Transitioning from unit trust to etf

[Wishdom]

I am 26 year old and have accumulated around 16k worth of unit trust by contributing around 1/2k monthly for the past year.

Understand that the fees for unit trust are higher... Thus, I will like some advise that can expose me to asian etfs at a smaller cost...

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[mynickname]

Just leave the ut and start buying etf.

 

[BBCWatcher]

Just leave the ut and start buying etf.

I disagree. If the ongoing management costs are higher with the unit trust -- and that's highly likely -- the earlier the move, the better.

 

[Thoreldan]

Is ts' ut making a profit ?

 

[Shiny Things]

I disagree. If the ongoing management costs are higher with the unit trust -- and that's highly likely -- the earlier the move, the better.

BBCW is right. It's pretty simple: redeem the unit trust, use the cash to open a Stanchart brokerage account, and buy into equivalent ETFs through Stanchart.

 

[BBCWatcher]

It's pretty simple: redeem the unit trust, use the cash to open a Stanchart brokerage account, and buy into equivalent ETFs through Stanchart.

I don’t have a specific broker recommendation. It could be Standard Chartered, or Interactive Brokers, or somebody else. That choice depends primarily on forecast costs over the next several years of investing.

 

[antonpoh]

I am 26 year old and have accumulated around 16k worth of unit trust by contributing around 1/2k monthly for the past year.

Understand that the fees for unit trust are higher... Thus, I will like some advise that can expose me to asian etfs at a smaller cost...

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Can share with us which unit trust you bought?

 

[Wishdom]

Is ts' ut making a profit ?

Can share with us which unit trust you bought?

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[BBCWatcher]

Annual management fees for your four funds (unit trusts) range from 1.0 to 1.5%. Depending on how you bought them, you may have also paid an initial sales charge. They’re all wallet disruptors.

With the exception of that LionGlobal fund, all are restricted to Asian investments. It’s unclear to me why you’d adopt that sort of approach. Conceivably you might overweight Asia if you have particular insight (or otherwise want to make a prediction) that stocks traded in Asian markets will outperform the rest of the world, but overweight usually doesn’t mean all-in (or nearly all-in). For example, if Asian stock markets represent 28% of the value of global stocks — I don’t know what the real number is, but let’s assume it’s that — then an overweight investment strategy might mean you’d invest 40% of your stock portfolio in Asian markets and 60% elsewhere. Something like that.

 

[Wishdom]

Annual management fees for your four funds (unit trusts) range from 1.0 to 1.5%. Depending on how you bought them, you may have also paid an initial sales charge. They’re all wallet disruptors.

With the exception of that LionGlobal fund, all are restricted to Asian investments. It’s unclear to me why you’d adopt that sort of approach. Conceivably you might overweight Asia if you have particular insight (or otherwise want to make a prediction) that stocks traded in Asian markets will outperform the rest of the world, but overweight usually doesn’t mean all-in (or nearly all-in). For example, if Asian stock markets represent 28% of the value of global stocks — I don’t know what the real number is, but let’s assume it’s that — then an overweight investment strategy might mean you’d invest 40% of your stock portfolio in Asian markets and 60% elsewhere. Something like that.

I didn't pay an initial sales charge.

I just feel like like Asia will outperform and it will be a better diversification than sti etf. No stats to back my gamble on why Asia. The funds are picked based on past returns compared with other similar funds. Not much of a research, I know. Hahaha.

I bought Lionglobal because it is a global '' tech '' fund. They invest in interesting projects that might boost company sales.

I'm going all in on Equities in hopes of better returns.

Things I like about unit trust is that I deal only in sgd. I also don't have to worry about transaction fees (0 sales charge, holding fees and redemption fees).

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[Wishdom]

BBCW is right. It's pretty simple: redeem the unit trust, use the cash to open a Stanchart brokerage account, and buy into equivalent ETFs through Stanchart.

One thing I'm ignorant about is which etf I should go into and how... Which market, which counter, which broker, monthly 2k contributions? Thus the delay and this thread. Will love any advice.

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[JuniorLion]

One thing I'm ignorant about is which etf I should go into and how... Which market, which counter, which broker, monthly 2k contributions? Thus the delay and this thread. Will love any advice.

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People are in love with Interactive Brokers and IWDA ETF here. You may check that out.

 

[BBCWatcher]

I didn't pay an initial sales charge.

That's a relief.

I just feel like like Asia will outperform and it will be a better diversification than sti etf.

The latter is certainly true. Asia is bigger than Singapore.

However, I would point out that most economists expect that Africa will be the continent experiencing the most economic growth over your working career, the investment time horizon we're talking about here. And you have (for all intents and purposes) zero exposure to Africa right now.

Things I like about unit trust is that I deal only in sgd. I also don't have to worry about transaction fees (0 sales charge, holding fees and redemption fees).

You do have to worry about holding fees. That's the 1% (or more) management fee, and that's a holding fee, a big one.

If you are investing globally or more regionally (or some of both), then take a look at ETFs in major exchanges such as the London Stock Exchange. Standard Chartered, Interactive Brokers, and others let you buy securities in those major exchanges. Let's suppose for sake of argument that your purchase cost is 0.5% total, and your redemption cost is 0.5%. That's approximately one year of management fees for your lowest cost unit trust, and you're age 26. You're paying a hell of lot for that convenience, and it isn't much convenience. (OK, that's an oversimplification. The ETF has a management fee, too, and that might be 0.2% or whatever. But you get the idea. Just do the math, and it should be pretty clear that you've got some much lower cost choices.)

 

[BBCWatcher]

People are in love with Interactive Brokers and IWDA ETF here. You may check that out.

Well, that one is super convenient. That's why it's liked. You can buy the developed world's stocks inexpensively and rather easily that way.

If you want some emerging markets exposure and still want one ETF, that's VWRL (or its currency twin).

 

[Wishdom]

That's a relief.


The latter is certainly true. Asia is bigger than Singapore.

However, I would point out that most economists expect that Africa will be the continent experiencing the most economic growth over your working career, the investment time horizon we're talking about here. And you have (for all intents and purposes) zero exposure to Africa right now.


You do have to worry about holding fees. That's the 1% (or more) management fee, and that's a holding fee, a big one.

If you are investing globally or more regionally (or some of both), then take a look at ETFs in major exchanges such as the London Stock Exchange. Standard Chartered, Interactive Brokers, and others let you buy securities in those major exchanges. Let's suppose for sake of argument that your purchase cost is 0.5% total, and your redemption cost is 0.5%. That's approximately one year of management fees for your lowest cost unit trust, and you're age 26. You're paying a hell of lot for that convenience, and it isn't much convenience. (OK, that's an oversimplification. The ETF has a management fee, too, and that might be 0.2% or whatever. But you get the idea. Just do the math, and it should be pretty clear that you've got some much lower cost choices.)

You are very right. I guess I just have to dive head in to create an account with interactive brokers.

I will look at iwda and vwrl. I will probably just all in whichever has the highest potential return.

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[limster]

I will look at iwda and vwrl. I will probably just all in whichever has the highest potential return.

You can't just look at return. You need to look at risk.

It's best to choose something that has both LOW RISK and HIGH RETURN!

 

[Wishdom]

You can't just look at return. You need to look at risk.

It's best to choose something that has both LOW RISK and HIGH RETURN!

Of course, but I also realise that the market is pretty efficient. I don't have that expertise to hunt for high sharpe ratios.. So I'll just take the highest risk etf and pray for high returns.

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[Wishdom]

I have decided to include emerging markets. The plan is a lump sum of 14k sgd into an etf and subsequent dca of 1k every month. Only a single etf for simplicity sake. I will be doing this using interactive brokers.

One last question... Vwrd or vwrl?

Should I go vwrd because I only have to fx once from sgd to usd instead of sgd to usd to gbp?

Or is gbp '' cheap '' now so I should go vwrl?

Also, I noticed that the dividends are not reinvested... Does that really matter? I can just add the dividends into my dca and invest them all again right?


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[BBCWatcher]

Should I go vwrd because I only have to fx once from sgd to usd instead of sgd to usd to gbp?

Interactive Brokers offers both GBP.SGD and USD.SGD, at least via IdealPro. So that's not a reason to prefer one or the other.

Or is gbp '' cheap '' now so I should go vwrl?

That's not a reason either. VWRL and VWRD hold exactly the same assets. Those assets are merely expressed at any/every moment in time using both British pounds and U.S. dollars. If the exchange rate between those two currencies changes, but nothing else changes, then the nominal price figures for VWRL and VWRD will perfectly adjust in exact mirror image to the exchange rate change. If that didn't happen, automated trading would immediately step in and trade against that imbalance to correct it, in the blink of an eye or faster.

Also, I noticed that the dividends are not reinvested... Does that really matter?

Yes, it matters a little in terms of convenience and efficiency. Ideally, for your purposes (age 26, long-term investing) dividends would be reinvested. But they aren't, and there isn't any other single, low cost fund that covers all the world's stocks like VWRL/VWRD does. So all you have to do is make your monthly purchases inclusive of any dividends that are paid out.

I can just add the dividends into my dca and invest them all again right?

Exactly.

So why should you favor VWRL over VWRD or vice versa? There are a few possible reasons. One reason is that IB's commissions are structured slightly differently depending on whether you're using U.S. dollars or British pounds to buy something on the London Stock Exchange. Check their commission schedule to see if that difference matters, and how much.

Another possible reason is that either VWRL or VWRD has more "Assets Under Management" and thus, on average, more liquidity/tighter bid-ask spreads. But that's unlikely to be a major factor. They both probably have ample trading volume for your purposes. They're both rather large funds.

Yet another possible reason is that, oddly enough, VWRL and VWRD both pay out dividends in U.S. dollars. So that would argue in favor of VWRD, since it's a little simpler to reinvest dividends that are already in the purchase currency.

 

[Wishdom]

Thank you bbcwatcher.

I will be going for vwrd simply because I don't want to deal with too many currencies. I'd prefer to pay a bit more than to complicate my investments.

This has been extremely enlightening. Thanks to all posters. I will take a week or two to start my liquidation of ut and then plunge into interactive brokers.

I'm sure I will be back with more questions,but till then, happy weekends.

PS. I suddenly recall the reasons why I went into ut in the first place. I did not have a large enough capital (10k usd) to justify trading on ib. I too, did not want to use standard chartered in the interim because that's not my ultimate goal and platform. I couldn't bring myself to open an account and learn its intricacies for the sake of holding etfs for a year, and then go through the cost and trouble of transferring them to ib.

UTs was my lazy solution to stay invested. I had a ready account which I was comfortable with. Bought a bit of them monthly till I accumulate 15k or so, and then liquidate and migrate long term into ib. It may have been '' expensive'' but at least it has been profitable. Not much but yes.

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