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
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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. 

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

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