--- title: What’s the difference between an ETF and a managed fund? description: Explore the key differences between ETFs and managed funds, including structures, costs, risks, and how to choose the right investment for your goals. image: https://www.strategyfirst.com.au/hubfs/What%E2%80%99s%20the%20difference%20between%20an%20ETF%20and%20a%20managed%20fund%20(2).png --- - 02 9091 0080 - contact@strategyfirst.com.au - - [![lzsk3cui](https://www.strategyfirst.com.au/hs-fs/hubfs/lzsk3cui.png?width=400&height=104&name=lzsk3cui.png "lzsk3cui")](https://www.strategyfirst.com.au/) - About us - [Who we are](https://www.strategyfirst.com.au/our-values-0) - [Meet the team](https://www.strategyfirst.com.au/en-au/meet-the-team) - [Why partner with Strategy First](https://www.strategyfirst.com.au/partering-with-us) - [Client testimonials](https://www.strategyfirst.com.au/testimonials) - [Investment commitee](https://www.strategyfirst.com.au/investment-commitee) - Information - [Who we can help](https://www.strategyfirst.com.au/who-we-can-help) - [Our services](https://www.strategyfirst.com.au/how-we-can-help) - [Packages & pricing](https://www.strategyfirst.com.au/service-offerings) - [Financial planning process](https://www.strategyfirst.com.au/process) - [Our community](https://www.strategyfirst.com.au/our-community) - [Learn more](https://www.strategyfirst.com.au/information) - [FAQs](https://www.strategyfirst.com.au/faqs) - [Aged Care](https://www.strategyfirst.com.au/aged-care-strategy-first) - [Blog](https://www.strategyfirst.com.au/blog) [Contact Us](https://www.strategyfirst.com.au/contact-page) [![Strategy First](https://www.strategyfirst.com.au/hs-fs/hubfs/INDEPENDENT%20FINANCIAL%20ADVICE-3.png?width=150&height=56&name=INDEPENDENT%20FINANCIAL%20ADVICE-3.png "Strategy First")](https://www.strategyfirst.com.au/) [Contact Us](https://www.strategyfirst.com.au/contact-page) - About us - [Who we are](https://www.strategyfirst.com.au/our-values-0) - [Meet the team](https://www.strategyfirst.com.au/en-au/meet-the-team) - [Why partner with Strategy First](https://www.strategyfirst.com.au/partering-with-us) - [Client testimonials](https://www.strategyfirst.com.au/testimonials) - [Investment commitee](https://www.strategyfirst.com.au/investment-commitee) - Information - [Who we can help](https://www.strategyfirst.com.au/who-we-can-help) - [Our services](https://www.strategyfirst.com.au/how-we-can-help) - [Packages & pricing](https://www.strategyfirst.com.au/service-offerings) - [Financial planning process](https://www.strategyfirst.com.au/process) - [Our community](https://www.strategyfirst.com.au/our-community) - [Learn more](https://www.strategyfirst.com.au/information) - [FAQs](https://www.strategyfirst.com.au/faqs) - [Aged Care](https://www.strategyfirst.com.au/aged-care-strategy-first) - [Blog](https://www.strategyfirst.com.au/blog) [Contact Us](https://www.strategyfirst.com.au/contact-page) # What’s the difference between an ETF and a managed fund? [Sam Battaglene](https://www.strategyfirst.com.au/blog/author/sam-battaglene) 2 November 2026, 7:45:00 pm AEDT If you’re starting to invest, you’ll likely come across **exchange traded funds (ETFs)** and **managed funds**. But there’s an important point that is often overlooked: **an ETF is actually a type of managed fund**. The main difference is how you buy and sell the investment. ETFs are generally bought and sold on a stock exchange, like shares, while traditional managed funds are usually bought directly from the fund manager or through an investment platform. Both can give you access to a portfolio of investments, such as Australian or international shares, bonds or property. Both can also be actively or passively managed. So, the question isn't simply whether an ETF or managed fund is "better". What matters is **what the fund invests in, how it is managed, what it costs, the risks involved and whether it is appropriate for your financial goals.** ![](https://www.strategyfirst.com.au/hs-fs/hubfs/image-png-Sep-09-2026-10-48-52-3835-PM.png?width=365&height=379&name=image-png-Sep-09-2026-10-48-52-3835-PM.png) Table of Contents [What is a managed fund?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#what-is-a-managed-fund) [What is an EFT?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#what-is-an-EFT) [Active vs Passive](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#active-vs-passive) [ETF vs managed fund: what’s the difference?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#difference) [Which is more important: the ETF or managed fund structure?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#important) [What are the fees and costs?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#fees) [What are the risks?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#risks) [How do you make money from an ETF or managed fund?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#make-money) [What should you check before investing?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#check-before-investing) [So, which is better: an ETF or a managed fund?](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#which-is-better) [Summary](https://www.strategyfirst.com.au/blog/whats-the-difference-between-an-etf-and-a-managed-fund#summary)   ## What is a managed fund? A managed fund pools money from multiple investors and uses that money to invest in a portfolio of assets. The fund is managed according to a particular *investment strategy\**. Depending on the fund, this could include investing in: - Australian shares - International shares - Government or corporate bonds - Property - Cash - A combination of different asset classes When you invest in a managed fund, you receive units in the fund. The value of those units generally changes as the value of the underlying investments changes. Managed funds can be **actively or passively managed**. An actively managed fund has a professional investment manager who researches investments and makes decisions about what to buy and sell. A passive fund generally aims to track a particular market index rather than trying to outperform it. [Choosing a managed fund - Moneysmart.gov.au](https://moneysmart.gov.au/managed-funds-and-etfs/choosing-a-managed-fund) *\*An investment strategy in a managed fund is the specific plan a professional manager uses to buy, hold, and sell assets to reach the fund's financial goals.*    ## What is an ETF? An **exchange traded fund (ETF)** is a type of managed fund that is listed on a stock exchange. Like a managed fund, an ETF pools investors' money and invests it according to a particular strategy. However, ETF units can generally be bought and sold throughout the trading day through a broker, in much the same way as shares. ETFs can provide exposure to a wide range of investments, including: - Australian shares - International shares - Government and corporate bonds - Property - Specific industries or sectors - Particular investment themes Many ETFs use a passive strategy and track an index, but **not all ETFs are passive**. Active ETFs are also available. This is an important distinction: **ETF does not automatically mean passive, and managed fund does not automatically mean active.** **[Exchange traded funds (ETFs) - Moneysmart.gov.au](https://moneysmart.gov.au/managed-funds-and-etfs/exchange-traded-funds-etfs)**    ## **Active vs Passive** Active and passive investing describe how a fund is managed rather than what type of structure it uses. Active investing involves an investment manager making decisions about what to buy and sell in an effort to outperform the market, which can offer more flexibility but often comes with higher costs. Passive investing typically aims to track a market index over the long term, using a buy-and-hold approach that is generally lower cost and more consistent in its construction. Neither approach is automatically better in every situation. What matters is whether the investment strategy, level of [diversification](https://www.strategyfirst.com.au/blog/importance-of-diversification), costs and [risks](https://www.strategyfirst.com.au/blog/minimising-investment-risk)are appropriate for your financial goals and broader portfolio.  *[Passive vs Active investing: What’s the difference?](https://www.vanguard.com.au/personal/learn/investment-options/active-vs-passive-investing)*  *Hint: How can you tell if a fund is active or passive? Passive funds often include words like "index", "tracker", or the name of a specific market benchmark (like S&P 500). Active funds usually lack these words and describe broader goals like "growth" or "capital appreciation".*    ## ETF vs managed fund: what’s the difference? The biggest practical differences relate to how you buy and sell the investment, how it is priced and the costs involved. | | ETF | Managed fund | | --- | --- | --- | | **How you buy and sell** | Generally bought and sold on a stock exchange through a broker | Usually bought directly from the fund manager or through an investment platform | | **Pricing** | Market price changes throughout the trading day | Generally bought or sold at a unit price calculated by the fund (priced once a day) | | **Management style** | Can be active or passive | Can be active or passive | | **Trading costs** | Tends to have lower ongoing fees and offer real-time trading flexibility, but brokerage fees apply. | No brokerage fees, but you often pay a buy/sell spread | | **Minimum investment** | Depends on the ETF's unit price and broker | Fund managers may set a minimum initial investment | | **Access** | Requires access to a brokerage account | Often available through investment platforms | | **Liquidity** | Can generally be bought or sold during market hours | Withdrawal timing depends on the fund's rules | These differences can affect which investment is more convenient or cost-effective for you. ### 1. How are they bought and sold? - ETFs are traded on a stock exchange. You can generally buy or sell units during market hours, with the price changing throughout the day according to supply and demand. - Managed funds are generally bought or sold through the fund manager or an investment platform. Rather than receiving a live market price, your transaction is generally processed using the fund's calculated unit price. This can make ETFs appealing to investors who want to manage their investments directly, while managed funds can be convenient for investors using an investment platform or regular investment strategy. ### 2. How are they priced? The price of an ETF is determined by trading on the stock exchange. This means an ETF can trade slightly above or below the value of the underlying investments. The market price will generally remain relatively close to the underlying value of the fund's assets, but the two prices aren't necessarily identical. Managed funds generally use a unit price based on the value of the fund's underlying assets. The price is calculated according to the fund's valuation process rather than continuously throughout the trading day. ### 3. Are ETFs passive and managed funds active? This is one of the most common misconceptions. **The structure of an investment does not tell you how it is managed.** Many ETFs are passive investments that track an index, such as a share market index. However, actively managed ETFs are also available. Likewise, while managed funds are commonly associated with active investment management, passive managed funds are also available. When comparing investments, look at the **investment strategy**, rather than assuming that an ETF is passive or a managed fund is active.   ## Which is more important: the ETF or managed fund structure? In many cases, **the underlying investment strategy is more important than whether the investment is an ETF or managed fund.** For example, an ETF that invests in a narrow industry may be considerably less diversified than a managed fund investing across thousands of companies. Before investing, consider: **What does the fund actually invest in?** A fund may focus on: - A particular country - A particular industry - A specific type of asset - A particular investment theme - A broad market index - A diversified portfolio A fund isn't automatically [diversified](https://www.strategyfirst.com.au/blog/importance-of-diversification) simply because it is an ETF or managed fund.   ## What are the fees and costs? Fees are an important consideration when comparing investments, but **the lowest management fee isn't necessarily the best option**. ETFs often have relatively low ongoing management costs, particularly when they track an index. However, you may also pay brokerage when buying and selling ETF units, as well as a bid-ask spread. Managed funds can have different types of fees and costs, which may include management fees, performance fees and transaction costs. When comparing investments, look beyond the headline management fee and consider the **total fees and costs** associated with the investment. Even relatively small differences in costs can have a meaningful impact on your investment returns over a long period.   ## What are the risks? The risks associated with an ETF or managed fund depend largely on **what it invests in and how it is managed**. For example, a fund investing in shares will generally be exposed to share market movements. A fund investing in international assets may also be exposed to currency movements. Other risks can include: - Market risk - Concentration risk - Currency risk - Interest rate risk - Credit risk - Liquidity risk - Manager or investment strategy risk Some funds may also use more complex strategies, derivatives or borrowing, which can increase the risks involved. This is why it's important to look at the specific fund rather than assuming that ETFs or managed funds are inherently low or high risk. [Minimising Investment Risk: Simple Strategies for Everyday Investors](https://www.strategyfirst.com.au/blog/minimising-investment-risk)   ## How do you make money from an ETF or managed fund? Your investment return can generally come from two sources: - **Capital growth** – the value of your investment increases over time. - **Income** – the underlying investments generate income, which may be paid to investors as distributions. For example, shares may pay dividends, while bonds may generate interest. Distributions can also have tax implications, including where you choose to reinvest the distribution rather than receive it as cash. Selling an investment for more than you paid may also result in a capital gain, which can have tax consequences. The tax treatment will depend on your individual circumstances and the investment involved.   ## What should you check before investing? Whether you're considering an ETF or managed fund, don't make the decision based solely on its name or management fee. Before investing, consider: ### 1. What is the investment objective? What is the fund trying to achieve? ### 2. What does it invest in? Look at the underlying investments and how diversified the portfolio is. ### 3. What are the risks? Consider whether the level of risk is appropriate for your circumstances and investment timeframe. ### 4. What are the total costs? Look beyond the headline management fee and consider brokerage, transaction costs, performance fees and other charges. ### 5. How has it performed? Past performance doesn't guarantee future returns, but comparing a fund's performance with its relevant benchmark can help you understand how it has performed relative to its objective. ### 6. How easily can you access your money? Check how and when you can buy or sell the investment and whether there are any restrictions or delays when withdrawing your money. ### 7. What does the product disclosure statement say? The **Product Disclosure Statement (PDS)** provides important information about the investment, including its strategy, risks, fees and other features. You should also consider the fund's **Target Market Determination (TMD)**, where applicable, to understand who the product is designed for.   ## So, which is better: an ETF or a managed fund? There isn't a universal answer. An ETF isn't automatically better because it has a lower management fee, and a managed fund isn't automatically better because it has a professional investment manager. - An ETF may suit someone who wants to buy and sell an investment through a brokerage account and see a live market price. - A managed fund may suit someone who prefers to invest through a platform, make regular contributions or access a particular investment strategy or manager. But these are only part of the decision. **The more important question is whether the underlying investment is appropriate for you.** When choosing between investments, always refer to the Product Disclosure Statements for the fund to understand the investment strategy, diversification, risk, fees, liquidity, tax implications and how the investment fits within your broader portfolio.    ## The bottom line **ETF vs managed fund isn't really a choice between "good" and "bad" investments.** An ETF is a type of managed fund, and both structures can provide access to a wide range of investment strategies. The right investment depends on what you're trying to achieve, how long you're investing for, how much risk you're comfortable taking and how the investment fits with the rest of your financial plan. Rather than choosing an investment based on whether it is an ETF or managed fund, focus on **what you own, why you own it and whether it is helping you work towards your financial goals.** If you're unsure which investments are appropriate for your circumstances, a financial planner can help you assess your options as part of your broader financial strategy. *The information provided is factual only, and does not constitute financial advice. 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