An introduction to Unit Trust Funds

All about unit trust funds

What are Unit Trust Funds?

Unit Trust Funds or Unit Trust(UT) is an open-end investment product offered and managed by a fund management company.

Investors can invest in (Subscription) or sell off (Redemption) on a continual basis. The money is pooled from investors with common objectives such as seeking regular yield (Income Fund) or capital gains (Growth Fund).

Read aboutInvesting Guide: Unit Trust Funds

Why invest in Unit Trust Funds?

Instead of picking and managing selected assets, unit trust funds allows investors to own a basket of assets in their preferred investment. An investor looking to profit from gains in an industry sector or geographic region can now own a pool of assets in the respective categories.

Depending on your investment objectives and risk profile, the various categories of unit trust funds allows you to accumulate wealth based on the nature on the funds:

  • Income Funds – Provides a stream of income payout, ideally with low volatility on the fund NAV
  • Balanced Funds – Provides a steam of income payout, with higher volatility on NAV that comes with capital potential
  • Growth Funds – Typically fully invested in equities for high potential returns on NAV, may not provide an income payout

While volatility and price fluctuation are higher, the long-term returns will be superior compared to Income and Balanced funds.

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Read aboutInvesting Guide: Reasons to investing in Unit Trust Funds

How does Unit Trust Funds complete my Investment Portfolio?

Based on an individual financial goal and objective, Unit Trust portfolio can be geared towards wealth enhancement, income generation, keeping up with inflation, short-term money market or a combination of the above. Investment risk varies depending on how the portfolio is constructed and the level of return expected.

RelatedInvestment Portfolio

What are the potential returns from investing in Unit Trust Funds?

Investment returns vary depending on the assets held and the allocation in the portfolio. In order from highest to lowest potential returns:

  • Equities Fund – Highest risk and highest potential returns in the long-term
  • Balanced Fund (Equities and Bond) – Higher risk and higher potential returns
  • Bonds Fund – Average risk with lower long-term capital growth due to lower price volatility
  • Money Market Fund – Lower risk and may provide only slightly higher return than typical deposits

When in doubt, seek financial advice from a qualified financial adviser.

Can I invest on a monthly or regular basis?

Even without a lump sum of funds, an investor can have long-term wealth accumulation by investing a fixed amount over time. By doing regular investing, an investor can reap the benefits of Dollar Cost Averaging. There is a greater possibility of buying more units during periods of market fluctuations, especially as fund prices fall in periods of volatility.

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Monthly investing into Unit Trust Funds can be done by a directly investing into a specific fund or via an Investment Linked Policy. Depending on individual financial needs, an Investment Linked Policy may offer health and protection coverage with wealth accumulation during the early years. As the investor ages, the coverage may be removed and replaced with coverage from a Whole Life Policy or Term Insurance plan.

RelatedInvestment Linked Policy

Read aboutInvestment Linked Policy: How does it work?

How can I achieve higher financial returns on my Investment Portfolio?

The objective of an investment portfolio should be for long-term financial gains and returns. It should be able to withstand heavy losses in a sudden market downturn while performing when opportunity are available. Know the right timing to realise your profits or cut losses to achieve higher financial returns.

A long-term time horizon and financial commitment may be required for most financial products. Ensure your financial adviser explains it may help you towards reaching your financial goals and objective.

Read about3 things to consider before taking up a new financial product

Read about: 8 commonly made financial mistakes by Singaporean

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