23.03.2021, 15:28

4 Things Singaporeans Need to Know Before Investing in Unit Trust

Singaporeans have access to different types of investment vehicles that they can use to grow their wealth and secure their future. If you’re a casual or newbie trader or if you lead a busy lifestyle, then you’re probably more interested in putting your money in a type of investment that will not require much of your time and attention. In this case, it’s worth looking into unit trust.

A unit trust, which is more popularly known in other countries as a mutual fund, is slightly more complex than the common types of investments—stocks, bonds, and properties—that most Singaporeans are familiar with. Simply put, investing in unit trust means pooling your funds together with that of other investors and getting a fund manager to control your collective resources. The fund manager, then, takes on the responsibility of channeling the fund into different investments. It seems like a hassle-free way of growing your money, but putting your resources in a unit trust comes with a few caveats. This type of investment can certainly be the right option for you, but you also need to know about the following realities when you invest in a unit trust.

Investing in Unit Trust Comes at a Cost

Relieving yourself of the responsibility of making vital decisions about your investments comes with a price, as the services of a fund manager are not free. Before signing up for unit trust investments, make sure to do a fund management fees comparison among your top choices. Some of the most common fees that you’ll encounter during your research include the following:

  • Initial service charge for purchasing a fund
  • Redemption or realisation fee for selling a fund
  • Switching fee should you decide to switch from one fund to another under the same manager
  • Online service charge when you buy a fund online
  • Management fee that will go toward the payment for your fund manager’s services
  • Trustee fee for the organisation that is acting as a custodian to the collective fund’s assets
  • Miscellaneous fee for various expenses like auditing and management services

These fees and charges may just cost 1 to 5 per cent of your annual investments, but they can add up. It’s prudent to look for a unit trust management option that offers reasonable one-time and recurring fees.

The Fund Manager Controls the Collective’s Funds

Investing in unit trust means relying on another person—your fund manager—to make your investment decisions for you. In essence, the fund manager calls all the shots and the investor is the beneficiary of the trust. The fund manager has the say on where they want to allocate the collective resources that the investors have entrusted to them. It’s important to get to know your fund manager and become familiar with their investment strategy. This way, you can choose one that matches well with your financial goals.

It’s Necessary to Evaluate the Fund’s Performance

It’s still important to track the performance of your investment even though you have a fund manager who can make all the important decisions for you. You have a goal that you want to meet, after all, and you want to make sure that your investment is making a steady progress toward that financial objective. You can choose to purchase or sell a fund as you see fit, but you should always take the fund’s performance into consideration before you make this big decision. Check your fund periodically and decide whether or not you want to keep your money in the pooled fund or you want to change your investment strategy.

Putting Your Money in Unit trust is a great way to get started on investing

There are many benefits that come with choosing unit trust as your first investment channel. You can start with a low capital, for one, and you can easily liquidate your investment whenever you need it. But perhaps the best benefit that this type of investment can afford you is that you can observe how an experienced manager handles your pooled resources, diversifies your investments, and reduces the level of risk that you take on. Doing so allows you to pick up trading strategies that you can use once you strike out on your own and start managing your own investments.

Are you ready to increase your wealth through investing in unit trusts? To enjoy a laid-back way of growing your money, you need to lay out proper groundwork first. Find out exactly what you want to achieve with your funds and research the investment options that are best suited to your goals, timeline, and risk appetite. Once you’ve chosen a unit trust that is appropriately matched to your financial objectives, you can enjoy all the benefits of making money without dealing with the intricacies of managing your investments yourself.


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