Advice on Unit Trust

[against all odds]

Hi everyone, I have some queries with regards to unit trust. Hope you all can answer my questions as well as give me some advice.

My scenario:
I have been saving and putting my money in fixed deposits (which i know is not the best way to grow money). I hope to increase the returns on my savings, but do not wish to take too high of risk such as going into stocks.

After some reading on my part, I believe the next step which I could take up the 'risk and return ladder', is to start to put my money in BONDS / UNIT TRUSTS.

However, returns from BONDS seem bleak too.

I hope to allocate a portion of my savings in unit trust for around 3-5 years, and hoping to see positive returns as compared to my fixed deposits.

Questions:

1) As a newbie to unit trust, I have no idea HOW to select unit trust. As of now, what unit trust are good to buy? And how do you all determine that?

2) Also, I have no idea WHERE to buy unit trust. One avenue is from banks but i heard banks charges high commission? I heard of fundsupermart.com, but am unsure of how to go about it too.

 

[Epps_Sg]

Below is my personal opinions in blue. Hope can give you some starting point to do you research. I do not invest in unit trust anymore as i invest in DIY passive portfolio of stock index (STI) ETF and govt bonds directly now, which have lesser annual cost in the long run - these are similar to unit trust and bought directly from stock exchange. Do your own final due diligence and research about the pros and cons of investing, about unit trusts/funds selction, and especially on the importance and dangers of market timing first. Come to your own conclusion about investing and don't just rely on other people's investment opinions, that's how you can learn.

Hi everyone, I have some queries with regards to unit trust. Hope you all can answer my questions as well as give me some advice.

My scenario:
I have been saving and putting my money in fixed deposits (which i know is not the best way to grow money). I hope to increase the returns on my savings, but do not wish to take too high of risk such as going into stocks.

After some reading on my part, I believe the next step which I could take up the 'risk and return ladder', is to start to put my money in BONDS / UNIT TRUSTS.

However, returns from BONDS seem bleak too.
Personally, i wont invest everything into bonds alone, unless you know what you are doing. Similarly, i wont invest purely in equities funds alone, as pure equities funds have much higer risk as well as rewards.

I hope to allocate a portion of my savings in unit trust for around 3-5 years, and hoping to see positive returns as compared to my fixed deposits.

Questions:

1) As a newbie to unit trust, I have no idea HOW to select unit trust. As of now, what unit trust are good to buy? And how do you all determine that?
Personally I would select unit trust containing both share equities and bond components, becasue generally bonds goes up when equities goes down, so the bond can buffer the portfolio during stock/equity market downturn and lowers the overall risk and potential loss, compared to unit trust that is pure equity only. Secondly, i would look for such unit trust with the lowest annual management fees, so as to maximize returns; usually actively managed unit trust have higher annual fees (2.5%) than passively managed unit trust (1.5%). Thirdly, i would prefer such unit trust that gives good dividends and performed better in the past 5 years relative to other similar unit trusts. Fourth, look for unit trust that have lowest initial sales charges. Fifth, personally i would not buy unit trust that invest in emerging markets, because i am of the opinion high economic growth does not equate to high stock market performance. Six, there is risk in investing in unit trust, in the sense that you may invest unknowingly at market high - you may need to learn how to buy when market is low and sell when market is very high - not an easy thing to do. At least you intend to invest for 3~5 years which gives time for market to recover if there is recession in between, hopefully.

2) Also, I have no idea WHERE to buy unit trust. One avenue is from banks but i heard banks charges high commission? I heard of fundsupermart.com, but am unsure of how to go about it too.
Can buy unit trusts from fundsupermart.com and POEMS, they usually have upfront charges, i think. Personally have not used both before. Look out for which platform has the lowest upfront charges for the unit trust you want.

Cheers, and good luck on your journey into investing.

 

[against all odds]

Hi thanks for your reply.

I have 2 questions after reading your comments.

1) How is unit trust bought and sold? Like stocks as in u can buy sell whenever u want, or like fixed deposit where there is a fixed time frame? I thought is by time frame, but u seem to suggest otherwise.

2) You didn't use fundsupermart and poems, den how did u purchase your unit trust? And what was your experience?

 

[crissangelz]

buying STI ETF will reward u better off than most unit trust in the long term, but same goes with unit trust, the timing to go in will have to be right

 

[Epps_Sg]

Hi thanks for your reply.

I have 2 questions after reading your comments.

1) How is unit trust bought and sold? Like stocks as in u can buy sell whenever u want, or like fixed deposit where there is a fixed time frame? I thought is by time frame, but u seem to suggest otherwise.

2) You didn't use fundsupermart and poems, den how did u purchase your unit trust? And what was your experience?

Unit trust can be bought and sold whenever you want, usually using online platform. Slight difference is the unit trust buy and sell price is taken at end of current or next day only.

Previously invested in unit trust through Single Premium ILP (Investment Linked Product/Insurance) - that had 3~5% upfront sales charge, and one-time buy/sell spread charge. On hindsight, that was a more expensive way to invest in unit trust due to higher initial sales charge, though fund switching was bid-to-bid, means no additional charge to switch funds. There was limited choices of unit trusts in ILP also.

More variety of unit trusts are available in fundsupermarts and POEMS, but fund switching may not be free there. Unit trusts can be more expensive and less efficient to invest in long term compared to buying ETF (exchange traded funds), dependign on how you invest. Whichever fund you buy, you still need some clear investment strategy or investment guidelines to make sure you have higher winning chances. For me, i avoid market timing approach and use "lower risk lower" returns diversified portfolio approach. For others, they go for "higher risk, higher returns" market timing approach.

 

[slackerz]

Just to add on, if a huge portion of your portfolio is made up of bonds, be prepared for a high likelihood for your bond price to fall since the current low interest rate is not gonna sustain indefinitely and a raise in interest rates in the near term is almost definite, which will mean your bond prices will fall.

However, good news is when your bond prices fall, its a good time to buy bonds then.

 

[xinus84]

Hi everyone, I have some queries with regards to unit trust. Hope you all can answer my questions as well as give me some advice.

My scenario:
I have been saving and putting my money in fixed deposits (which i know is not the best way to grow money). I hope to increase the returns on my savings, but do not wish to take too high of risk such as going into stocks.

After some reading on my part, I believe the next step which I could take up the 'risk and return ladder', is to start to put my money in BONDS / UNIT TRUSTS.

However, returns from BONDS seem bleak too.

I hope to allocate a portion of my savings in unit trust for around 3-5 years, and hoping to see positive returns as compared to my fixed deposits.

Questions:

1) As a newbie to unit trust, I have no idea HOW to select unit trust. As of now, what unit trust are good to buy? And how do you all determine that?

2) Also, I have no idea WHERE to buy unit trust. One avenue is from banks but i heard banks charges high commission? I heard of fundsupermart.com, but am unsure of how to go about it too.

bonds are low-risk assets, of course will look bleak. they can give positive returns if invested properly.

 

[PruCorgi]

I think when it comes to investing in unit trusts (UTs) or closely related instruments (mutual funds and investment-linked plans [ILP] funds), you can use a few criteria:

1. Identify the better performers (they outperform their benchmark, more consistent in returns and are more resilient--i.e. recover more quickly after downturns)

2. (a) Go in during suitable times (e.g. for Singapore UTs, wait for bad economic news before going in, with the expectation that the fund price is temporarily depressed and will eventually recover). OR
(b) Use a dollar cost averaging strategy where you just regularly invest. This cultivates discipline and requires less work/monitoring than (a) above, but you won't earn as much as someone who uses (a) successfully.

3. Suitable investment platform:
(a) Some people prefer going through another person; others are OK with online platforms
(b) Fees and charges. There are generally 4 areas for these, but confirm there will definitely be charges:
i. When you buy
ii. When you sell
iii. When you switch funds
iv. Ongoing/periodic charges

For banks, typically they will charge you when you buy and when you switch funds. For online platforms, you will usually be charged for i., iii. and iv. For single premium ILPs, it's normally i. and ii. Some companies only charge ii.

So, I wouldn't say a bank is necessarily more expensive, especially if you don't plan to switch often and can find a good banker who is more service-oriented (TIP: Normally they are not the top sales performers, but they do well enough to stay employed), and negotiate a one-time upfront charge of 2.5%-3% max.

 

[hwmook]

Unit trust can be bought and sold whenever you want, usually using online platform. Slight difference is the unit trust buy and sell price is taken at end of current or next day only.

Previously invested in unit trust through Single Premium ILP (Investment Linked Product/Insurance) - that had 3~5% upfront sales charge, and one-time buy/sell spread charge. On hindsight, that was a more expensive way to invest in unit trust due to higher initial sales charge, though fund switching was bid-to-bid, means no additional charge to switch funds. There was limited choices of unit trusts in ILP also.

More variety of unit trusts are available in fundsupermarts and POEMS, but fund switching may not be free there. Unit trusts can be more expensive and less efficient to invest in long term compared to buying ETF (exchange traded funds), dependign on how you invest. Whichever fund you buy, you still need some clear investment strategy or investment guidelines to make sure you have higher winning chances. For me, i avoid market timing approach and use "lower risk lower" returns diversified portfolio approach. For others, they go for "higher risk, higher returns" market timing approach.

Just want to point out something, having a lower fees doesn't mean its a better deal. It doesn't work that way, STI ETF track the STI perfectly but for mutual funds, they don't as they invest in shares that they believe is better thus returns might be higher. I can point out to you that some of the singapore equities funds beat the STI even with higher annual fees. Its quite misleading to think its a 1 for 1, mutual funds are not same as ETF.

Investing in SGS bonds is fine but short period bond yield is crap while long term bonds carry a certain risk that a slight uptick in yield will wipe out your gains and even make you lose money. I invest in a variety of bond funds that have much better returns while also ensuring that i am not bond tightly to a single economy. FSM have 0% sales charge for bond funds and also free switching. You only pay for platform fees at 0.2% PA.

 

[hwmook]

I think when it comes to investing in unit trusts (UTs) or closely related instruments (mutual funds and investment-linked plans [ILP] funds), you can use a few criteria:

1. Identify the better performers (they outperform their benchmark, more consistent in returns and are more resilient--i.e. recover more quickly after downturns)

2. (a) Go in during suitable times (e.g. for Singapore UTs, wait for bad economic news before going in, with the expectation that the fund price is temporarily depressed and will eventually recover). OR
(b) Use a dollar cost averaging strategy where you just regularly invest. This cultivates discipline and requires less work/monitoring than (a) above, but you won't earn as much as someone who uses (a) successfully.

3. Suitable investment platform:
(a) Some people prefer going through another person; others are OK with online platforms
(b) Fees and charges. There are generally 4 areas for these, but confirm there will definitely be charges:
i. When you buy
ii. When you sell
iii. When you switch funds
iv. Ongoing/periodic charges

For banks, typically they will charge you when you buy and when you switch funds. For online platforms, you will usually be charged for i., iii. and iv. For single premium ILPs, it's normally i. and ii. Some companies only charge ii.

So, I wouldn't say a bank is necessarily more expensive, especially if you don't plan to switch often and can find a good banker who is more service-oriented (TIP: Normally they are not the top sales performers, but they do well enough to stay employed), and negotiate a one-time upfront charge of 2.5%-3% max.

1 lady in UOB sold my mum some funds without letting know about the sales charge of 3.5%. Luckily for that her and my mum, that HY bond funds bounce strongly from the btm which my mum bought at returning 5% gain in 1 week thus i ask her to keep it since its already in the green. Banks are filled with blood suckers, nothing more need to be said.

 

[Epps_Sg]

Just want to point out something, having a lower fees doesn't mean its a better deal. It doesn't work that way, STI ETF track the STI perfectly but for mutual funds, they don't as they invest in shares that they believe is better thus returns might be higher. I can point out to you that some of the singapore equities funds beat the STI even with higher annual fees. Its quite misleading to think its a 1 for 1, mutual funds are not same as ETF.

Investing in SGS bonds is fine but short period bond yield is crap while long term bonds carry a certain risk that a slight uptick in yield will wipe out your gains and even make you lose money. I invest in a variety of bond funds that have much better returns while also ensuring that i am not bond tightly to a single economy. FSM have 0% sales charge for bond funds and also free switching. You only pay for platform fees at 0.2% PA.

One thing i noted about singapore equities funds that beat STI - such funds may underperform the STI during a market downturn also. End up some of these funds that outperform STI simply have higher volatility. For me i prefer not to have higher potential losss during market downturns. For me, potential bigger loss is something to be considered too, so i dont just look at potential bigger gains.

You have a point about interest rates affecting investments in bonds, but from my perspective it applies more if one is investing purely in bonds alone. For a diversified passive portfolio consisting of both equities and bonds, investor should look at total portfolio performance - long term and short term bond just gives different overall volatility to portfolio in long run. One thing to consider, is that interest rates can remain low for a long time also - we will have to see how things play out in future. I agree that bond funds in unit trusts can also be a viable asset to invest in, due to the relatively lower fees and wide choices.

 

[bbmars1128]

One thing i noted about singapore equities funds that beat STI - such funds may underperform the STI during a market downturn also. End up some of these funds that outperform STI simply have higher volatility. For me i prefer not to have higher potential losss during market downturns. For me, potential bigger loss is something to be considered too, so i dont just look at potential bigger gains.

I have a different strategy. I don't really know how volatile the funds I hold, only know that are rating at the top. As compare to STI, I think they do outperform it. But during the down turn, I don't hold on to it. Because I use CPF to invest, during recession, I don't hold any of them but intead let them earn CPF interest instead. Why would I want to hold LONG TERM and ride through the Bear cycle? I would not want to catch a falling knife continuing to fall all the way to the whatever bottom??? if I know for sure it is still going to fall further? WHY would I be so stupid to hold on to it?

I sit out of the market. Am I not in for long term? YES. just that my strategy is to earn CPF interest instead of buying some low volatile funds/bonds hoping to loose less...? ride through the bear storm and then accelerate with the bull along the way. Its a Profit Profit for me ... either way I win. invest in funds in bull cycle, earn CPF interest in bear cycle

 

[limster]

invest in funds in bull cycle, earn CPF interest in bear cycle

If you can predict when is the "bull cycle," then you are a guaranteed millionaire or billionaire already.

In 2008 Beijing Olympic year, so many people posting on the forums that 2008 is a guaranteed "bull market", PRC government will never let the market drop during Olympic year, so they go "all in" 100% China fund. 100% Asia. After that, don't see these people posting in the forums anymore.

Under your theory above, you will be buying shares in the 2007 bull cycle, then 2008-2009, suddenly stop buying shares. Bad idea.

Myself, I used value averaging during the 2008-2009 downturn so I managed to recover. Those who use dollar cost averaging (DCA) will also recover their losses, but not as much as those who use VA. Those who don't know simple concepts like VA/DCA, go library and borrow simple investment books rather than rely on HWZ to invest on life savings....

 

[bbmars1128]

If you can predict when is the "bull cycle," then you are a guaranteed millionaire or billionaire already.

No one can predict, not even me. But invest based on my comfort level of risk I am willing to take and cut LOST measure. Sorry, no m/billionaire here. Small investor using CPF $$ most time. How much do you think I have in my CPF ? not forgetting all sorts of restriction being imposted. I do make some including after loosing $40k in my 1st yr investing. Recover lost and with some profit. When not sure, I don't invest, sell out and stay out of market.

In 2008 Beijing Olympic year, so many people posting on the forums that 2008 is a guaranteed "bull market", PRC government will never let the market drop during Olympic year, so they go "all in" 100% China fund. 100% Asia. After that, don't see these people posting in the forums anymore.

I know that was what market was saying, but it didn't translate into much gain. I had not invested anything in PRC then... but some time 2008 August (as I recall), I was already out of the market after the knee jerk reaction of a correction. I sold all my stocks and UT.... only to realise that the recession began a few months later (Of course, learn this from news). Why, because I was already weary of the stock market as it was frenzy buying by many .... stock rocket higher and higher. Imagine 1 such stock I was holding bought at $0.88 could rocket all the way to $2.2 (i think) while correcting, I sold at $2 only for it to recover almost close to $2.2 and then, the unthinkable happen..... RECESSION. That stock was only worth $0.2/share during recession. So do you expect me to hold like many of my friends did? FYI, during this time too, when I sold my UT bought using CPFSA which I hold for a period of 9 months, average profit was 24%24%? a lot? Sorry, I am not greedy, I merely invested 30K from CPF despote the fact that I could have dump int some 100K but I refrain from doing so because I believe in managing my risk and balance my account. anything goes wrong, my main bulk of CPF $$$ are still in tact in CPF account. Given that scenerio, how much do you think I am willing to invest at one go? I learn my lession

Under your theory above, you will be buying shares in the 2007 bull cycle, then 2008-2009, suddenly stop buying shares. Bad idea.

There had never been any thoery. The Bull cycle never started in 2007. According to chart, I started buying UT one month after it has bottom and enter more in stocks soon after in Apr that year... I think it was in 2004? can't recall. For when I sold all my holdings in Feb then follwoing year, I make $71K selling it off because my mum pass away and I had no time to monitor. I stay out as it had gone up too furious. But buy back later at lower prices for stocks except for 1 which I ended up buy high sell high. during this period, I was in and out of the market. Entering only after a major correction. How do I know, I simply don't know but based on my conviction, charts and cyclical pattern. Read some economy news and know the trend (right or wrong, only you belive in them). That's all I know. Even to date, there are some financial terms and explanations which I still do not understand. I manage my risk and not be greedy. Never chase because I know I can't take it. To date, it has work well for me since I started out in 2000.

I jump into UT after the May correction, entered again in oct/nov/dec period. Invested in Stock in late Oct last yr as I sense that there could be a year end rally. My reference source also inform me the same info too. I am prepared to stick my head out for a while as I believe there is some leg for it to move. when Market condition turns volatile and I am uncomfortable with it, I would rather sell out and sit out of the market. Never be greedy.

Someone told a $1 make is still a profit. A $1 lost, you, no matter what, you still loose. Market is always there, preserve $$$ to fight another day.

 

[bbmars1128]

Sorry, mistaken info that I had in my earlier post. I made 51K during the 2004 rally till recession and made 71K in 2010 Feb when my mum died. Bought it in 2009 some few months after market bottom.

 

[buxinxie]

It is a well know fact that MOST unit funds worldwide fail to make money for their investors or match their benchmark indices. Furthermore, you have to pay upfront normal 5% agent commission, annual normal 5% management fee and some other fees as well.

Don't be lazy and let banks suck your money. Learn how to invest in equity!

 

[anfielder]

It is a well know fact that MOST unit funds worldwide fail to make money for their investors or match their benchmark indices. Furthermore, you have to pay upfront normal 5% agent commission, annual normal 5% management fee and some other fees as well.

Don't be lazy and let banks suck your money. Learn how to invest in equity!

Actually the commission can be 1.5% or less, and the management fee is usually less than 2%.

But it's of course far cheaper to do it yourself.

 

[bbmars1128]

.....Myself, I used value averaging during the 2008-2009 downturn so I managed to recover. Those who use dollar cost averaging (DCA) will also recover their losses, but not as much as those who use VA. Those who don't know simple concepts like VA/DCA, go library and borrow simple investment books rather than rely on HWZ to invest on life savings....

Read this article in Sunday Times last sunday and the author has another article in today's Sunday Times. - "Buy-and-hold works – up to a point"
(See link below)

What it has written is what I had observed and been doing since I sufferred the the 1st lost of 40K when I started investing/ After doing my own research and thought that would be the stratgey I should use. That's why I try to buy at the bottom, if not somewhere near there. Must do your homework, no free lunches..
Afterall, after a long recession and when prices had dropped so much, chances of share price appreciating is higher than dropping. Why worry when somehow, what ever bad news are kind of being absorped by the market and most are already mule to it..... that's where the opportunity arises.

Buy-and-hold works

 

[buxinxie]

Actually the commission can be 1.5% or less, and the management fee is usually less than 2%.

But it's of course far cheaper to do it yourself.

I have not looked at unit trusts for a long long time. Actually the concern is not the cost. It is about the performance. Research has been done that most of the unit trusts are suck!

 

[chopra]

Threadstarter, explore ETF as well.
The sales charge is lower than unit trust. Performance wise, subjective.

READ MORE before you level up from LOW risk fixed deposit to HIGH risk investments.