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What are Unit trusts

A unit trust is a type of investment where you pool your money together with other investors to buy a portfolio of stocks, bonds or other securities. This allows you to take advantage of the diversified portfolio and professional portfolio management at a reasonable cost.

  • Advantages
  • Unit Trust VS Mutual Funds
  • Types of Unit Trusts

Advantages

Advantages of investing in Unit Trusts

Diversification

Offers the potential for higher returns than investing in individual assets.

Professional Management

Have experienced fund managers who actively monitor your investment.

Liquidity

Easy access to your money as most unit trusts can be redeemed on dealing days. The value of your shares, when redeemed, may be worth more or less than their original cost.

Affordability

Low initial investment required.

 

Unit Trust VS Mutual Funds

In Singapore, the term unit trust and mutual funds refer to the same form of investment and are often used interchangeably. To find out what mutual funds are, read more here.

Types of Unit Trusts

1. Equity funds Equity funds typically invest in stocks with the objective of long-term capital appreciation. In some instances, an equity fund may have a preferred market sector of investment style such as growth, Shariah, value, deep value and blend.
2. Fixed income funds

Fixed income funds typically invest in bonds or other forms of debt-related securities. These types of funds are considered to be a more conservative type of investment. Advantages included generally steady income generation and preservation of capital.

Types of fixed income investment strategies for investors in Singapore could include bank loans, corporate credit, currencies and Sukuk.
3. Multi-asset funds

For investors looking to diversify, multi-asset funds could potentially be one of the best options.

Multi-asset fund investment strategies can aim to achieve objectives such as target risk, managed volatility, retirement funding, target date, education funding and inflation protection.
4. Alternative funds

Alternative funds have become an attractive investment option in recent years. They offer a low correlation with stock and bond markets, which allows for a more consistent valuation during market downturns.

They typically have higher fees and minimum investments and are less liquid than mutual funds and exchange-traded funds (ETFs).

 

Unit Trust expenses

Unit trusts charge investor fees which pay for the costs involved in managing the portfolio. You can discuss the most suitable options for your circumstances and financial objectives with your financial advisor.

Some of the costs associated with unit trusts include:

1. Subscription or initial sales fee

This is a front-or back-end lump sum charge required to buy or sell your share within the fund. In Singapore, this fee may range between 1% and 5%.

2. Management fee

These include recurring fees charged by fund managers for their professional money management services. This fee may be between 1% and 2.5%.

How to Invest in a Unit Trust

To invest or find out more, you may approach one of our Franklin Templeton authorize distributors:

Our distributors