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Introduction

What is a Unit Trust?

A unit trust is an investment vehicle comprising a pool of funds from many investors and managed by a fund manager. The fund manager invests the pooled money into assets such as stocks, bonds, money market instruments, a combination of these investments, or even other funds. Purchasing a unit trust gives 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 funds provider you choose to do your investments with.

1. Platform Fees

Some funds distributors charge platform fees for you to hold your investments with them. Platform fees are ongoing fees that are levied on your holdings. It is important to check if platform fees are applicable when choosing the distributor to hold your investments with.

At Phillip, there has never been and there will never be platform fees levied on your investments. This means that you can hold your investments with us at zero fees.

Some fund distributors charge a one-time sales charge when you purchase a fund with them. A switching fee may also be charged when you switch from one fund to another. The sales charge and switching fee ranges from 0% up to 5% of the invested amount.

When you purchase Unit Trusts online through POEMS, the sales charge is 0%. Investors who have done their research or have already set their minds on purchasing certain funds may waive their rights to financial advice and make the purchases online.

Phillip also provides financial advice for those who require this service. This is through our Phillip Investor Centres and Financial Advisory Representatives, who provide individual advice based on your profile, investment objectives and risk appetite. A sales charge may be levied in this instance.

These fees are payable by the fund and are applicable to all funds. The management fee helps to cover the costs of operating the fund as well as the fund managers’ expertise in managing the fund. The trustee fee is charged by the trustee for providing custodian services for safekeeping the fund’s assets. The management fee usually ranges from 0.5% to 2% and the trustee fee usually ranges from 0.1% to 0.15%.

The NAV per unit announced by the fund management companies are net of management fees and trustee fees.

Advantages of Unit Trust Funds

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
A unit trust typically invests 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 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 around $100,000. Thus, Unit Trust is a good alternative 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.

Not sure where to begin? Take a look at our Model Portfolios

Model Portfolios

Discover Phillip Unit Trust

Investments and Benefits

Since 1975, PhillipCapital has grown as an integrated Asian financial house with a global presence that offers a full range of quality and innovative services to retail and high net worth individuals and corporate and institutional customers.

As a member of PhillipCapital, we clinched the ‘Best Retail Broker Award’ three times in a row in the annually held Investors’ Choice Awards by the Securities Investors Association of Singapore (SIAS).

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