There are distinct differences between how ETFs operate relative to managed funds, and these are important to consider in the context of building a portfolio.
| Considerations | ETFs | Unlisted index and managed funds |
| Pricing | A key defining feature of ETFs is that they trade like stocks on the sharemarket and can be bought and sold during ASX trading hours. | Index and managed funds prices are updated once at the end of each trading day, meaning investors have less flexibility around purchasing and selling units at set prices. |
| Simplicity | Because ETFs trade on the stock exchange, an investor with a brokerage account is free to buy different funds, much like shopping for different items at a supermarket with just a few clicks. | Index and managed funds are generally bought and sold directly from the issuer. The process to “purchase” or “redeem” units in a fund can also be onerous and may require completing paper-based application forms. |
| Minimum trade size | Like ordinary shares, the minimum initial investment in an ETF begins at $500 for most brokers (however, platforms like CommSec Pocket allow $50), making it affordable to start your investing journey. | Depending on the fund, a minimum investment requirement of $5,000 or more is typical across unlisted index and managed funds, with subsequent minimum incremental investments of $500 or more potentially applying. |
| Transaction costs | Brokerage commissions and bid-ask spreads apply on each trade. | No brokerage fees apply, however, entry and exit costs do. |