A unit trust is an investment vehicle that comprises a pool of funds from many investors and managed by a fund manager. The fund manager will invest the pooled money into assets such as stocks, bonds, money market instruments, a combination of these investments, or even other funds. By purchasing unit trusts, it will give you exposure to all the investments in that fund. The collective holdings of the assets held in trust will form the total portfolio of a unit trust fund.

Pricing Mechanism

The price of a Unit Trust is the Net Asset Value (NAV) per unit. This is calculated by the fund manager after the end of every business day and will be made known to the public by T+2 i.e. 2 business days after the business day in question.

An investor’s entitled net monetary value of the unit trust fund is the number of fund units owned, multiplied by the NAV per unit.

The number of units of a fund represents an investor’s proportionate holdings of this portfolio of assets and their proportionate entitlement to the income (if any) generated by these assets. Therefore,

(Number of units of a fund owned by an investor) x (NAV per unit*) = Investor’s entitled net monetary value of the unit trust fund

*The NAV (Net Asset Value) per unit prices announced by fund management companies are already net of the fund’s Annual Management Fees and Trustee Fees. We do not charge or collect these fees.

Costs of Investing into a Unit Trust

There are some costs involved when you invest in a Unit Trust. While some fees are applicable to all funds, there are other fees that you can avoid depending on which fund provider you choose to do your investments with.

Advantages of Unit Trusts

Professional Management
Unit trusts are managed by professional fund managers with expertise and experience in investments. Your investments will be monitored regularly and the fund managers will make investment decisions based on research and analytical tools that you may not have access to.

Diversification
Unit trusts typically invest into a number of stocks and/or bonds in its portfolio that are from different companies and often from different industries or regions. This means that the poor performance of any one security or business sector is not likely to have a major adverse impact on your investment as a whole.

Windows of investment opportunities
Investing in unit trusts not only allows one to gain access to overseas markets at ease, it also allows individuals to invest in products that might not be affordable. For instance, some bonds require a minimum investment of $100,000. Thus, Unit Trusts are good alternatives for investors to participate in these bond exposures at a relatively lower entry amount.

Lower costs
When building a diversified portfolio, the costs associated with buying units in a mutual fund may be lower than buying different individual stocks and bonds. This is due to economies of scale where the costs of accessing extensive research as well as, administrative, operating and trading expenses are spread among a large number of unit trust investors.

Liquidity

Unit trusts are mostly open-ended investments that investor can buy and sell on a daily basis (unless otherwise stated). Fund management companies are mandated (under normal circumstances) to meet all “sell” requests from the unit holders.

Considerations when Investing in Unit Trust

Entrusted control
Fund manager(s) make the decision of the assets that a Unit Trust invests into. When you invest in a Unit Trust, you give up control over the choice of individual bonds, shares and other assets that go into the fund. Even though the investment direction of the fund may be pre-determined, the specific needs of individual investors might not be considered.

Low risk does not mean no risk
Similar to any investments, there is always an element of risk when investing in unit trusts. Although the risks are relatively lower as compared to direct investments in stocks and shares, it is not entirely eliminated as Unit Trust is not a capital protected investment.

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