An ETF’s expense ratio is the yearly cost of running the fund, taken from its assets. Tracking error measures how consistently the fund follows its index, and the bid-ask spread is the gap between buying and selling prices that you pay each time you trade. To compare two ETFs tracking the same index, you need all three, because the cheapest fund on one measure can cost more overall.
This guide explains each cost using MoneySense’s definitions and real figures from Singapore fund pages, then works through an example on S$20,000. Funds are named only to show the figures; they are not picks.
Total Expense Ratio (TER)
MoneySense defines the TER as “the annual cost of running a fund, expressed as a percentage of assets”. It covers the management fee, trustee fee and other fund expenses. It is not billed to you: it reduces the fund’s value, day by day.
MoneySense says TERs on similar ETFs tracking the same index range from about 0.03% to over 0.5% of net asset value a year.
Three points when reading a TER:
- Check the period. The Amova Singapore STI ETF shows a TER of 0.24% for the period to 30 June 2025, but its management fee was cut from 0.20% to 0.09% on 1 October 2025, after that period. The next audited TER may differ.
- Management fee is not the TER. The TER includes other costs, so it is usually higher.
- TER is not total cost. Brokerage, spreads and, for foreign funds, withholding tax come on top.
ETF Expense Ratio and Tracking Error: How They Differ
An index fund aims to match its index, but costs, cash holdings, timing and dividend taxes mean it never matches exactly. MoneySense uses two measures:
- Tracking difference: “the gap between the ETF’s actual return and the return of the index it tracks, over a specified period.”
- Tracking error: “the consistency of the tracking difference over time.”
A fund can have a steady tracking difference, roughly equal to its TER, and a low tracking error. That is what a well-run index fund looks like. MoneySense says “a consistently high tracking error suggests the ETF is not efficiently replicating its index.”
A real example. The ABF Singapore Bond Index Fund’s page shows an annualised NAV return since inception of 2.36% against 2.65% for its index, to 31 October 2026. That is a tracking difference of about 0.29% a year, close to its 0.24% TER. Its three-year annualised tracking error was 0.10% at 30 June 2026. The Amova Singapore STI ETF showed a three-year tracking error of 0.12% on the same date.
The Bid-Ask Spread
On an exchange, the ask is the lowest price a seller will accept and the bid is the highest a buyer will pay. You buy at the ask and sell at the bid, so a round trip costs you roughly the spread.
MoneySense puts spreads at often 0.01% to 0.05% for very liquid ETFs with high trading volumes, and 0.5% or more for less liquid ones. It suggests checking average daily trading volume and the typical spread before choosing.
ETF market prices can also drift from the value of the holdings (the net asset value). MoneySense notes they “can diverge, particularly during periods of market stress”.
The short version: the TER is what you pay every year you hold; the spread is what you pay each time you trade; tracking error shows how well the manager delivers the index. Long-term holders should weigh the TER most, frequent traders the spread.
Worked Example: Which Fund Costs Less?
Illustration only, not a guarantee. Two hypothetical ETFs track the same index. You invest S$20,000 and sell at the end. To isolate costs, we assume the value stays at S$20,000 and ignore brokerage, which is the same for both.
| Fund A | Fund B | |
|---|---|---|
| TER | 0.20% a year | 0.30% a year |
| Typical spread | 0.50% | 0.05% |
| Spread cost, one buy and one sell | About S$100 | About S$10 |
| TER cost per year | S$40 | S$60 |
| Total cost if held 1 year | S$140 | S$70 |
| Total cost if held 5 years | S$300 | S$310 |
| Total cost if held 10 years | S$500 | S$610 |
Fund A has the lower TER but costs twice as much if you sell within a year. The two break even at about four and a half years, and after that Fund A’s lower TER wins.
Two lessons. Your holding period decides which cost matters most. And buying in small monthly amounts means paying the spread, and a minimum commission, on every purchase. Our ETF broker comparison shows minimum fees by broker, and the compound interest calculator shows what a yearly cost compounds to over decades.
Other Costs to Add
- Brokerage and exchange fees on each trade.
- Currency conversion if the fund trades in US dollars or another currency.
- Withholding tax on dividends, which depends on where the fund is domiciled. MoneySense notes a 30% US withholding on dividends for a US-domiciled ETF held by a Singapore investor. See investing in the S&P 500 from Singapore.
- Platform or management fees if you buy through a robo-adviser; see robo-advisor vs DIY index investing.
Where to Find the Figures
- TER, tracking difference and tracking error: the fund’s factsheet, product highlights sheet and annual report.
- Spread: a live quote from your broker during trading hours.
- Authorisation: MAS’s OPERA database shows whether the fund can be offered to retail investors in Singapore.
What To Do Next
- For two funds tracking the same index, put TER, tracking difference and typical spread side by side, and decide how long you expect to hold.
- Read each fund’s prospectus and product highlights sheet, and check it on MAS’s OPERA database.
- Check that your broker is listed in the MAS Financial Institutions Directory.
- Read our ETF investing guide for the other things to compare, such as domicile and replication.
- This is general information, not advice on your situation.
