ETFs (Exchange Traded Funds) are a type of managed investment fund which are listed on a stock exchange. Investors can buy and sell them like regular shares which have contributed to the rise in popularity in recent years.
The value of many ETFs on the market will track a particular index like the All Ordinaries or ASX20. Instead of trying to beat the index, ETFs will provide returns which are in-line with their respective index (less any fees) and this is why they are called passive investments.
An ETF is a trust so any investment will provide you with units in the fund. LICs can issue dividends determined by the company’s board each financial year vs. an ETF which must pass on all earnings to unitholders each year. Management fees and costs are typically higher in a LIC due to the labour-intensive process of investing and trying to outperform the market. ETFs are passive investments and do not require tactical changes, so they usually have lower fees.
