs are normally a cheaper investment because there are no fund management involved, like with an actively managed unit trust, but CHEAPER is not always the best.

A tracker fund cannot change its composition due to market changes like a unit trust can, for instance resources have been suffering for a long time, but there are quite a number of resource shares in the ALSI/FTSE 40.

The underperformance is clear from the following example, where the ETF funds are compared to unit trusts within the same grouping, over the last year:
 

Satrix Divi:	160th out of 162 funds
Satrix 40:	9th out 13 large cap funds
Performance of some of the other ETFs:
Satrix Fini:	7th out of 9 funds
DBX-trackers MSCI World Index ETF:	17th out of 34 funds
Satrix Indi:	4th out of 9 funds
Source: Funds on Friday, 30 November 2013

 Please note that this performance is not necessarily an indication or guarantee for the future. 

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.