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What is the Difference Between an ETF and a Tracker Fund?

LOW COST FUNDS: Looking to invest? Want to go passive? We explain the key similarities and differences between exchange traded funds and mutual tracker funds

Kenneth Lamont 3 October, 2016 | 9:48AM

 

 

 

Kenneth Lamont: Well, investors traditionally invest in passive funds for their low cost and for the transparency associated with these funds. 

The two major options that investors in the U.K. have are traditional mutual fund, index funds and exchange traded funds. The primary difference between these two products is that mutual funds are priced once a day and have traditional as I say mutual fund structure. Whereas ETFs are priced throughout the day and traded like a stock on exchanges. 

The second major difference between the two is that ETFs, certainly in Europe have a far larger breadth of exposure that they offer. For example you may be able to buy an ETF which gives you sole access to one country like Vietnam, whereas this exposure is not available with index funds. 

Also ETFs are more versatile in the sense that, there is a far higher percentage of these funds which are synthetically replicated as opposed to physically replicated. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Kenneth Lamont  is a passive funds research analyst for Morningstar Europe.

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