Index Fund vs ETF (Singapore)
Why a Nikko AM STI ETF at 0.26% can beat a unit trust charging 2%, and when the unit trust route still wins.
An index fund in Singapore is usually a unit trust that tracks a market index and is bought directly from a fund platform without a brokerage account, while an ETF (exchange-traded fund) tracks the same kind of index but is listed and traded on SGX like a stock, typically at a lower expense ratio.
Not financial advice. All figures for educational reference only. Data as at July 2026.
Last updated: July 2026
Key Takeaways
- Traditional actively-distributed unit trust index funds in Singapore typically carry a Total Expense Ratio (TER) of 1.5%-2% per annum, versus well under 0.5% for most listed ETFs.
- The Nikko AM Singapore STI ETF has an expense ratio of 0.26%, versus the 1.5%-2% typical of older-style unit trust index products.
- Digital platforms like Endowus have narrowed the gap by offering index-tracking unit trusts (such as the Amundi Singapore Straits Times Index Fund) with management fees as low as 0.05% for cash and CPF/SRS money.
- ETFs require a brokerage account and are bought and sold at intraday market prices on SGX, while unit trusts are typically bought and redeemed once daily at end-of-day NAV through a fund platform.
- CPF Ordinary Account and SRS money can access both structures, but the specific list of CPFIS-included ETFs and unit trusts differs, so eligibility must be checked fund by fund.
What Is Index Fund vs ETF?
Both index funds and ETFs exist to do the same underlying job: give an investor low-cost, diversified exposure to a market index — the Straits Times Index, the S&P 500, or a global equity benchmark — without having to pick individual stocks. The difference lies in how they are structured, priced, and accessed, not in what they invest in.
A traditional index fund in the Singapore context is usually a unit trust: an open-ended fund that issues and redeems units directly with the fund manager (or via a fund platform like Fundsupermart, Endowus, or a bank’s wealth platform), priced once a day at the fund’s net asset value (NAV) after markets close. You do not need a brokerage account to buy a unit trust index fund; you buy it through the platform or your bank, often with CPF Ordinary Account or SRS funds directly.
An ETF (exchange-traded fund) tracks the same kind of index, but is structured as a listed security that trades continuously throughout the day on a stock exchange — SGX for Singapore-domiciled ETFs like the Nikko AM STI ETF (ticker G3B) or SPDR STI ETF (ticker ES3). Buying an ETF requires a brokerage account, and the price you pay fluctuates intraday based on supply and demand, generally tracking very close to the underlying index’s real-time value.
How Does It Work in Singapore?
The practical mechanics differ across several dimensions that matter for Singapore investors choosing between the two:
- Cost structure: Traditional unit trust index funds typically carry a Total Expense Ratio (TER) of 1.5%-2% per annum — largely because of distribution and platform fees layered on by intermediaries. Listed ETFs are usually far cheaper: the Nikko AM Singapore STI ETF charges just 0.26% per annum. Digital advisory platforms have partly closed this gap by cutting out the traditional distribution layer — Endowus, for instance, offers an index-tracking unit trust (the Amundi Singapore Straits Times Index Fund) with a management fee as low as 0.05% for CPF, SRS, or cash money routed through its platform.
- How you buy and sell: ETFs trade on SGX throughout market hours via a brokerage account, at whatever price the market clears at that moment, subject to a bid-ask spread and brokerage commission. Unit trusts are transacted once a day at end-of-day NAV, typically with no separate brokerage commission, but sometimes with a sales charge depending on the platform.
- Minimum investment: ETFs can usually be bought in small board lots (as little as 1 share on SGX for most counters since board lots were reduced), while some unit trust platforms set a minimum initial or monthly investment amount, though many digital platforms have brought this down to very low thresholds too.
- CPF/SRS access: Both structures can be bought with CPF Ordinary Account and SRS funds, but only specific funds and ETFs included under the CPF Investment Scheme (CPFIS) or accepted by SRS operators are eligible — this must be checked on a fund-by-fund basis, not assumed by structure type.
Index Fund vs ETF Example
Wei Jie wants S$10,000 of exposure to the Straits Times Index and is deciding between the Nikko AM STI ETF (0.26% TER, bought via a brokerage account) and a traditional bank-distributed STI-tracking unit trust charging 1.8% TER.
- On the ETF, his annual cost is roughly S$26 (0.26% of S$10,000), plus a one-off brokerage commission when buying and selling.
- On the traditional unit trust, his annual cost is roughly S$180 (1.8% of S$10,000), with no separate brokerage commission, but the higher expense ratio compounds over time.
- Over 20 years, assuming the underlying index performs identically either way, the roughly 1.5 percentage-point annual fee gap compounds into a materially larger ending balance for the ETF holder — a difference that grows larger the longer the holding period, purely from the cost drag.
If Wei Jie instead routed the same S$10,000 through Endowus into its Amundi STI-tracking fund at a 0.05% management fee, his annual cost would fall to roughly S$5 — cheaper even than the listed ETF, illustrating that the “unit trust = expensive” assumption no longer holds once digital advisory platforms are part of the comparison.
Advantages
ETFs generally offer the lowest all-in cost for a simple, single-index bet, especially for investors who already have a brokerage account and are comfortable with intraday trading.
Digital-platform unit trusts have closed much of the historical cost gap, and in some cases (Endowus’s 0.05% index funds) now undercut even listed ETFs, while removing the need to manage a brokerage account or watch intraday prices.
Unit trusts often make automated monthly investing simpler, since many platforms support recurring investment plans that buy fractional units automatically, whereas ETF investors typically need to manually place trades or use a broker’s regular savings plan feature.
Both structures give genuine diversification across dozens or hundreds of underlying constituents for a single small investment, the core appeal of passive investing either way.
Risks and Limitations
ETF prices can trade at a premium or discount to NAV during periods of low liquidity or market stress, whereas unit trusts always transact at NAV, removing that specific risk.
Traditional bank-distributed unit trusts remain expensive if bought through the wrong channel — the 1.5%-2% TER figures are still common outside digital advisory platforms, and investors who default to their bank’s recommended fund may unknowingly pay far more than the ETF alternative.
ETFs incur brokerage commissions on every trade, which can erode returns for investors who trade frequently or invest very small amounts at a time, unlike a no-commission unit trust platform.
Not every index or theme is available in both structures. Some niche indices are only accessible via unit trust, and some via ETF only, so the “choice” is sometimes moot depending on what exactly you want exposure to.
CPFIS and SRS eligibility varies fund by fund, and a fund that looks attractive on cost may simply not be usable with CPF or SRS money, forcing a workaround or a different fund choice.
Index Fund (Unit Trust) vs ETF in Singapore
| Feature | Traditional Unit Trust Index Fund | Digital-Platform Index Fund (e.g. Endowus) | Listed ETF (e.g. Nikko AM STI ETF) |
|---|---|---|---|
| Typical expense ratio | 1.5%-2% per annum | As low as 0.05% per annum | 0.26% per annum (STI ETF example) |
| Where to buy | Bank or fund platform | Digital advisory platform | SGX via brokerage account |
| Pricing frequency | Once daily, end-of-day NAV | Once daily, end-of-day NAV | Continuous, intraday market price |
| Brokerage commission? | Usually none, may have sales charge | Usually none | Yes, per trade |
| Best suited for | Investors wanting simplicity via a bank relationship | Cost-conscious CPF/SRS/cash investors wanting automation | Investors comfortable with a brokerage account and intraday trading |
Source: Endowus insights, dollarsandsense.sg, moneysmart.sg ETF guide, as at Jul 2026.
The Bottom Line
The old rule of thumb — “unit trusts are expensive, ETFs are cheap” — no longer holds cleanly in Singapore now that digital advisory platforms offer index-tracking unit trusts at fees as low as 0.05%, undercutting even the cheapest listed ETFs. The real decision for most Singapore investors is less about fund structure and more about which access channel — a brokerage account for ETFs, or a digital platform for unit trusts — better fits how they want to invest their cash, CPF, or SRS money.
Frequently Asked Questions
Is an ETF always cheaper than an index fund in Singapore?
Not anymore. While traditional bank-distributed unit trust index funds typically charge 1.5%-2% versus an ETF’s under-0.5%, digital platforms like Endowus now offer index-tracking unit trusts with fees as low as 0.05%, cheaper than most ETFs.
Do I need a brokerage account to buy an index fund in Singapore?
No. Unit trust index funds, including digital-platform versions, can be bought directly through the fund platform without opening a separate brokerage account. ETFs, however, require one since they trade on SGX.
Can I use CPF or SRS money for both ETFs and unit trust index funds?
Yes, but eligibility is fund-specific under CPFIS and each SRS operator’s approved fund list, so it must be checked for the specific ETF or unit trust rather than assumed based on structure alone.
What is the expense ratio of the Nikko AM STI ETF?
0.26% per annum, as at 2026, making it one of the lowest-cost ways to track the Straits Times Index via a listed structure.
Why would anyone choose a unit trust over a cheaper ETF?
Convenience and automation — many unit trust platforms support automatic recurring investment plans and don’t require managing a brokerage account or watching intraday prices, which some investors value more than the last few basis points of cost.