Guide To Investing In Unit Trusts In Singapore

When it comes to investing, a common approach that many of us may take is to concentrate our portfolio on one or two asset classes that we are most comfortable with. The number of instruments within this portfolio would also be dependent on the amount of investment capital and expertise that we may have. However, this approach may not be optimal, as we risk making the proverbial mistake of putting all of our eggs in one basket.

What we should do instead is create a well-diversified portfolio that can weather market storms. One way we could do so is with unit trusts. These forms of investment vehicles, which were first launched in 1924, offer a simple and low-cost option for achieving diversification and exposure to different asset classes and markets.

What Are Unit Trusts

Unit trusts, also known as mutual funds, pool money from investors, also known as unit trust holders, into a single fund that is managed by a professional fund manager according to the fund’s objectives and investment approach.

They are usually set up under a trust deed, where the investor is the beneficiary and collectively owns the interests in the trust property. In Singapore, this is carried out under the collective investment scheme (CIS) structure as adopted in other commonwealth countries like Australia, Ireland, and the United Kingdom.

The pooled funds’ portfolio would invest in a variety of assets, with profitable investments adding value to the fund and giving distributions to unit holders.

Why Invest In Unit Trusts

Typically, professional managers actively manage unit trusts in an effort to beat the benchmark index that they track. With these investments, we can leverage their expertise to invest for better returns.

Unit trusts also offer a simple and low-cost way of diversifying across varying asset classes such as stocks, bonds, or other securities for as little as $1,000 (or, in some cases, even $100). In some instances, unit trusts allow us to access markets and investments that we may not be able to make through direct personal means.

Read Also: REITs ETFs VS Unit Trusts VS Syfe REIT+: Which REITs Investing Method Should Beginners Choose?

What Are The Fees Associated With Purchasing Unit Trusts

Similar to other investments, there are associated fees when investing in unit trusts. Here are some cost-related terms that we may come across when investing in unit trusts:

Subscription Fee (or Initial Service Charge): The fee charged by the distributor when purchasing the unit trust. The fee may range between 1% and 5% of the investment amount. Typically, if there’s a subscription fee, there may not be a redemption fee when the fund is sold.

Realisation (or Redemption) Fee: The fee charged by the distributor when the fund is sold.  The fee may range between 1% and 5% of the investment amount. Typically, distributors that charge a redemption fee may not levy a subscription fee when the fund is first purchased.

Switching Fee: The fee charged by the distributor to switch the investments from one fund to another fund. Some distributors may offer free switching if it’s within the same fund house.

Trustee Fee: The fee charged by the distributor (or trustee) for providing custodian services for the safekeeping of unit trust investments. It usually ranges between 0.1% and 0.15% of the investment per annum.

Management Fee: The fee imposed by the fund for the performance of the unit trust. The management fee also helps to cover the costs of operating the fund as well as the fund managers’ expertise in managing the fund. It may typically range between 0.5% and 2% of the investment per annum.

Platform Fee: The admin fee charged by the online platforms for using their services to buy, sell, and manage unit trust investments. The fees are typically charged on a quarterly basis based on the investment value.

Types Of Unit Trusts

There are various types of unit trusts that we can invest based on a specific investment focus and risk profile. Here are some types that we can choose:

Equity Funds: These are funds that invest solely in stocks with the intention of outperforming the benchmark index that it tracks. They can be further sub-categorised into large-cap, mid-cap, or small-cap or based on the specific sectors like healthcare or technology.

Fixed Income Funds: These are funds that invest solely in bonds with the intention of outperforming the benchmark index that they track. They could be sub-categorised as corporate bonds, government bonds, money market funds, or based on their risk profiles.

Balanced Funds: As the name suggests, these funds offer diversification across different asset classes. Typically, they would comprise a proportion of equity and fixed income. In some cases, they may also include a proportion of alternative asset classes.

Where Can You Buy Unit Trusts From?

Here are some ways that you can buy unit trusts in Singapore:

Investment Brokerages

Some brokerage platforms also offer investment fund options on top of allowing you to buy and sell securities on an exchange. Here are some brokers that offer unit trust investments on their platform:

FSMOne

Founded in 2000, FSMOne (formerly known as FundSupermart) bills itself as a one-stop platform for investments. Among the various investment options that you can invest on its platform, such as stocks, ETFs, bonds, and insurance, there are also unit trusts. You can select from over 2,000 funds available on the platform.

There are no sales charges for the buying and selling of unit trusts with FSMOne. However, for unit trust purchases using cash and SRS funds, you will need to pay a quarterly platform fee of 0.05% for fixed income funds, 0.0875% (for the first $300,000), and 0.05% (for any amount beyond $300,000) for all other funds such as alternative investments, balanced, and equity.

Read Also: Non-Bank Stock Brokerages: Lim & Tan Securities, Phillip Securities and FSMOne – Here’s What You Need To Know About Investing Through Them

moomoo

Since 2021, when it was made available in Singapore, digital brokerage firm moomoo (Futu Singapore) has become one of the top financial apps used by investors. It also received in-principle approval for SGX membership within the following year.

In addition to stocks, ETFs, and futures, investors can also purchase various types of mutual funds, like equity, bond, and money market funds, on its superapp. moomoo does not charge any subscription, redemption, or platform fees for its managed funds.

Read Also: Step-By-Step Guide To Opening A moomoo Account

POEMS

Established in 1996, POEMS, short for Phillip’s Online Electronic Mart System, is another online brokerage firm that allows you to purchase unit trusts. On top of the other trading instruments like shares, ETFs, bonds, and CFDs, you can also purchase around 2,000 unit trusts across various investment objectives, asset classes, and geographical regions.

POEMS does not charge any sales, switching, or platform fees.

Read Also: Step By Step Guide To Opening A Brokerage Account With POEMS

Tiger Brokers

Founded in 2014, Tiger Brokers is another popular online stock brokerage firm that allows investors to invest in the global markets with on app. In addition to providing access to stocks, options, and treasuries, you can also purchase unit trusts under the Fund Mall.

Tiger Brokers has a selection of over 1,000 unit trusts from 10 fund houses such as Allianz, BlackRock, Nikkio AM, and UOB AM. There is no sales or platform fees with Tiger’s Fund Mall and you can start investing for as low as US$100.

Read Also: Step-By-Step Guide To Opening An Account With Tiger Brokers Singapore

Robo Advisors

Robo advisors are another option where you can purchase unit trusts with. These robo advisory platforms provide automated financial advices based on your investment objectives and risk profile.

Endowus

Endowus, a Singapore-based financial technology company, was started in 2017. It is a fee-only independent advisor that offers a fund investment platform and fiduciary advisory services.

With its Fund Smart platform, it offers access to over 200 best-in-class unit trusts from over 80 global leading asset managers across major asset classes. It also offers one of the lowest charges at just 0.3% per annum for single fund purchases with no sales or transaction fees.  Furthermore, there are lock ups and Endowus also offers 100% cashback on trailer fees.

Read Also: Understanding Endowus: How This FinTech Investment Advisor Will Help S’pore Investors Access Superior Global Portfolios At Low Cost