Unit trusts vs ETFs

(Shutterstock)
(Shutterstock)
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

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