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<\/a>\nA drawback of an ETF is that because the shares held in an ETF \u201cbasket\u201d usually have similar characteristics, there might be diversification from a company point of view, but there may still be risks based on the shared characteristic such as their industry, for example. In unit trusts there is usually a much more diverse range of shares held within a single unit trust, which suggests that unit trusts are preferable to ETFs from a diversification point of view. If an investor prefers ETFs, it is advised to invest in a few different ETFs that have a lower correlation to each other.<\/p>\n
Unit Trust
\nETF
\nBasic concept
\nBuy a unit in a pooled investment group
\nBuy a \u2018share\u2019 that represents a pre-determined \u2018basket\u2019 of shares
\nFees
\nManagement fees increase the overall cost
\nLower costs due to the absence of a fund manager
\nManagement type
\nActively managed
\nPassively managed
\nBuy\/sell
\nSold via product providers
\nTraded publicly on stock exchange
\nDiversification
\nWider range of shares that may have lower correlation to each other
\nBaskets usually have shared characteristics, which means the underlying shares are less diversified<\/p>\n","protected":false},"excerpt":{"rendered":"
In the previous articles, we discussed unit trusts, which are pooled investments where a manager trades the underlying shares actively. In this article we will look at the cousin of a unit trust \u2013 the exchange traded fund (ETF), and also compare their characteristics. An ETF can be thought of as a basket of shares,<\/p>\n","protected":false},"author":35,"featured_media":142910,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_eb_attr":"","_sitemap_exclude":false,"_sitemap_priority":"","_sitemap_frequency":"","footnotes":""},"categories":[1,585],"tags":[],"country":[],"class_list":{"0":"post-142899","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-a-z-topics","8":"category-business"},"acf":[],"yoast_head":"\n