About ETFs
What is an ETF?
What is an index?
What are the advantages of ETFs?
ETFs combine the benefits of stocks, unit trusts and index funds because they share common characteristics:
Easy access to diversification
- Own a basket of securities e.g. an entire market, country or region with a single trade
Flexibility
- Buy and sell during trading hours just like a stock
Low cost
- Cost of investing (lower management fee and no upfront fee) is generally lower because it follows the performance of the index
Transparency
- You know what you are buying as the underlying securities are disclosed. Prices are available real-time throughout the trading day.
Liquidity
- The investor can redeem units easily and obtain cash by the 2nd market day after trade date (T+2).
Affordability
- For a small sum of money, you can invest in your desired securities investment.
What should I do before investing in an ETF?
It is best if you understand:
- Investment objective and strategy of the ETF
- Information on the index that the ETF is tracking
- Fees and charges that will be borne by an investor
- Trading information of the ETF
- Income distribution policy
- Information on the management company
- Risk factors specific to investing in an ETF
How do I buy ETFs?
What do I have to pay when buying and selling ETFs?
What determines the price of an ETF?
Do ETFs provide income distribution?
What are the risks of investing in ETFs?
The risks of investing include:
Market Risk
- Performance of an ETF will be directly affected by the performance of the underlying market in which the ETF invests in.
Tracking Error
- The performance of the ETF may not be able to follow closely to the performance of the index due to failure of the trading strategy, fees and expenses etc.
Trading Units
- The units may trade at a discount or premium against the NAV of the fund, subject to the demand and supply of the units.
How are ETFs different from stocks and unit trust?
Instruments | ETFs | Stocks | Unit Trusts |
Diversification | ![]() | ![]() | ![]() |
Fees and Charges | |||
Entry Charge | Brokerage fees apply* | Brokerage fees apply* | Up to 6% of NAV per unit |
Annual Management Fees (p.a.) | 0.5% | ![]() | Up to 1.5%-2.0% |
Tradability | |||
Intra-day Pricing | ![]() | ![]() | ![]() |
Cash settlement | T+2** | T+2** | Upfront |
Note: For illustrative purposes only.
*Please note brokerage fee of up to 0.70%, clearing fee of 0.03% and stamp duty are applicable when trading securities on Bursa Malaysia Securities Berhad.
** T+2 means second business day after trade date.