Why Unit Trusts
When you invest in a unit trust, also known as a mutual fund, your money is pooled with money from other investors and invested in a portfolio of assets according to the fund's stated investment objective and investment approach.
Unit trusts are the investment vehicle of choice for pension funds, retail and sophisticated investors, and multi-national companies to manage their cash because:
They are well-diversified
Unit trusts spread the investment risks because they can invest in a variety of financial instruments, including stocks, bonds, properties, commodities, currencies and cash. When a single company stock is underperforming, it does not impact significantly on the entire fund because it is diversified in many other companies' stocks.
They are professionally managed
Unit trusts are managed by professional fund managers. Their job is to monitor your investments and make necessary investment decisions based on research and analyses in order to generate a good risk-adjusted return.
You can invest all over the world
Unit trusts are invested all over the world and in various business sectors. This way, you have a lot more opportunities. Think China might boom? Interested in European property stocks? The fund managers in the unit trusts pick out the best companies in these sectors for you.
You only need a small amount of investment to start with
Initial investments usually start from $1,000. You can also begin a Regular Savings Plan (RSP), where you instruct us to automatically deduct an amount, which can start from as low as $100, from your bank account to make unit trusts purchases at regular intervals. With unit trusts, a small sum buys you into a well-diversified portfolio.
They are liquid
Most unit trusts in Singapore allow daily buying and selling of units. As long as we receive your orders by the day's trading cut-off time, you can be assured that your purchases or redemptions will be transacted at that day's prevailing price.
They are less volatile
As unit trusts invest into a wide variety of companies, their risk level is typically lower compared to investing into a single company. In addition, if you have a low risk tolerance level, you can choose a fixed income fund that can give stable returns. Generally, over the medium to long term, it will likely perform better than your fixed deposits.
There is no-lock in
Unlike investing through insurance policies where you pay many layers of fees and have to lock in the money, there is no lock-in or early surrender penalty when you need to sell your investments to meet your other needs.