6 Ways How Singaporeans Can Benefit From Investing in Unit Trusts

Everyone knows about putting their money in a bank. Unfortunately, the rate of return is close to a mere 0.1%.


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In the long term, you won’t earn much and inflation will reduce the purchasing power of your savings or fixed deposits. To overcome this problem, you are going to need another instrument that can outpace the rate of your money’s depreciation. You might have heard of unit trusts.

Also known as funds or collective investment schemes, many people see unit trusts as an attractive way to grow their money.

It is feasible even for people with little cash on hand, because you can invest in it using your CPF.

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Most unit trusts start off with an initial investment of $1000 and subsequent additions of $100. Depending on which fund type and objectives you pick, some are less risky eg money market funds, government bond funds.

Other more risky options are things like equity funds, high yield bond funds, alternate asset class funds, property funds…

If you are considering what are upsides of unit trusts, let me share 6 advantages not every novice investor may know of.

1) Instant Diversification

Every fund invests your money in one or more countries, across many companies. It feels like you own various securities with just one fund. If one security is not doing well, others will help cushion the blow.

2) Professionally Managed

Each fund will have a portfolio manager who will monitor the performance of the securities. Having someone who is spending all the time monitoring the markets, it gives you assurance that they are the best people to manage which security to buy or sell.


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3) Autopilot Your Investment

You need to set aside a fixed amount of at least $100/- (in multiples of $100) on a fixed day every month to invest, taking advantage of the concept called “dollar cost averaging”.

You are in control, whether to buy more units when prices are low and less units when prices are high. Forward Price (Net Asset Value or NAV) is shown at the end of a working day.

4) Access To Markets

Some markets are very expensive if you invest directly. eg New York Stock Exchange, the share price are in the double digits and exchange rate is S$1 to US $1.40 as at 2015 December.

5) Your Money Is In Safe Hands

The legal structure prevents others from taking away your money. The trustee, which is the bank, insurance company or financial institution will be the custodian.

6) No Brokerage Fees

Unlike Exchange Traded Funds (ETFs), these are not sold on the stock market. Therefore, you need not go through a broker, saving you transaction fees.

After reading thus far, you might be wondering…

Where can I go to buy and view the fund prices?

You can look into the online statements of distributor websites. Some places to start are fundsupermart.com or dollardex.com.

You can view pricing, factsheets and prospectuses at fundsingapore.com, with the option to have them mailed to you. You can even see the performance tables in newspapers or certain financial magazines.

These funds are actively managed, with the aim of outperforming a benchmark index. Using the Sharpe Ratio, it reduces volatility and increases returns.

If you’re totally lost at how to start, my suggestion is to go for balanced funds – a mixture of stocks and bonds or high-yield bonds depending on your circumstance.

You may stick to more stocks and less bonds if you’re starting out in your career. If you’re older and need more income, go for high-yield bonds and Real Estate Investment Trusts (REITs).

I believe you need to stick to only one to two funds and autopilot to build your wealth.

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With so much to offer you, the fund does take a fee from you(expense ratio). This fee will reduce as the fund size grows.

Income supplement – The fund owned can be offering payouts eg monthly, quarterly or semi-annually to defray living expenses.

Accumulation – The fund owned can be used for a huge onetime expense. eg travelling or down payment for buying a home.

Which of the benefits of unit trust makes you keen on investing in it? Let us know!

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Peter Yok

Yok likes to read self-enrichment and personal finance books in his free time. He believes everyone must learn to build an asset base for income. Like everyone, he chooses to be financially free when approaching retirement age.

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