What Is an ETF — And How Is It Different from a Mutual Fund?

byadmin@abundant

Introduction

If you’re beginning your investment journey in Singapore, you’ll quickly come across two very common terms: ETF and mutual fund.
Both are popular investment vehicles.
Both offer diversification.
Both can be used for long-term wealth building.

But they are not the same — and understanding the difference can help you choose the right structure for your financial goals.

In this guide, we explain ETFs and mutual funds in simple, practical terms, so you can make confident investment decisions.

What Is an ETF? (Simple Definition)

An ETF — Exchange-Traded Fund — is an investment fund that:

  • Holds a basket of assets (stocks, bonds, commodities, etc.)

  • Tracks an index (e.g., S&P 500, Nasdaq-100, STI)

  • Trades on the stock exchange just like a normal share

This means you can buy and sell an ETF during market hours, the same way you would buy individual stocks.

ETFs are popular because they offer:

  • Low cost

  • Instant diversification

  • Transparency

  • Flexible trading

  • Access to global markets

Some well-known ETFs include:

  • SPY (S&P 500)

  • QQQ (Nasdaq-100)

  • VOO (S&P 500)

  • IWDA (global equities)

What Is a Mutual Fund?

A mutual fund is a professionally managed investment fund where:

  • Investors pool their money

  • A fund manager buys and sells assets inside the portfolio

  • The fund price updates once per day (no intraday trading)

Mutual funds can be:

  • Actively managed (decisions made by portfolio managers)

  • Passively managed (tracking an index, like ETFs)

Common mutual funds include:

  • Balanced funds

  • Bond funds

  • Growth funds

  • Global multi-asset portfolios

In Singapore, many ILP sub-funds and unit trusts are structured as mutual funds.

Key Difference Between ETFs and Mutual Funds

(Easy Comparison Table)

Feature ETF Mutual Fund
Trading Trades like a stock (intraday) Bought/sold once per day (end-of-day NAV)
Pricing Changes throughout the day Fixed once daily
Management Mostly passive Active or passive
Cost Typically cheaper Can be higher fees
Minimum Investment 1 share Varies (often higher minimums)
Accessibility Easy for beginners Common in advisory-based portfolios
Use Case Simple index investing Customised strategies & risk management

Both can be excellent choices — depending on your goals, risk appetite, and investment style.

Why Do Investors Choose ETFs?

✔ Low Fees

Most ETFs have very low expense ratios, making them cost-efficient.

✔ Easy Diversification

Buying one ETF like SPY or QQQ gives you exposure to hundreds of companies.

✔ Transparency

You can see exactly what an ETF holds.

✔ Global Access

ETFs cover U.S. markets, Europe, China, emerging markets, bonds, commodities — everything.

✔ Great for Long-Term Passive Investors

Perfect for “buy and hold” strategies using DCA (dollar-cost averaging).

Why Do Investors Choose Mutual Funds?

✔ Professional Management

A portfolio manager makes decisions for you.

✔ Built-In Risk Strategies

Many mutual funds have balanced or defensive allocations.

✔ Suitable for CPF/SRS

Many Singapore-approved funds are mutual fund structures.

✔ Perfect for All-In-One Solutions

Investors who prefer:

  • Guidance

  • Risk management

  • Diversified, goal-based portfolios

often choose mutual funds through trusted advisors.

ETFs vs Mutual Funds: Which Is Better for You?

There is no “best” — only what fits your needs.

ETFs may suit you if:
✔ You want low-cost, passive investing
✔ You prefer simple index exposure
✔ You like the flexibility of buying anytime
✔ You are comfortable managing decisions yourself

Mutual funds may suit you if:
✔ You prefer professional guidance
✔ You want risk-controlled, diversified portfolios
✔ You invest via structured plans (CPF, SRS, ILP)
✔ You prefer not to manage the portfolio actively

Most investors eventually use both as part of a well-rounded strategy.

Conclusion

ETFs and mutual funds are two of the most powerful wealth-building tools available to Singapore investors.
Understanding the strengths of each helps you make smarter, more confident long-term decisions.

At Abundant Life Planners, we help investors build globally diversified portfolios using the right mix of ETFs, mutual funds, and structured strategies — based on your goals, timeline, and risk appetite.

📍 Book a Wealth Review with Us
Let’s structure a personalised investment plan that balances growth, diversification, and long-term stability.