05 April 2011

You can be your own fund manager - part 3



LITTLE BIT ABOUT UNIT TRUST

Benefit:
  1. Managed by finance professionals. You can start investing by invest your money into unit trusts as it is managed by professionals. You can read through the prospectus and annual report and learn their investment philosophy. Basically it is suitable to those investors who requires less time on doing homework but want a decent returns without worrying unsystematic risk.
  2. Diversification. When your investment is little, it is unwise you go and purchase shares as the commission rate is comparable higher. With little cash, you are able to invest in a pool of different shares or asset classes.
  3. Monthly investment plan. Normally unit trusts come with monthly investment plan. You are able to invest as little as possible while enjoying the benefit of dollar cost averaging.

Things to take note:
  1. Annual management fees - most fund managers are charging annual management fees ranged from 0.1% to 3%. It can reduce your annual returns if fund manager can achieve a better result compared to market. When you do a research, please check at the fund's management fees.
  2. Platform fees - some distributors are charging platform fees. For that reason, you may consider to transfer your holdings to those don't charge for platform fees.
  3. Understand the underlying risk or the character of funds. Equity funds are more volatile than bond funds


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