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18 Apr 2019


STI ETF via RSP or UT RSP better for a first time investor who is more risk adverse?

I'm a fresh grad, know nth about investment.

Costs for the STI ETF RSP is 0.5% per transaction while the UT RSP is a one time 0.5% and requires capital of $1k initial & subsequently $100/month

My financial advisor advices UT RSP because no transaction surcharge.

What are some figures I should look for in a UT fact sheet? I ask so that I'll know I'm not buying the wrong thing.

Thanks a lot!

Discussion (2)

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What platform are u using for the UT rsp? The 'one time' 0.5% i believe is the sales charge, and it should apply to all subsequent investment amount as well (therefore it will be the same for the etf rsp u mentioned).

On top of that, UT have a higher management fees as it is an active fund. According to statistics, UT on average in the long term will underperform passive index funds.

In 2007, Warren Buffett made a $1 million bet against Protégé Partners that hedge funds wouldn't outperform an S&P index fund (at the end of 10years), and he won.

To add from Tony Robbins "When you own an index fund, you're also protected against all the downright dumb, mildly misguided or merely unlucky decisions that active fund managers are liable to make".

Unless u fully understand which sectors/direction u want to invest in, it might be better to stick to an index fund. As Buffet advises, on average one will be better off investing in a broad base low cost index fund for the long term compared to an active fund.

That aside, there are platforms (like poem's, dollardex) that offers zero sales charge(for most funds), zero platform fee. If u want to look at UT, i would suggest u look at these low cost platforms.

Hi there! Personally, I would think that investing in a unit trust is less risky. The STI ETF aims to replicate the STI index by investing in a basket of securities which contains the same weightage as the index. This exposes you to the volatility of the index, both upturns and downturns in the market. Whereas, in a unit trust you are less exposed to poorly performing underlying holdings as the fund manager actively manages the fund to achieve its aim of outperforming the market.

When choosing a unit trust, compare the UT's cumulative total returns, average annual total returns with other UTs as well as the sharpe ratio. The sharpe ratio measures your reward-to-risk ratio, where a higher sharpe ratio indicates a better return generted per unit of risk taken. If you compare two unit trust, the fund with the higher sharpe ratio would generate more returns for the same amount of risk exposure.

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