The value of Unit Trust

Before I became a professional full-time IFA, like a consumer, I was cursing and swearing on why my CPF money is going the opposite direction on where I want it to be... isn't it supposed to be making $$$???

Entering this line, I started to understand the true meaning of Unit Trust and how to help clients better manage their portfolios.

Under Wikipedia definition:

A unit trust is a form of collective investment constituted under a trust deed.

Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. Each fund has a specified investment objective to determine the management aims and limitations.

Bringing you backwards to the Investment Linked Policies, most of the insurance companies invest in Unit Trust in the form of ILPs. Features of the ILP is that the choices of unit trust funds are limited to that of the company, e.g. Company A can only use A funds.... Company B can only use B funds.. etc.

There's where independent platforms like iFast, Navigator, or even fundsupermart.com comes in to give consumer more choices. Why limit yourself to a small coffeeshop when you visit a hawker centre?

Next, to the performance of Unit Trust. If you are the ones who started investing in Unit Trust from 2007 onwards.. probably you would have suffered a heartache as your portfolio goes down to as much as 40~60% in 2008 financial crisis era. Right now, your funds should have breakeven or close to breakeven? Don't lose heart.

As an IFA, we still believe in the use of Unit Trust as one of our instruments to help our clients achieve their financial goals and objectives. If you look at the above picture, I gave the e.g. of a few random funds vs. the STI index:

i) Aberd**** Global Technologies

ii) Aberd*** Pacific Equitiy

iii) Fi*** State Bridge

iv) D** China Equity

Over a period of 5~10years, most of the funds would have outperformed the STI benchmark. And it can really make a big big difference.

To put it simply, Unit Trust is still a viable and good way to grow your wealth, subjected to the following factors below:

i) Time. (> 5yrs)

ii) Choice of funds. Go for champion funds.

iii) Switch of funds at required times. Dun expect miracles to happen by sticking to a single fund.

iv) Competency of the financial adviser and fund managers. i.e. Strategies.

Of course there is a long chain of argument of why other instruments like stocks, commodities, options could be better than unit trust. But ultimately, the key is to build up a good portfolio that is adjusted to your risk profile and other factors.

Do not hesitate to call me to review your insurance & investment portfolios. 9876-0237

The beginning of knowledge is the discovery of something we do not understand. - Frank Herbert