Frequently Asked Questions
A unit trust is a type of 'pooled' investment vehicle. What this means is that an investor combines his money with other investors'; the total is then invested to buy a range of assets like shares or bonds. The investor owns units whose value is based on the underlying assets. The fund is 'open-ended' to the extent that units can be created or cancelled as investors subscribe or redeem more money.
Professional Management: Unit trusts are run by expert fund managers and thus give individuals access to the same skills as professional investors. Some fund houses are attached to large organisations, like banks, while others are independent - such as Aberdeen. It is the manager's decision what stocks to choose for the portfolio, and when to buy and sell.
Access: Unit trusts may invest in areas that may be difficult to access as an individual, usually for reasons of size, liquidity or legislation. They may also offer opportunities to invest in new markets (such as China or India). Even for experienced investors, this is a huge advantage
Economies of scale: Each investor can gain access to a much wider number of stocks via a unit trust than if he had tried to buy them individually. Typically, a unit trust consists of 30-100 stocks.
Cost: To buy all the shares in a typical unit trust portfolio would be very expensive since dealing in small lots in individual shares is pricey. Equally, just to buy shares in a handful of companies would expose an investor to another level of risk entirely.
Diversification: The more companies the collective 'pool' is invested in, the less the performance of each one will affect the whole. So, one of the main fears of direct equity investment -- that you risk losing all your money - is much diminished.
Convenience: Unit trusts let you buy and sell units easily. Prices are quoted every business day. Moreover, there are no requirements for a minimum holding period (although we strongly discourage speculative trading). Investors can also buy extra units or sell down their holdings at any time.
Unit trusts are suitable for anyone interested in growing the value of their savings over the longer term. This could include people who have neither the time nor the experience to manage their own portfolios, small investors seeking diversification and 'ordinary' investors who simply want to improve their long-term financial security.
As a general rule, the more risk you are prepared to take on and the longer you can put your money away, the higher the potential return. Funds have different levels of risk, reflecting such things as the type of underlying assets, the number of stocks held, market liquidity and the manager's overall investment style.
It is sensible to establish at the outset your investment goals (for example, aiming to save for retirement, buying a home, etc) and look for a fund with an investment objective that matches these needs and expectations.
Funds can go some way to spreading risk, by including investments in tens of stocks and covering different markets. However, if you want to diversify risk further, you may want to consider splitting an investment across several funds, including those investing in markets with low correlation to one another. If you are really undecided about a market, consider a monthly savings plan.
Unit trusts cover a spectrum of assets from low risk money market funds through to bonds and higher risk equities. There are also hybrid categories such as balanced funds (which contain bonds and equities) and capital guaranteed funds (which limit potential losses but have less upside as a result).
Aberdeen's Select range concentrates on equity investments. Historically this asset class has outperformed other types of securities over the long term. However, returns are never guaranteed. Examples of our different categories of equity funds include:
Regional funds – eg Aberdeen Pacific Equity Fund or Aberdeen European Opportunities Fund They invest over a wide geographical area that might include 10-15 markets.
Country funds – eg Aberdeen Singapore Equity Fund. A single country fund is useful for those wanting specific market exposure and who are prepared to take on any volatility that this may entail.
Unit trusts are generally long-term investments, and at least three to five years is usually recommended. Why? Because unit trusts offer diversification of risk via a portfolio of stocks; as such, it will take time for the portfolio to produce a return.
There is no 'right' time to buy. Too many investors imagine they can perfect investment timing – so they become preoccupied checking the fluctuations in daily prices before committing. This is folly. As professionals we don't do this because we know that markets discount expected news and there are, anyway, many irrational influences that can move markets.
Many investment newcomers make the assumption that a fund costing, say, S$1.50 a unit is more expensive than a new one at S$1.00 a unit. This is incorrect. The higher price of the first fund reflects the fact that its underlying assets are worth more. The fund might, say, have taken five months (which would be unusual), or five years to appreciate to that level. There is no reason to think that a new fund at S$1.00 has more upside when it is investing in the same market and similar underlying assets.
The unit price you pay will be based on the closing prices for the day that the original copy of your completed application form is received. Units are priced on a forward basis, meaning that you will not know the exact price at which you are transacting. These prices will be published in the newspapers (and posted on this website) two business days after the transaction date, but will be calculated based on the closing market prices of the day of your transactions (see below).
The price of the unit (also known as net asset value) is calculated in the following way:
Market value of Fund's holdings $10,000,000
+ cash $500,000
+ accrued dividends/interest $50,000
less expenses
(eg management, trustee, registrar fees) $15,000
Total S$ 10,535,000
Assume 10,000,000 units in issue
Net Asset Value = 10,535,000 ÷ 10,000,000 = 1.0535
NB An initial sales charge of up to 5% of the value of your investment may be deducted by your fund vendor.
Once invested, you will receive a contract note detailing your number of holdings and transaction price. You can keep track thereafter by looking in the main newspapers as well as on this web site. Valuations usually appear in newspapers two business days later - so, for example, a Monday price will be printed the following Wednesday.
Our practice is to issue statement of holdings to unitholders every quarter.
Once invested, the hardest part is to know when to take profits or cut losses. Markets are proverbially a pull between greed and fear, and it is these emotions that can impel investors to hang on to paper gains too long or sell too quickly. If you're thinking of selling, ask yourself simply if you have given an investment enough time to perform, whether you have reached your objectives and how the underlying fund/market prospects appear.
You can sell your units at the distributor from whom you purchased your units.
Realisation proceeds will be paid out within four business days for bond funds and six business days for other funds. If your units were purchased with cash, the proceeds will be paid to you/ your agent in the form of a cheque. Should your units have been purchased with CPF funds, the proceeds of any sale will be credited direct to your CPF investment account.
No. Under Singapore law there are no capital gains taxes. Dividends are not liable to tax. You should seek independent advice if unclear about your tax status.
Investors frequently worry that stock markets are over-valued and that they will buy at the wrong time. This begs the question of whether there is a 'right' time to buy, and of course there isn't one. But how often have you said to yourself, with hindsight, 'I should have bought then'? And yet it never appeared so obvious at the time.
If market volatility makes you uncomfortable – for instance because you feel you have too much to lose if markets were to go down, or are afraid to miss out in a rising market, regular savings are a painless way of smoothing out potential bumps.
You can invest in a regular saving scheme from as little as S$100 per month. It's convenient, since transfers are by GIRO. Plus investments will benefit from 'dollar cost averaging'. This is a way of saying that average unit costs over the period of investment would be less than the arithmetical average of the monthly prices.
The table below illustrates how dollar cost averaging works, using the example of a monthly investment of S$200. An investor would have bought an average 209.65 units per month via RSP; however, if the same money were invested at the average price, the number of units purchased would have been 205.33. So the discount in this instance works out at 2.1%.
| Month | Mid Price | Units Purchased |
|---|
| Jan '98 | 0.987 | 202.63 |
| Feb | 1.009 | 198.22 |
| March | 1.023 | 195.50 |
| April | 1.026 | 194.93 |
| May | 0.986 | 202.84 |
| June | 0.914 | 218.82 |
| July | 0.857 | 233.37 |
| Aug | 0.830 | 240.96 |
| Sept | 0.737 | 271.30 |
| Oct | 0.761 | 262.81 |
| Nov | 0.849 | 235.57 |
| Dec | 0.886 | 225.73 |
| Jan '99 | 0.896 | 223.21 |
| Feb | 0.930 | 215.05 |
| March | 0.948 | 210.97 |
| April | 1.010 | 198.02 |
| May | 1.131 | 176.90 |
| June | 1.182 | 169.20 |
| July | 1.289 | 155.16 |
| Aug | 1.232 | 162.34 |
| Total amount invested over 20 months | S$4000 |
|---|
| No of units at end of 20 months | 4193.67 |
|---|
| Average cost per unit under RSP | S$0.954 (S$4000, total no. of units) |
|---|
| Average offer price over the 20 month period | S$0.974 |
|---|
| Effective discount | 2.1% |
|---|
If you'd like more information, please view the Regular Savings Plan page. Note this site is sponsored by Aberdeen Asia, however the information is provided by third parties.