Costs of investing in Exchange-Traded Funds

Costs of investing in Exchange-Traded Funds

If you've got a minute,

  • Most fees associated with investing in equities are similar to ETFs
  • But investors of ETFs also incur management, trustee and custodian fees, which are deducted from a fund’s net asset value at the end of a year
  • The combination of these fees forms the Expense Ratio -- expressed as a percentage -- and their amounts depend on the ETF

The cost of investing is an important factor that all retail investors should consider when investing. Some of these costs can take several forms and may vary when investing in different financial instruments such as equities, Exchange-Traded Funds (ETFs) and unit trusts. It is prudent to do your due diligence and weigh all the charges incurred when making investments. Remember that the lower the cost, the higher the returns.

Similar to equities, there are costs associated with investing savings through ETFs.

Common fees between investing in equities and ETFs

ETFs are passively managed funds which are viewed as a low-cost option providing individuals with the opportunity to invest in a basket of companies according to their risk profiles without having to purchase individual stocks.

In the case of ETFs purchased through Singapore-based brokers, the same front-end and back-end costs for shares and Real Estate Investment Trusts (REITs) apply, along with some additional fees.

Assuming an investor wants to purchase 10,000 units of ETF X at $2.615, the front-load costs similar to purchasing equities are listed below:


Total contract value


Commission fee


Clearing fee (0.0325%)


Trading fee (0.0075%)


Total fees


GST (7%)*


Indicative total proceed


*GST is charged on fees only

When making an investment worth $26,150, the investor will have to incur an additional $83.68 in the form of commission, clearing, and trading fees along with the prevailing goods and services tax.

Expense Ratios

On top of those fees and GST, investors also face annual fees when purchasing ETFs. Often times, investors do not take notice of these management, trustee and custodian fees even though they are listed in fund prospectuses and documents.

The combination of these fees — called an expense ratio — is expressed as a percentage. Think of it as an operating expense for running the fund. In 2019, ETFs across the globe had an average expense ratio of 0.44% per annum (pa). This means that for every $1,000 invested in an ETF, unitholders will incur an annual fee of $4.40.

The expense ratios of Singapore-focused ETFs vary. For instance, the SPDR STI ETF and Nikko STI ETF each have an expense ratio of 0.3% pa. Meanwhile, the ABF Singapore Bond Index Fund, which tracks Singapore government bonds has an expense ratio of 0.25% pa while the Lion-Phillip S-REIT ETF is a little more costly at 0.6% pa.

These expenses are usually deducted from a fund’s net asset value at the end of each year. It is important to note that fees are not deducted from the amount the individual invested.

Rounding back to the example of an investor purchasing 10,000 shares in ETF X for a total contract value of $26,150.00, what are the estimated returns over a 5-year period if the fund has an expense ratio of 0.3% or 0.5%?



Expense ratio






$ 26,150.00

$ 26,150.00

$ 26,150.00


$ 27,457.50

$ 27,379.05

$ 27,326.75


$ 28,830.38

$ 28,665.87

$ 28,556.45


$ 30,271.89

$ 30,013.16

$ 29,841.49


$ 31,785.49

$ 31,423.78

$ 31,184.36


$ 33,374.76

$ 32,900.70

$ 32,587.66

$ loss


-$ 474.07

-$ 787.11

% loss




Assuming ETF X has an annual return of 5% and is an expense-free fund, the investor’s initial investment would be worth $33,374.76 after 5 years. If the expense ratio of ETF X is 0.3%, the returns from the investment would be 1.4% lower than if it was expense-free.

Now, consider the expense ratio of ETF X as 0.5%. This will lead to a 2.4% decrease in return, thus, showing how a slight difference in expense ratios can affect returns over a period.

Making ETF investments using CPF balances

Investors are also able to purchase select ETFs through their CPF Ordinary Account (OA) and Special Account. To invest your CPF OA in shares, open a CPF Investment Account with an approved CPF Investment Scheme (CPFIS) agent like DBS.

On top of the brokerage commission, clearing, trading, management fees as well as GST, investors will have to bear addition fees. This includes a CDP settlement fee of 35 cents per transaction, which the CPFIS agent will collect on behalf of CDP.

Further upfront costs include agents charging up to $2.50 per 1,000 shares or units, with maximum charge of $25 per transaction.

Recurring costs include a $2 fee per ETF holding per quarter, with a minimum charge of up to $5.

Ready to start?

Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.

Let's Meet

Need help selecting an investment? Try ‘Make Your Money Work Harder’ on DBS NAV Planner to receive specific investment picks based on your objectives, risk profile and preferences.

Try it Now

Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.

All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.

Disclaimer for Investment and Life Insurance Products

Thank you. Your feedback will help us serve you better.

Was this information useful?

That's great to hear. Anything you'd like to add?
We're sorry to hear that. How can we do better?
Enter only letters, numbers or @!$-(),.