A Quick Guide to Investing in Unit Trusts

How do you ensure that you profit from unit trust investments and minimize the chance of losses? Here are 7 golden rules to follow:


This article is contributed by a friend, fellow financial professional and colleague from Business Network International, Mr Daniel Tay.



Rule Number 1: Don’t choose a unit trust based on return alone

Unit trusts with higher returns are almost always accompanied by higher risks.

It is important to ensure that you know what risks you‘re exposing yourself to, that you are able and willing to take on those risks.


Rule Number 2: Develop an overall financial plan for your investments

It is common to find investors who choose unit trusts with little or no sense of an overall investment strategy.

Be clear about your investment objectives, your investment time horizon, and your risk profile. These have important implications on your investment decisions.


Rule Number 3: Choose the right fund manager

Fund managers have different investment strategies, different levels of resources, expertise and skills to manage the unit trusts.

Do research on these fund managers to understand their strategies and ensure that these are aligned with your personal investment strategy.


Rule Number 4: Ensure you are buying an approved unit trust

Check if the unit trust you are buying is managed by an authorized fund manager.

This information is available from the Monetary Authority of Singapore (MAS) website at: www.mas.gov.sg


Rule Number 5: Read the prospectus carefully

The prospectus contains important information about the unit trust, especially the risks involved.

Unit trusts are caveat emptor investments, which mean that reasonable steps have been taken to ensure a level playing field for investors.

The prospectus contains the information you need to know about the unit trust.


Rule Number 6: Be aware of the fees and charges involved

Check what fees you have to pay when buying, selling, or switching a unit trust, as these will affect your returns.

Depending on the fund manager and the distribution channels, there may be additional fees and charges incurred.


Rule Number 7: Monitor your investments regularly

Read the financial statements and annual reports sent to you so that you know how your unit trust is performing.

Consider using a monitoring service if you lack the time or expertise to properly manage and monitor your investment portfolio.


By Daniel Tay,
Financial Planner,
Prestige Raffles Group