The investment strategies of ETFs and actively managed funds differ fundamentally:
- ETFs (passive strategy):
- Form an index automatically after
- No active management required
- The aim is to achieve the return of the index
- Lower costs through automated replica
- Actively managed funds:
- Fund managers actively select securities
- The aim is to achieve a higher return than the comparison index
- Higher costs through active management
With ETFs, investors know almost exactly which assets are included thanks to the index replica. This makes ETFs very transparent. Active -managed funds, on the other hand, are less transparentsince the securities it contains can change between the reporting periods.
The cost structure is another important difference. As a rule, ETFs have no issue, low transaction costs and no costs for fund managers. Active -managed funds, on the other hand, have higher total costs, including administrative costs, custody costs and possibly a performance fairy.
With regard to tradability, ETFs can be traded in real time and at current prices during the stock exchange opening times. In contrast, fund shares of classic investment funds can only be sold back to the fund company or acted out of the exchange, which slows down the trade.
Ultimately, the choice between ETFs and actively managed funds depends on the individual preferences and goals of the investor. ETFs offer an inexpensive way to invest broadly in markets, while actively managed funds offer the chance of an overrun through professional management.