An exchange-traded fund (ETF) is a type of investment fund that is listed on a stock exchange.

ETFs are passively managed: they aim to track the movement of a particular index and do not try to outperform the index that they intend to replicate. The idea is to match the performance of the broader market.

As ETFs track an index, the return of an ETF matches that of the index tracked less the ETF’s fees.

It should be noted that ETF transactions incur a brokerage fee typically ranging from 0.08% to 0.28% (with minimum commission fees of $8-$28) and the Exchange’s trading and clearing fees. Like unit trusts, ETFs also usually charge a trustee or custodian fee of 0.1 to 0.15% per annum on the NAV of the fund and a management fee of under 1% per annum.

Returns vary depending on the type of ETF invested in and its associated risk profile - for example, an equity ETF is likely to have higher returns than a bond ETF, which has a lower risk profile.