Hate for Unit Trusts

[dreamyxq]

Why most of you here just hate Unit Trusts? Care to share?

According to my calculation, one can easily get at least 5% dividend yield with any high yield equity funds, be it global or singapore.

However, STI ETF seems to only have a yield of 2.6%, a farcry from those funds. Is it really the capital appreciation of STI ETF that makes you guys favour it over trust funds?

Management fees aside, pls share why the hate for unit trust.. I'm seeking more advice before allocating my $$ into different investments

 

[limster]

I recommend unit trusts for

(1) anyone who does not want to bother reading up on investments OR

(2) access to markets that are not easily available to DIY investors

Anyone who reads up on investments will know the answer why DIY is preferred if available. Those that are too lazy to read up and rely on HWZ to tell them what to buy, are safer buying unit trusts.

I am holding some unit trusts for reason (2).

 

[Rmondo]

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Ninth Edition): Burton G. Malkiel: 9780393330335: Amazon.com: Books

Do yourself a favor, buy it and read it.

 

[Mancunian2]

With ETFs so readily available, unit trust is for the dodos these days

 

[antonpoh]

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Ninth Edition): Burton G. Malkiel: 9780393330335: Amazon.com: Books

Do yourself a favor, buy it and read it.

Want us to read which part?

A Random Walk Down Wall Street - pdf

 

[havetheveryfun]

Why most of you here just hate Unit Trusts? Care to share?

According to my calculation, one can easily get at least 5% dividend yield with any high yield equity funds, be it global or singapore.

However, STI ETF seems to only have a yield of 2.6%, a farcry from those funds. Is it really the capital appreciation of STI ETF that makes you guys favour it over trust funds?

Management fees aside, pls share why the hate for unit trust.. I'm seeking more advice before allocating my $$ into different investments

coz u shldnt be just looking at the yield, but also the growth. in the past 10 years, the STI ETF has averaged a combined yield of 9.2% (both dividends and capital gains) Instrumental Returns Of The STI Over The Past 10 Years – SharesInv.com

n most s-reits at the moment can also get you a 5% yield. for unit trusts you don't really get 5% yield after all the fees

 

[dreamyxq]

coz u shldnt be just looking at the yield, but also the growth. in the past 10 years, the STI ETF has averaged a combined yield of 9.2% (both dividends and capital gains) Instrumental Returns Of The STI Over The Past 10 Years – SharesInv.com

n most s-reits at the moment can also get you a 5% yield. for unit trusts you don't really get 5% yield after all the fees

But theoretically, since the underlying asset of the fund is also equities of companies, if the overall STI appreciates, the fund NAV will more or less grow too, thus I can sell it at a capital gain as well. Am I correct to say that?

According to what I see on fundsupermart, the yields of some funds can be as high as 7-8%, even with a 2% management, its still significantly higher.

Of course, this is just what I think and i'm still a newb, so I can be wrong. Paging for experts to spread their knowledge..

 

[havetheveryfun]

But theoretically, since the underlying asset of the fund is also equities of companies, if the overall STI appreciates, the fund NAV will more or less grow too, thus I can sell it at a capital gain as well. Am I correct to say that?

According to what I see on fundsupermart, the yields of some funds can be as high as 7-8%, even with a 2% management, its still significantly higher.

Of course, this is just what I think and i'm still a newb, so I can be wrong. Paging for experts to spread their knowledge..

I am a newb too, but ultimately it is still your own personal choice. Some people still prefer unit trusts for whatsoever reason they might have. As long as you have done your due diligence and homework and think that it is worth it, then go ahead.

What people dislike is not really the unit trusts, but how the agents try to sell them to you and then hide from you all the costs and fees. If you know the costs and fees upfront, and have already done your homework and think it is still worth it after deducting the fees, then why not?

And for the 7-8% yield that is shown on fundsupermart, you still have to remember that those are projected and estimated yields, which means that they are not guaranteed at all.

 

[dreamyxq]

I am a newb too, but ultimately it is still your own personal choice. Some people still prefer unit trusts for whatsoever reason they might have. As long as you have done your due diligence and homework and think that it is worth it, then go ahead.

What people dislike is not really the unit trusts, but how the agents try to sell them to you and then hide from you all the costs and fees. If you know the costs and fees upfront, and have already done your homework and think it is still worth it after deducting the fees, then why not?

And for the 7-8% yield that is shown on fundsupermart, you still have to remember that those are projected and estimated yields, which means that they are not guaranteed at all.

That's a very valid point. Thanks for sharing your insights!

 

[Bedokian]

What's The Difference? Mutual Funds And Exchange Traded Funds Explained - Forbes

 

[Bedokian]

To add, "hate" would be too strong a word, probably "not prefer" would be a better choice.

That said, unit trusts are good investment vehicles where you can select different asset classes and portfolios, and can even do dollar cost averaging with them. The main gripe would be the fees and charges that accompany them, such as entry/exit fees, management fees, etc., which to an investor it is not as "more bang for my buck" than direct investments such as shares.

Enter the Exchange Traded Funds (ETFs), where it is like unit trusts which can be bought and sold like shares.

ETFs (those simple types that follow indices, not those short/inverse or 2x 3x ones) are usually transparent in their exact holdings, unlike unit trusts where you do not know what counters they have other than a pie chart. And their fees are much lower than unit trusts'.

However, ETFs here are not as varied as the ones in the US, where there are mutual funds (unit trusts in US lingo) and ETFs that are equivalent to each other (Mutual Fund to ETF Converter | ETF Database). So in a way we have to look outside of here to source for unit trust-alternative ETFs.

 

[hindsight]

Why most of you here just hate Unit Trusts? Care to share?

According to my calculation, one can easily get at least 5% dividend yield with any high yield equity funds, be it global or singapore.

However, STI ETF seems to only have a yield of 2.6%, a farcry from those funds. Is it really the capital appreciation of STI ETF that makes you guys favour it over trust funds?

Management fees aside, pls share why the hate for unit trust.. I'm seeking more advice before allocating my $$ into different investments

What mutual fund guarantees you a 5% return? There are none. The fact is nearly all fund managers fail to beat the benchmark indices in the long run, and much of it is due to the much higher fees charged by these robbers.

Paying 2% extra each year might not seem like much but it will have a significant impact on your portfolio if you compound it over 10 years.

 

[Mecisteus]

if you want exposure to indonesia or thailand market, then you may consider the unit trusts version. if you want exotic or special themes like mining or asian property companies, etc then you can go for the unit trusts versions.

 

[Darkzi0n]

bcos studies after studies shows that unit trust does not outperform the index in general. u r literally paying fund managers to make it worse for u... of cos at any point in time there will definitely be funds doing better than the index... but how the unit trust performed in the past has little correlation of how it perform in the future. one study compares 2 consecutive 5 years block and found little correlation in performance... another shows how the longer the horizon, the less likely it is for unit trust to outperform index.

 

[limster]

According to what I see on fundsupermart, the yields of some funds can be as high as 7-8%, even with a 2% management, its still significantly higher.

Unit trusts are ideal for you because
(1) You believe that past performance is indicative of future performance
(2) You don't know the difference between Alpha and Beta
(3) You expect to learn this in HWZ instead of reading up.

 

[Shiny Things]

Why most of you here just hate Unit Trusts? Care to share?

According to my calculation, one can easily get at least 5% dividend yield with any high yield equity funds, be it global or singapore.

However, STI ETF seems to only have a yield of 2.6%, a farcry from those funds. Is it really the capital appreciation of STI ETF that makes you guys favour it over trust funds?

Management fees aside, pls share why the hate for unit trust.. I'm seeking more advice before allocating my $$ into different investments

So, there's a couple of things here that I want to touch on.

The first one, and it's one I see a lot here: fixating on dividends at the expense of capital gains. When you just compare the yields of the two funds, it's like you're entirely forgetting about capital gains - but capital gains account for half or more of the gains from equities. The S&P 500 index, for example, averages about 7-8% in total returns over the long term, but only about a quarter of that - 2% - comes from the dividend yield. If you say "oh this fund yields 5% but the STI only yields 2%" you're letting yourself be duped.

Secondly, there's no "management fees aside" - management fees are the reason for the unit trust hate. Most of these funds give you exposure that's almost identical to what you'd get from an index fund, or from just doing it yourself - but they charge vastly more.

My favourite especially egregious example is from the USA: the $50 billion American Funds Washington Mutual fund charges 0.67% for a fund that exactly - EXACTLY, like, tick-for-tick - tracks the SPY ETF, which charges 0.09%. The only difference is that the mutual fund consistently underperforms by exactly 0.58%: the difference between the two management fees. Over 20 years, that's ten percentage points drag on your portfolio - potentially tens or hundreds of thousands of dollars, because you didn't know about the ETF.

And there are really very few exposures that you can't get through an ETF, even the batsh!t risks that you don't really want exposure to in the first place. High-dividend emerging market stocks? 1-3 year corporate bonds? Precious metals, but only white precious metals? Coffee? There's an ETF for all of those. (Even the white-metals one! This is a real thing - its ticker is WITE on the NYSE. Why you would want that I have no idea, but it's there.)

 

[frenchbriefs]

unit trusts are like prudential insurance....they are designed with one purpose in mind:for the agent or financial advisor to buttfark u till they can **** u no more....

and all the while u thinking of all the perks ur getting and discounts at sph petrol station and free membership at Expressions body and wellness spa and 30% off all travel bookings to Bora Bora island.....

ur adviser is busy counting his commisions and royalties and doing the soul train disco dance and playing air bass guitar and boogie till he can boogie no more....

 

[wahkao3]

unit trust sarkssssssssssssssssss!

 

[RM2SSG]

But theoretically, since the underlying asset of the fund is also equities of companies, if the overall STI appreciates, the fund NAV will more or less grow too, thus I can sell it at a capital gain as well. Am I correct to say that?

According to what I see on fundsupermart, the yields of some funds can be as high as 7-8%, even with a 2% management, its still significantly higher.

Of course, this is just what I think and i'm still a newb, so I can be wrong. Paging for experts to spread their knowledge..

To me it depends on the fund manager. If you buy unit trusts because you do not want to do the investment yourself due to lack of knowledge, how do you know the fund you bought into is managed by competent people?

You will still have to study the fund, the people manages the fund, etc.

I recently bought a high yield fund, it's Allianze Income and Growth, pay about 8% and give you dividend monthly. Each month I see the money coming in very shiok. Prior to buying it I was questioning left right and center about how the dividend is generated, I didn't get a straight forward answer except to be told that the manager is very good and they took risks. Also I read the fund prospectus on the redemption risks, very scared.

After 6 months I got out. Not because it didn't pay any dividend anymore but I got truly cold feet. It's just me.

Many of us invest with money we saved from many years of living frugal life, so even though it is only 35K that I have invested into the fund, to me, eventually I just didn't want to take the many unknown risks.

If you want to invest please do a lot of reading, talk to many people and only after you are very sure it is sound, then perhaps you could go in. Even after you have gone in, I suggest you monitor closely as well and pay attention to any news related to your fund.

My humble opinion.

 

[wahkao3]

You will still have to study the fund, the people manages the fund, etc.

if you need to spend time to study the fund, etc. Might as well spend that effort to directly study the stocks and cherry pick the best ones , u agree or not?