| 1. Basics of unit trust a. What is a unit trust?
A unit trust is a form of investment for the medium and long-term investor. When you invest in a unit trust, you put your investment into a pool of money that is managed by a team of professional fund managers. The fund managers then use this pool of money to invest in a wide range of bonds, equities and/or other money market instruments according to a set objective. This pool of money is split into a number of equal parts called units. Each unit represents the same proportion of the value of the total securities held by the unit trust. As an investor, you "buy into" the pool by purchasing these units. Then, as the securities held by the unit trust increase or decrease in value, so does the value of your units. b. Types of unit trust
There are many different types of unit trusts available to suit your individual investment objectives and risk profile, including Equity Funds, Bond Funds, Balanced Funds, Money Market Funds, Fund of Funds and so on. Understanding their risk and returns is an important part in learning about investing. | |  |
2. Why invest in unit trusts?a. Access to markets and overseas opportunities
Unit trusts give you the opportunity to invest in specialised and/or overseas markets. Again, it would be difficult or impossible for an individual to access such markets directly due to limited capital resources as well as time required to be spent on careful research to gain in-depth knowledge of these markets. b. Low minimum investment
With as little as S$1,000 and subsequently S$100, you can invest into a wide range of securities that you might otherwise not have access to. There are also regular savings plans which start from as low as S$100 a month so that you can continuously build on your investments. c. Professional management
Few of us are investment experts. The great thing about investing in unit trusts is that you leave your money in the hands of experienced professionals who devote their time to ongoing research and managing the funds. |  | d. Spreading the risks
As a unit trust buys into a range of securities, the investment risk is reduced. This is because if any particular security proves to be a bad investment, the impact on such a diversified portfolio is not as significant as having put all eggs in one basket. e. Investments to cater to different objectives
There are many types of funds to meet a variety of financial objectives and an investor can use a portfolio of funds to achieve his or her objectives. Investors would have different objectives when they invest. If you are planning to invest for your retirement 30 years later, you might consider using growth-oriented equity funds that have traditionally delivered healthy returns over a longer period. Other funds such as bond funds are suitable for those who prefer steady returns with lower risks. f. Liquidity
Unit trusts have a high liquidity, that is, they can be readily redeemed. Although it is not advisable to redeem these investments in the short term, you have the option of selling whole or partial of your holdings within the stipulated timing by sending a written redemption request to the distributor or fund manager by stipulated means. |
3. Getting Started a. Know yourself
a1. What are your goals?
Before you invest, determine your objectives and time horizon, and then balance them against the risks you are prepared to take. For example, if your goal is to accumulate wealth over a long period of time, your portfolio may comprise more equity funds than bond funds to focus on capital growth.
a2. What is your risk tolerance?
It is not enough to want the highest returns on your investments as risks and returns go hand in hand. A high risk-taker would be prepared to weather a few knocks in exchange for the possibility of higher rewards. A more conservative investor would opt for steady but relatively lower returns and greater stability. a3. Think medium to long-term
Most unit trusts offer potentially good returns over the long run. However, be prepared to hold onto your investments as unit trusts are regarded as medium to long-term investments. Just like many other investments, the value of unit trusts can rise and fall on a daily basis. But don't panic. If an investment temporarily falls, this can sometimes provide an excellent opportunity to invest more money, averaging your price when the market offers good value. b. Start to invest b1. Where to buy?
Prudential Asset Management sub-funds are available through our distributors. Please click here to view our list of distributors. b2. What are the fees and charges?
Upon purchase of a fund, you will be charged an initial fee, often called an "initial sales charge". Typically, this charge ranges from between 1.5% to 5% depending on the asset type of the fund. Other charges such as a "switching fee" and a "back-end fee" would also apply for some funds. These fees are deducted upfront from your investment amount. Expenses incurred by the fund such as annual management fee, trustee fee, administrative fee and others are deducted from the funds. For details on fees and charges, please refer to the fund prospectus. b3. How can I get a copy of unit trust prospectus? They are available online and from our distributors. Prospectuses contain important information including investment objectives, management fees, charges, and other expenses. It is important to read the prospectus carefully before investing. b4. What is forward pricing?
All funds have a daily cutoff transaction time at 3 p.m., and all investments made on that day before 3 p.m. are valued as at the end of that day, with the manager using the securities valuations in the underlying markets to calculate prices. You can visit the Fund Prices section of this website to check the valuations of the funds in the evening of the next business day. b5. How can I monitor the performance of my unit trusts?
You can keep track of the performance of your unit trusts at our website at www.prufunds.com.sg. For some of the funds, you can also keep track of the performance in major newspapers. Moreover, monthly updated Factsheets of the funds can be viewed at the website. To keep you updated over the longer term, you will also receive semi-annual and annual reports on funds' performance, as well as market reviews and outlook. |
