Q1. How does unit trust or fund work?

Answer: If you invest in a unit trust or fund, your money is pooled with money from other investors and invested in a portfolio of assets according to the fund’s stated investment objective and investment approach. A unit trust is a fund which adopts a trust structure; not all funds use a trust structure. In this guide, the term “fund” will also refer to a unit trust. In Singapore, local and foreign funds offered to retail investors are regulated as collective investment schemes. The unit trust or fund is managed by a fund manager.

Q2. What assets do unit trust or fund invest in?

Answer: There are different types of funds available. Each one will have its own investment objective and investment approach or strategy. The investment objective may be capital appreciation or to generate income. The fund manager decides the fund’s investment strategy (to achieve the investment objective) and what assets to buy or sell. In general, funds may be divided into three main categories: shares, bonds, and balanced funds that combine shares and bonds. Aside from shares and bonds, funds can invest in assets or a combination of assets such as: financial derivatives, cash or cash-equivalent products, real estate, units in other funds.

Funds offered to retail investors are not permitted to invest in physical commodities directly. They may however obtain exposure to commodities by using financial derivatives.

Q3. How does investing in unit trust or fund benefit me?

Answer: It makes investing easy for you - once you decide which funds to invest in, you leave the day-to-day investment decisions to the professional managers. They not only take care of the complex and demanding tasks of market and investment instrument research but also the time-consuming administration work, like stock settlements. You can achieve asset diversification and benefit from high growth potential, as professional fund managers work for you to identify the best investment opportunities worldwide. A unit trust or fund generally invests in 50 to 100 different securities, often covering several different asset classes and/or individual national markets at once. This diversifies your investment a lot more efficiently than you can on your own.

Q4. Does investing in unit trust or fund mean that I give up control of my money?

Answer: No. You always have control of your investment. Firstly, it is your decision to invest in a specific fund and you make that decision based on your investment objectives. Secondly, you can always sell your units or switch to other funds on any dealing day. Thirdly, record keeping is easy.

Q5. What are the criteria on which I base to choose a fund management company?

Answer: We believe a good fund management company should have the following qualities: market recognition, extensive global investment resources, proven performance track record, and strong customer focus with products and services tailored to clients' needs.

Q6. When is a good time to invest?

Answer: We believe the best way to invest is to start early and to take a long term and disciplined approach regardless of the short-term movements of the markets. In this sense, any time is a good time to start investing. The early you start, the earlier you benefit from the power of compounding effect. Remember, short-term changes in the market are hard if not impossible to predict.