1.
What is a unit trust?
2. Why invest in unit trusts?
3. Getting started
1. What is a unit trust?
A
unit trust is a simple and convenient 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.
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.
There
are many different types of unit trusts available to suit your
individual investment objectives and risk profile.
Why
invest in unit trusts?
| Getting
started | Back
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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, 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
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.
What
is a unit trust? | Getting
started | Back to
Top
3. Getting Started
a.
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.
b.
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.
c.
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.
What
is a unit trust? | Why
invest in unit trusts? | Back
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