Hedge Funds vs Mutual Funds vs ETFs – Which Should I Invest In?

Looking to invest in mutual funds, hedge funds or ETFs? Read on to find out which fits best into your investment portfolio.

Priscilla Lee

by Priscilla Lee on Jan 16, 2024

man looking at stocks on phone and laptop

If you are building an investment portfolio in Singapore, hedge funds, mutual funds and Exchange-Traded Funds (ETFs) are probably some of the most common options you would have come across. Even though these investment products share similar traits, there are also differences that may or may not resonate with your investment goals.

Want to know more? Read on because this article will reveal all that you need to know about investing in hedge funds, mutual funds, and ETFs.

Related: An Introduction to Funds in Singapore: What Are Unit Trusts and ETFs?

Differences Between Investing in Hedge Funds, Mutual Funds and ETFs

These three investment options are commonly used by Singapore investors for portfolio diversification. Here’s a quick glance before we take a closer look at each of them.

Hedge Funds vs Mutual Funds vs ETFs

Hedge FundsMutual FundsETFs
Buy/SellHedge Fund companies/ managersBrokerage firms or Mutual Fund companies/ managersOn an exchange
RiskHigh riskLow riskLow risk
LiquidityLow. Usually come with a lock-in periodModerate but less than ETFs. Trade only once a dayHigh. Can buy/sell any time
AvailabilityInstitutional investors and high-net-worth individualsGeneral publicGeneral public
Level of TransparencyLittle to no transparency. Hedge funds do not disclose their portfolios to publicQuite transparent. Holdings are reported periodicallyVery transparent. Most ETFs disclose their full portfolios on public websites

About Hedge Funds

Hedge funds are managed pooled investment funds that employ complex and aggressive strategies to deliver above-market returns for investors. To do this, a hedge fund manager will take both short and long positions, buy and sell equities, initiate arbitrage and trade bonds, currencies, convertible securities, commodities and derivative products to generate maximum returns at reduced risk.

While investing in hedge funds promises highly lucrative potential, they are also riskier, less liquid and less regulated than mutual funds and ETFs in Singapore. This is also the reason why they are restricted to accredited and institutional investors who can afford larger initial minimum investments and have the expertise to manage the risks associated with such investments.

Read Also: 4 Low-Risk Investment Alternatives to Fixed Deposits

About Mutual Funds

Like hedge funds, mutual funds are private investment options built from pooled funds from investors. The funds are managed by fund managers on behalf of the investors and they have total autonomy to decide which stocks or bonds to include in the holdings.

The upside of investing in mutual funds lies in wider exposure to shares at a lower price than direct investment. It is good for those who are unsure about where to invest and prefer to rely on the expertise of fund managers. Investors can also expect much lower investment risk since most mutual funds will invest anywhere from 50 to 200 different securities to diversify the portfolio.

The typical disadvantages associated with mutual funds are the high fees, tax inefficiency, potential for management abuses and unavailability of intraday trading. Unlike ETFs which can be traded throughout the day, mutual funds can only be traded once per day after the market closes. While this is not a huge problem for passive investors, it could mean there is a different order price than you expect if you place orders manually.

stock market on the screen
Source: Unsplash

About ETFs

This is a form of portfolio investment in Singapore that is built out of a series of underlying assets or indices. An ETF will comprise a collection of publicly available products like stocks, bonds and commodities.

One good example is the Straits Times Index (STI) ETF which mirrors the performance of top 30 companies listed on the Singapore Exchange. The portfolio’s returns will be based on the collected gains and losses in those underlying assets.

Investing in ETFs may not be as lucrative as buying an individual stock but it is a lower-risk product that may strike a chord with more risk-averse investors. It is widely used for portfolio diversification in Singapore.

Also, unlike mutual funds and hedge funds, which are strictly managed by fund managers, ETFs can be freely traded on exchanges like regular stocks. The high transparency and liquidity also made it a popular choice amongst retail investors.

Read Also: A Guide To Exchange-Traded Funds (ETFs) In Singapore

man looking at stock market on laptop
Source: Unsplash

Which Should You Invest In?

When deciding which is a better investment option for you, you must first assess your investment goals, risk appetite, funds available and how much control you want over your investment portfolio in Singapore.

If you are a seasoned investor with a healthy net worth and do not mind dabbling with lucrative but risky investments, working with a hedge fund manager may offer generous returns.

Some top hedge funds of 2023 include:

  • Bridgewater Associates – delivered a return of 20.5% in 2023
  • Renaissance Technologies – delivered a return of 22.8% in 2023
  • Two Sigma Investments – delivered a return of 21.7% in 2023
  • 4. D.E. Shaw & Co. – delivered a return of 18.5% in 2023
  • Millennium Management – delivered a return of 19.6% in 2023

Mutual funds and ETFs are more suitable for low-risk investors. Between the two, mutual funds stand out in terms of variety. There is a huge number of mutual funds available for all different types of investment strategies, risk tolerance levels and asset types.

Here are some popular mutual funds you may want to consider:

  • GMO Climate Change Investment Fund Z SGD Acc
  • BNY Mellon Global Funds PLC – BNY Mellon Mobility Innovation Fund SGD K Inc Hedged
  • BNY Mellon Global Funds PLC – BNY Mellon Mobility Innovation Fund SGD K Acc Hedged
  • Baillie Gifford Worldwide Long Term Global Growth Fund Class A SGD Acc
  • AIA Regional Equity Fund

An ETF is an ideal option for those looking for low-risk and less volatile investments. It requires a low-entry budget to start investing, making it suitable for young or new investors who want to start trading but have limited funds on hand.

The top ETFs to look out for in Singapore include:

  • SPDR Straits Times Index ETF (SGX: ES3)
  • Lion-OCBC Securities Hang Seng Tech ETF (SGX: HSS)
  • SPDR Gold Shares ETF (SGX: O87)
  • Phillip Sing Income ETF (SGX: OVQ)

Related: Key Financial Trends of the Month (May 2023)

money pots
Source: Canva

Guide To Investing With Online Brokers

Ready to trade? Here’s a step-by-step guide to help you get started with online brokers like Moomoo and Tiger Brokers that promise the best trading experience at the lowest trading costs.

Step 1Once you have selected a broker, visit their website and follow their account opening process. You are required to provide personal information, including your name, address, contact details, and a valid form of identification.
Step 2After your account is approved, you are required to fund the trading account before you will be eligible to trade. Choose from the multiple funding options, including bank transfers, credit/debit cards, or electronic payment systems.
Step 3Before making any trades, research the products that you are interested in trading. Analyse market trends, study company fundamentals, monitor economic indicators and consider any relevant news or events that may impact your trades. Most online brokers offer research tools and educational resources to assist you in this process.
Step 4Develop a trading strategy that aligns with your investment goals and risk tolerance. Determine factors such as entry and exit points, stop-loss levels, position sizing, and risk management techniques.
Step 5Once you are ready to execute a trade, specify the product, order type and the number of shares you want to trade on the trading platform. Always double-check the details before confirming the trade.
Step 6Continue to monitor market movements, track the performance of your trades and consider implementing stop-loss or take-profit orders to manage risk and secure profits. Regularly review your trades and adjust your strategy if necessary.
Step 7Most brokers provide withdrawal options similar to the funding methods. Follow the broker’s instructions to initiate a withdrawal request, which will usually be processed within a specified timeframe.

Related: Average Cost of Online Brokerages in Singapore 2024


With so many online brokers in the market, it can be hard to shortlist one that truly aligns with your trading philosophy.

Don’t fret, our analysts at ValueChampion have scouted the market and shortlisted some of the best online Brokerages for ETF and Unit Trust trading based on their fees and market access. Simply visit our page and click to directly sign up for an account that resonates with your investment needs.

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