Passive investing has become the default choice for many investors seeking broad market exposure at low cost. Since 2024, total assets in US passive mutual funds and ETFs have surpassed those in active ones—and the gap has continued to widen. US actively managed mutual funds and ETFs struggled to outperform their passive peer in 2025 (Morningstar, 1 Apr 2026), with only 38% of active strategies beating their asset-weighted average passive composite, a drop of 4 percentage points from a year ago.
Recent data show that passive strategies continue to dominate investor demand, capturing the majority of new inflows across key asset classes, particularly in US equity funds. Closer to home, Singapore-listed ETFs also continued their growth, with SGX ETF assets under management reaching a record S$16.3 billion.
The appeal is straightforward: passive funds generally cost less and often outperform actively managed alternatives over the long run. According to the latest SPIVA data (3 Mar 2026), 79% of active US large-cap funds underperformed the S&P 500 in 2025.
But while passive investing is often associated with low costs, not all passive products are equally cheap.
This guide breaks down the real cost of investing in index funds, explains where hidden fees can arise, and compares different ways Singapore investors can gain exposure to the S&P 500.
What is an Expense Ratio (TER)?
One of the most important costs to understand when evaluating an index fund is the expense ratio, also known as the Total Expense Ratio (TER).
The TER represents the annual fee charged by a fund manager to operate the fund. It is expressed as a percentage of assets under management and is deducted automatically from the fund’s returns.
For example:
- TER of 0.03% = S$3 per year on a S$10,000 investment
- TER of 0.50% = S$50 per year on a S$10,000 investment
While these differences may appear small, they compound over time. Over a 20-year investment horizon, a fund charging 0.50% annually can leave investors with thousands of dollars less compared to an equivalent fund charging 0.03%.
This is why understanding a fund’s expense ratio or TER is one of the first steps in evaluating investment costs.
Index Fund vs ETF: What’s the Difference?
When comparing an index fund vs ETF in Singapore, investors are often looking at two products that track the same underlying index but are structured differently.
An index fund is typically offered as a unit trust or mutual fund. Investors buy and redeem units directly with the fund manager.
An ETF, or exchange-traded fund, is listed on a stock exchange and traded like a stock throughout the day.
Both structures can provide exposure to the same benchmark, such as the S&P 500. However, ETFs generally have lower operating costs because they are simpler to administer and often benefit from greater scale.
As a result, investors seeking low-cost market exposure frequently find that ETFs offer a more cost-efficient solution than comparable index funds.
Why Some S&P 500 Index Funds Cost 10–20x More
For investors seeking exposure to the S&P 500, the fee gap between products can be surprisingly large.
Low-cost ETFs such as VOO, IVV and CSPX typically charge expense ratios ranging from approximately 0.03% to 0.07% annually.
In contrast, some S&P 500 index funds Singapore investors (e.g. localised unit trusts distributed by local banks) commonly use may charge total costs closer to 0.60%–1.00% per year.
A key reason is the feeder-fund structure. Instead of directly holding the underlying securities in the S&P 500, some index funds invest into another fund or ETF that already tracks the index.
This creates multiple layers of costs:
- The underlying ETF fee
- The feeder fund’s management fee
- Operational and administrative expenses
- Potential currency hedging costs
A commonly cited example is the Lion Global Infinity US 500 fees structure. While the fund provides convenient SGD-denominated access to the S&P 500, investors should carefully evaluate the total cost of ownership rather than focusing solely on the fact that it is an index fund.
The important takeaway is that passive does not automatically mean cheap.
S&P 500: Full Cost Comparison
| Product | Structure | Expense Ratio | Additional Considerations |
| CSPX | Ireland-domiciled ETF | 0.07% | Lower dividend withholding tax |
| VOO | US-domiciled ETF | 0.03% | Higher dividend withholding tax for non-US investors |
| Typical SGD S&P 500 Index Fund | Unit Trust / Feeder Fund | 0.60%–1.00% | Additional management and operational costs |
Estimated Annual Cost on S$100,000
| Product | Annual Cost |
|---|---|
| VOO | S$30 |
| CSPX | S$70 |
| SGD Index Fund (0.80% example) | S$800 |
Although VOO has the lowest headline fee, Singapore investors should consider tax efficiency alongside expense ratios. For many long-term investors, CSPX can be competitive because of its Ireland-domiciled structure. Meanwhile, higher-cost feeder funds may charge 10–20x more than ETFs while delivering exposure to the same underlying index.
Hidden Costs Beyond the Expense Ratio
The expense ratio is only one part of the total cost equation. Investors should also evaluate several hidden costs of index funds before making a decision.
1. Foreign Exchange Conversion
Investing in overseas assets often requires converting SGD into USD. Currency conversion spreads can add meaningful costs over time.
2. Dividend Withholding Tax
US-domiciled ETFs are generally subject to a 30% withholding tax on dividends for non-US investors. Ireland-domiciled ETFs may offer more favourable tax treatment.
3. Brokerage Commissions
ETF purchases may incur trading commissions depending on the brokerage platform used.
4. Bid-Ask Spreads
Every ETF has a difference between its buy and sell price. Less liquid funds may have wider spreads, increasing trading costs.
5. Platform Fees
Some investment platforms charge advisory or custody fees on top of fund expenses. These fees can significantly increase the overall cost of investing.
Looking only at the TER can therefore underestimate the true cost of ownership.
How to Check a Fund’s True Cost
Before investing, use this simple checklist:
✓ Check the fund’s TER or expense ratio.
✓ Identify whether the fund is a direct index tracker or a feeder fund.
✓ Review dividend withholding tax implications.
✓ Estimate trading and FX conversion costs.
✓ Include any platform or advisory fees in your calculation.
By evaluating total ownership costs rather than a single fee figure, investors can make more informed comparisons between funds.
Appendix
TABLE 1 — Fee comparison
| Cost item | VOO (US) | CSPX (Ireland) | SPLG (US) | STI (SG) |
|---|---|---|---|---|
| Expense ratio | ~0.03% | ~0.07% | ~0.02% | 0.05% and 0.17% |
| Dividend w/h tax | 30% | 15% | 30% | – |
| Transaction costs | Standard brokerage fees | Standard brokerage fees | Standard brokerage fees | Standard brokerage fees |
| Bid-offer spread | ~0.01% | ~0.02% | ~0.01% | 0.05% – 0.17% |
| Est. total annual cost | ~0.03% + brokerage fees | ~0.07% + brokerage fees | ~0.02% + brokerage fees | 0.05% and 0.17% + brokerage fees |
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TABLE 2 — Performance comparison
| Annual Returns (in SGD) | 1y | 3y | 5y | 10y |
|---|---|---|---|---|
| CSPX | 21.1% | 20.2% | 11.9% | 13.9% |
| SGD Index Fund | 33.4% | 17.0% | 10.6% | 6.5% |
| S&P 500 Index | 9.9% | 15.3% | 10.0% | 12.7% |
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Frequently Asked Questions
Do index funds charge fees?
Yes. All index funds charge some form of fee, typically expressed as an expense ratio or TER. Even passive funds require administration, portfolio management and operational oversight.
Why do some index funds cost more than ETFs?
Many index funds operate as feeder funds or unit trusts, which can introduce additional layers of fees. ETFs are generally simpler structures and often benefit from greater scale, resulting in lower costs.
What is a good expense ratio for an S&P 500 fund?
For broad-market S&P 500 exposure, expense ratios below 0.10% are generally considered very competitive. Many leading ETFs charge between 0.03% and 0.07%.
Is an ETF or an SGD index fund cheaper for Singapore investors?
In many cases, ETFs are cheaper from a fee perspective. However, investors should also compare taxes, FX costs and platform charges before deciding.
What hidden costs should I check beyond the expense ratio?
Key costs include dividend withholding tax, currency conversion fees, brokerage commissions, bid-ask spreads and platform fees.
What is the cheapest way to invest in the S&P 500 from Singapore?
There is no single answer for every investor, but low-cost ETFs with competitive expense ratios and efficient tax structures are often among the cheapest ways to invest in the S&P 500 from Singapore. Always compare total costs rather than focusing on headline fees alone.
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