Fees
An ETF (exchange-traded fund) is a single investment that holds a basket of many underlying assets – such as shares or bonds – and trades on a stock exchange like an ordinary share. Buying one ETF can give you exposure to hundreds or thousands of companies at once, at a low ongoing cost. ETFs are the building blocks SCM Direct uses to construct its discretionary portfolios.
An ETF pools money from many investors to buy a diversified basket of assets, then divides ownership into shares you can buy and sell on an exchange throughout the trading day.
A share gives you a stake in one company; an ETF gives you a stake in hundreds at once – instant diversification in a single purchase.
ETFs and index funds are close cousins, with both usually tracking an index at low cost.
The main practical differences are how they trade (live vs once a day) and how holdings are disclosed. Active funds aim to beat the market and charge more for the attempt; UK regulators and long-running studies (for example, the FCA’s Asset Management Market Study and the SPIVA reports) have found that, after fees, most active funds do not consistently outperform their benchmark over the long term.
| Feature | ETF | Index (tracker) fund | Active fund |
| How it’s priced | Live, on an exchange | Once per day | Once per day |
| Typical aim | Track an index | Track an index | Beat an index |
| Typical ongoing cost | Low | Low | Higher |
| Holdings disclosure | Usually daily | Periodic | Periodic |
| Traded like a share | Yes | No | No |
Costs matter because they are one of the few things an investor can control, and they compound over time. With ETFs there are usually three:
SCM Direct’s philosophy is that all of these should be visible. Hidden or layered charges are exactly what the firm’s founders campaigned against through the True & Fair Campaign.
ETFs are mainstream, regulated investment vehicles, but, like all investments, they carry risk:
SCM Direct builds its discretionary portfolios almost entirely from ETFs – typically 15 to 20 carefully selected funds per portfolio – to give clients broad, global diversification at low cost.
The typical SCM Direct Total Annual Cost is 0.85% all-in – covering management, custody, the underlying ETF charges, and trading costs, with no performance fees, initial charges, or exit penalties. Eight risk-graded portfolios are available across ISA, SIPP, JISA and General Investment Accounts (GIA).
Capital at risk. The value of investments can go down as well as up, and you may get back less than you invest.
Exchange-traded fund — a fund that trades on a stock exchange like a share.
Many investors use ETFs because a single fund gives instant diversification at low cost – even the highly respected professional investor, Warren Buffett. Whether any investment is right for you depends on your goals, timeframe and attitude to risk.
Capital is at risk.
Yes. ETFs can be held inside tax-efficient wrappers such as a Stocks & Shares ISA, SIPP or Junior ISA. SCM Direct’s portfolios are available in all of these.
An ETF trades live on an exchange and usually discloses its holdings daily; a traditional fund is priced once a day. Most ETFs track an index at low cost.
Generally, yes. Index-tracking ETFs usually have lower ongoing charges than actively managed funds, because they don’t pay for a manager to select stocks.
Many do. “Distributing” ETFs pay income out to investors; “accumulating” ETFs reinvest it inside the fund.
Yes. The value of an ETF can fall as well as rise, and you may get back less than you invested.
