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Get to Know Unit Trusts
At a Glance
When investing, make every dollar count. Invest in Unit Trusts which are professionally managed funds to help you grow your wealth.
A Unit Trust invests a pool of money, collected from a number of investors, in a range of assets. By pooling your money with that of other investors, you’ll be able to invest in a wide range of assets. Successful investments in the assets add value to the fund and their returns are then distributed back to investors.
Types of Unit Trusts
Unit Trusts are collections of different assets and commonly invest in stocks or bonds or a mix of both. To reduce risks, these investment assets are diversified in geographical markets and industry types.
Unit Trusts are typically classified by geography, sector and type of assets held. A fund house's fund name would reflect these. For example, if a fund name reads "Yellow Pebble Asia Energy Equity Fund", this means that the fund is managed by a fund house called "Yellow Pebble" which invests in equity stocks of companies in the energy sector that are listed in Asia.
Benefits of investing in Unit Trusts
Professional management by fund managers who have greater access to investment information and tools. You can therefore benefit from their expertise and full time attention given to research
Risk management by investing in a diversified collection of assets
Liquidity, as most Unit Trusts can be redeemed daily, freeing up cash as you need it
Affordability as it allows you to start investing from just S$100/month or a minimum lump sum of S$1,000
Greater diversification enabled by a bigger investment capital pooled from a group of investors
Ways to Invest
- Lump-sum Contribution
- One-time contribution with ad-hoc funds (e.g. an inheritance or bonus)
- Additional contributions as and when funds are available
- Start from just S$1,000 for certain funds
- Regular Savings Plan (RSP)
- Fuss-free monthly contribution via interbank GIRO or monthly deductions from your DBS/POSB savings or current account on the 15th of every month (or the next business day if the 15th is a non-business day). Please note that the respective debiting date is subject to change.
- Start investing from just S$100/month
- Long-term investing with the following benefits:
- Gradually creates wealth by investing small and affordable amounts regularly
- Eliminates guesswork in investing
- With Dollar Cost Averaging, you can potentially enjoy a lower average cost over time, compared to lump-sum contributions
Illustration: How does Dollar Cost Averaging work?Average cost per unit: S$1,000 / 1,069.09 units = S$0.935(Average cost per unit is derived by averaging monthly contributions across the total number of units bought over 5 months. This respects the cost you have paid to acquire each unit of the fund)
Average price per unit: S$4.73 / 5 months = S$0.946(Average price per unit is derived by averaging the unit prices over 5 months)
The example above shows how Dollar Cost Averaging in RSP can result in a lower cost per unit and lower average price per unit. With the same total contribution of S$1,000, RSP allows you buy more units (total of 1,069.00 units) at a lower average unit price of S$0.935 over five months as compared with lump-sum contribution (total of 1000.00 units bought at a unit price of S$1.00 in January).
With effect from 1st June 2017, all Unit Trust Regular Savings Plan’s monthly contribution will fall on the 15th of every month (or the next business day if the 15th is a non-business day). Please note that the respective debiting date is subject to change.
- Both Lump-sum Contribution and RSP
- Make a lump sum contribution (e.g. with your bonus) but continue investing with regular monthly contributions
- Start investing with a lump sum of S$1,000 for certain funds and continue with monthly contributions of at least S$100/month
Check out our list of RSP eligible funds.
Three ways of funding your Unit Trusts investment
Find out how much you should invest now, to reach your investment goal here.
*For illustration purposes only. Unit Trust prices may fluctuate.
How to Apply
Interested to find more about investing in Unit Trusts?