ETF Expense Ratio, Fees and How to Pick an ETF in Singapore [2026]

Singapore investors pumped S$2.4 billion into ETFs on SGX in 2025, a record inflow that reflects a growing appetite for low-cost index investing across the region. The trend is not confined locally. Globally, exchange-traded products drew a record US$2.3 trillion in net inflows in 2025, surpassing the previous high of US$1.8 trillion set just a year earlier.

The appeal is straightforward. ETFs offer broad diversification, transparency, and what appears to be exceptionally low cost. Broad market funds tracking the S&P 500 now charge as little as 0.03% a year, while Ireland-domiciled UCITS equivalents listed in London are priced around 0.07%. On the surface, cost has become almost irrelevant.

That conclusion does not hold up under scrutiny. The expense ratio reflects only the fund manager’s fee. It does not capture the full cost of ownership. Trading spreads, currency conversion, and taxes all sit outside this figure, yet directly affect returns.

Some of the most meaningful differences are structural. The domicile of an ETF, for instance, determines how dividends are taxed. Over time, this creates a persistent drag that can outweigh small differences in expense ratios and materially change long-term outcomes.

Understanding ETF costs therefore requires a more complete framework. This guide breaks down the full cost of owning an ETF, shows how these costs compound over time, and outlines a structured approach to selecting the most efficient ETF for your portfolio.

What is an ETF expense ratio?

An ETF's expense ratio reflects the annual cost of operating the fund, expressed as a percentage of its average net assets. 

At 0.20%, you pay S$20 a year for every S$10,000 invested. Unlike a brokerage commission that shows up on your trade confirmation, this fee is never billed separately: it is deducted from the fund's net asset value (NAV) in small daily increments, appearing as a marginally lower unit price rather than a line item on your statement.

How does the expense ratio work?

The expense ratio is calculated as a percentage of the fund's average net assets throughout the year. This means the actual dollar amount you pay grows alongside your investment.

If you put S$10,000 into an ETF charging 0.04%, you pay approximately S$4 in year one. After a decade of compounded growth at 7% per annum, that same holding is worth roughly S$19,700 and the annual fee has grown to about S$8. The percentage stays fixed; the dollar cost scales with your wealth.

The expense ratio bundles together all the operational costs required to keep the fund running year to year. These typically include:

•   Administrative and record-keeping fees

•   Portfolio management fees paid to the fund manager

•   Compliance and regulatory fees

•   Index licensing fees paid to providers like S&P Global or MSCI

•   Auditing and legal fees

•   Marketing, distribution, and shareholder service fees

All of these costs are charged against the fund's Net Asset Value (NAV). The NAV is the per-unit value of the fund's total assets after liabilities, including operating expenses, have been deducted. 

When the expense ratio is high, the NAV is reduced by a proportionally larger amount each day, which is why the fee has a direct and measurable impact on your long-term returns.

What is not included in the expense ratio?

The expense ratio only captures costs inside the fund. 

It does not include what you pay outside, such as brokerage commissions on every buy and sell order, bid-ask spreads embedded in the market price, currency conversion fees when purchasing foreign-listed ETFs, and withholding taxes deducted from dividends before they reach the fund are all real costs of ETF ownership that sit entirely outside the TER. 

Gross vs net expense ratio

Some ETFs publish two cost figures: the gross expense ratio and the net expense ratio. 

• The gross expense ratio is the fund's full annual operating cost before any fee waivers or expense reimbursements that the fund manager has voluntarily chosen to absorb. 
• The net expense ratio is what investors actually pay after those waivers are applied.

Fee waivers are common in newer funds or during periods of competitive pricing pressure. However, waivers are typically time-limited and can be withdrawn by the fund manager. 

When comparing ETFs, verify whether the quoted figure is gross or net, and for how long any waiver arrangement is in effect. Tracking difference (a fund's actual return versus the index, measured over a full year) cuts through both figures and reflects the true economic cost of holding the ETF.

Do expense ratios vary across ETFs?

Yes, significantly. Three structural factors explain most of the variation you will see across the ETF universe:

• Geographic complexity of the underlying index. ETFs investing in foreign or frontier markets cost more to manage than those holding domestic large-cap stocks or US Treasuries. Custody, compliance, and settlement infrastructure in markets like Vietnam or Saudi Arabia is materially more expensive than in the US or the UK.
• Fund size and economies of scale. As an ETF's assets under management grow, fixed operational costs (auditing, legal, administration) represent a smaller share of the total asset base. This is why larger ETFs such as VOO (over USD 600 billion) can sustain a 0.03% expense ratio while a fund managing USD 50 million tracking the same index might charge 0.20%.
• Active vs passive management. Index-tracking ETFs require minimal trading and no ongoing security analysis, keeping costs low. Actively managed ETFs employ portfolio managers making discretionary investment decisions, which carries a higher cost that is passed on through a higher expense ratio, typically 0.50% and above.

Expense ratio examples across fund types

Expense ratios vary across fund types, reflecting differences in structure, scale, and investment approach. The range can be wide, even within ETFs, depending on how simple or specialised the exposure is.

Index ETFs (broad market)

Typical expense ratio: 0.02% to 0.10%

These funds track large, liquid benchmarks such as the S&P 500 or MSCI World. Due to their scale and rules-based approach, they are the lowest-cost option in the market. Leading examples now price as low as 0.02% in the US, with UCITS equivalents generally slightly higher.

Global UCITS ETFs (developed and all-world exposure)

Typical expense ratio: 0.07% to 0.25%

These funds provide diversified exposure across multiple markets, often with built-in tax efficiency due to their domicile. Costs are marginally higher than US-listed equivalents but remain low relative to the diversification provided.

Sector and thematic ETFs

Typical expense ratio: 0.30% to 0.75%

These funds target specific industries or trends such as technology, healthcare, or clean energy. The narrower exposure and higher turnover result in higher operating costs. Some niche or leveraged strategies can exceed 1%.

Actively managed funds (including active ETFs)

Typical expense ratio: 0.75% to 1.50%

These funds rely on portfolio managers to select securities and adjust allocations. The higher fee reflects research, trading activity, and active decision-making. In less efficient markets such as emerging markets or small caps, costs can exceed 2%.

Alternative strategies (hedge funds and private markets)

Typical expense ratio: 2% + performance fees

While not ETFs, these strategies illustrate the upper end of the cost spectrum. A typical structure includes a 2% annual management fee alongside a 20% performance fee, significantly increasing the total cost of ownership.

Across all categories, the pattern is consistent. Costs increase as strategies become more specialised, less liquid, and more reliant on active management.

The full cost of owning an ETF

The expense ratio is the only cost disclosed in a fund’s prospectus. It is also the least complete measure of what you actually pay.

ETF ownership involves multiple layers of cost. Some are explicit, such as brokerage commissions. Others are embedded in pricing, execution, or tax structure. None are presented in a single figure, yet together they determine your net return.

In practice, these costs can exceed the headline expense ratio.

1. Brokerage commissions

Every ETF transaction incurs a fee. The structure varies significantly across platforms and has a direct impact on long-term returns, especially for investors making regular contributions.

Local bank brokerages typically charge a percentage-based commission with relatively high minimums. This makes smaller trades inefficient, as the minimum fee can represent a large percentage of the investment amount.

Fintech and global brokers have reduced both percentage fees and minimums, making them more suitable for recurring investments. Simplified platforms and robo-style execution models have gone further by introducing flat-fee structures.

2. Bid-ask spread

Every ETF is quoted with two prices. The ask is the price you pay to buy, and the bid is the price you receive when selling. The difference between the two is the bid-ask spread.

This spread functions as a transaction cost. Unlike commissions, it is not charged explicitly. Instead, it is embedded in the price and paid when you enter and exit a position.

The implication is straightforward. The wider the spread, the more you lose at the point of execution. This becomes more significant if you trade frequently or invest in less liquid ETFs.

What drives bid-ask spreads

Spreads are not random. They are primarily driven by three factors:

• Liquidity of the ETF and its underlying assets
  ETFs holding large, liquid stocks tend to have tighter spreads. Funds tracking less liquid markets or niche segments tend to have wider spreads.

• Market maker competition
  More market makers quoting prices leads to tighter spreads. Fewer participants typically result in wider pricing gaps.

• Inventory and hedging costs
  Market makers manage risk when providing liquidity. If it is more expensive or difficult to hedge the underlying exposure, spreads widen to compensate.

Why spreads can matter more than fees

Consider two ETFs tracking similar exposures:

At first glance, ETF B appears cheaper due to its lower expense ratio.

However, its wider spread increases the total cost of ownership. Once execution cost is included, ETF A becomes the more cost-efficient choice despite having a higher headline fee.

The expense ratio is a recurring cost. The bid-ask spread is paid upfront and again when you exit.

For long-term investors buying large, liquid ETFs, spreads are usually negligible. But for smaller, less liquid ETFs, or for investors trading frequently, spreads can materially affect returns.

The takeaway is simple. Always consider liquidity alongside fees. A slightly higher expense ratio can be justified if the ETF offers tighter spreads and more efficient execution.

3. Tracking difference

The expense ratio tells you what a fund charges. Tracking difference tells you whether the ETF is actually delivering what it promises.

An index ETF is designed to match the return of a benchmark. In reality, it rarely does so perfectly. Tracking difference is simply the gap between the ETF’s return and the return of its underlying index over a given period.

In most cases, the ETF underperforms its index slightly. If an index returns 8% and the ETF returns 7.8%, the tracking difference is -0.2%.

The expense ratio is the main reason for this gap. If a fund charges 0.20%, you would expect it to lag its index by roughly that amount over time.

But fees are not the only factor. Several operational frictions affect how closely an ETF can track its index:

• Trading and rebalancing costs when the index changes its constituents
• Sampling, where the ETF holds only a subset of the index
• Cash drag from holding dividends before reinvestment
• Timing differences when adjusting holdings
• Securities lending, which can generate extra income and reduce the gap

These factors explain why tracking difference is rarely zero.

Importantly, tracking difference can sometimes be better than expected. If an ETF earns enough income from securities lending, it may fully offset its expense ratio, or even outperform the index in a given year.

A low expense ratio does not guarantee better performance. An ETF with a 0.05% fee can still underperform its index by more than 0.20% if it is inefficient. Conversely, a fund with a higher fee can deliver similar or even better returns if it manages costs well internally.

The takeaway is simple. Do not compare ETFs using expense ratio alone. Always check how closely the ETF has tracked its index over time.

The best ETFs are not just the cheapest on paper. They are the ones that consistently deliver returns that match, or come closest to, the index they are designed to track.

4. FX conversion costs

Investing in foreign-listed ETFs requires converting SGD into USD. This conversion comes with a spread that is built into the exchange rate.

In practice, this spread can vary significantly by platform.

A typical local bank brokerage applies an FX spread of around 0.81%, which translates to S$81 on a S$10,000 investment.

Meanwhile, robo advisors like StashAway reduce this to around 0.32%, or S$32 on the same S$10,000.

This is a real, upfront cost. It is paid immediately when you convert currency and is not reflected anywhere in the ETF’s expense ratio.

For investors investing regularly, this cost repeats with every transaction and compounds over time. In many cases, the FX spread alone can be larger than the ETF’s annual fee.

5. Withholding tax on dividends

Dividend taxation is the most significant structural cost and is determined by the ETF’s domicile.

US-domiciled ETFs apply a 30% withholding tax on dividends. For a fund yielding 2%, this results in a 0.60% annual drag on returns.

Ireland-domiciled UCITS ETFs benefit from a tax treaty that reduces withholding to 15%, effectively halving the drag. Over time, this difference can exceed the entire expense ratio.

In addition, US-domiciled ETFs expose investors to US estate tax on assets above USD 60,000, with rates of up to 40%. UCITS ETFs are not subject to this regime.

6. Premiums and discounts to net asset value (NAV)

ETF prices do not always match the value of their underlying holdings.

Each ETF has a net asset value (NAV), which represents the per-share value of the securities it holds. At any given moment, the ETF also trades in the market at a market price. The difference between the two is known as a premium or discount.

• Premium: ETF trades above its NAV
• Discount: ETF trades below its NAV

For example, if an ETF trades at S$30 while its underlying holdings are worth S$29.90, it is trading at a 0.33% premium. If its holdings are worth S$30.25, it is trading at a 0.83% discount.

Unlike fees or spreads, premiums and discounts are not a fixed cost. They can either reduce or improve your returns depending on how they change between the time you buy and sell.

• Buying at a premium and selling at a discount creates a loss
• Buying at a discount and selling at a premium creates a gain

What matters is not the level itself, but the change over your holding period.

For instance:

• Buy at +0.6% premium
• Sell at -0.4% discount
• Net impact: -1.0% drag on returns

This is a real cost that is often missed because it does not appear as a fee.

Why premiums and discounts exist

ETF prices can deviate from NAV due to:

• Temporary imbalances between supply and demand
• Differences in trading hours between the ETF and its underlying markets
• Illiquidity in the underlying securities
• Market volatility

Why ETFs usually stay close to NAV

Most ETFs trade very close to their NAV because of the creation and redemption mechanism.

Large institutional players, known as authorised participants, can:

• Buy the underlying securities and exchange them for ETF shares (creation), or
• Redeem ETF shares for the underlying securities

This creates arbitrage opportunities.

If an ETF trades at a premium, participants can create new shares and sell them, pushing the price down. If it trades at a discount, they can buy ETF shares and redeem them, pushing the price up.

This process keeps prices broadly aligned with NAV.

When this becomes a real risk

For highly liquid ETFs tracking major indices, premiums and discounts are usually minimal, often within ±0.10% to 0.20%.

However, deviations can widen for ETFs that track:

• Emerging markets
• High-yield bonds
• Commodities
• Less liquid or complex asset classes

In these cases, premiums or discounts of 1% or more are not uncommon, and can materially affect returns.

Why fees compound into a significant drag over time

A 0.50% expense ratio sounds small. Over 30 years of compounding on a growing base, the impact on your final portfolio value is substantial.

Taking a S$10,000 lump-sum investment with a 7% gross annual return, the table below shows what each expense ratio level means in real money at year 30.

Compounding impact of expense ratios over 30 years (S$10,000 at 7% gross return)

Based on S$10,000 lump-sum, 7% gross annual return, compounded annually. Illustration only.

The gap between a 0.05% and a 1.50% ETF is approximately S$25,000 over 30 years on a single S$10,000 starting investment. That is 2.5 times the original principal, lost entirely to fees. Regular monthly investors face a proportionally larger absolute drag as contributions compound over time.

The compounding is non-linear. The gap between 0.50% and 1.50% ETFs (S$16,000) is nearly twice the gap between 0.05% and 0.50% ETFs (S$9,000), even though the fee increment is identical. Higher fees hurt disproportionately in the later years because they compound on a much larger base.

Portfolio strategy: long-term vs active trading

The cost of owning an ETF is not fixed. It is a function of holding period and trading frequency.

The same ETF can produce materially different outcomes depending on how it is used. Costs that are negligible for a long-term investor can become dominant for an active trader.

The divergence is driven by execution.

For the long-term investor, cost is largely a function of the expense ratio. It accrues gradually and is proportional to the time capital is deployed.

For the active investor, cost is dominated by turnover. Each trade incurs a spread, and the cumulative effect is linear with trading frequency. At 30 roundtrips a year, even a modest 0.15% spread becomes the primary cost driver.

The expense ratio becomes secondary in this context. Holding the ETF for shorter periods reduces the time over which management fees accrue, but this reduction is more than offset by repeated execution costs.

Tax implications for Singapore investors

Singapore’s tax framework is favourable at the investor level. There is no capital gains tax, and dividends from foreign-listed ETFs are not taxed as personal income. 

The key distinction is domicile. 

• US-domiciled ETFs are subject to a 30% withholding tax on dividends at source
• Ireland-domiciled UCITS ETFs benefit from a tax treaty that reduces this rate to 15%.

This difference is not disclosed as a fee. It is embedded in fund performance and reflected through tracking difference. 

For an equity ETF yielding 2%, the tax drag is approximately 0.60% for US-domiciled funds and 0.30% for UCITS equivalents. Over time, this gap compounds and can exceed the ETF’s stated expense ratio.

There is also a separate legal consideration. US-domiciled ETFs are classified as US-sited assets, which exposes non-US investors to US estate tax. Holdings above USD 60,000 may be subject to estate tax of up to 40% on the excess upon death. Ireland-domiciled UCITS ETFs are not subject to this regime, as they fall outside US estate tax jurisdiction.

CPF and SRS considerations

For CPF investors, ETF eligibility is restricted to instruments approved under the CPF Investment Scheme (CPFIS). This list is largely limited to SGX-listed ETFs. Most UCITS ETFs listed on the London Stock Exchange, including widely used funds such as CSPX and VWRA, are not CPF-eligible.

For SRS investors, the annual contribution cap is S$15,300 for Singapore citizens and permanent residents. Investment options are broader than CPF, and some platforms such as StashAway provide access to foreign-listed ETFs, including UCITS structures. Availability varies by provider and should be verified before execution.

Investing in ETFs through StashAway

One option for Singapore investors seeking ETF access without the hassle in researching for the right ETF and without steep commission fees is StashAway ETF Explorer. The platform provides access to over 80 global ETFs at a flat $1 per transaction, regardless of trade size. 

ETF Explorer is SRS-eligible, making it one of the few platforms where SRS funds can be deployed across a wide range of global ETFs.