Asked on 10 Jul 2019
A colleague told me he is getting about 6% per annum from a UT he bought from Aviva
Top Contributor (Sep)
There are unit trusts that can deliver decent returns, so 6% is not an unheard of number. However, whether or not one should invest in unit trusts in the first place will come down to a number of factors, including
Analysis of the unit trust also is down to several factors such as
I presume that your colleague is probably buying from the Navigator Platform when you mention that he bought it from Aviva. What is more important is the actual unit trust that he bought.
The short answer is yes.
A unit trust offers a cost effective manner to access a diversified portfolio of investments. As opposed to buying individual shares and bonds to build your own portolio. This diversification can also happen across various countries, industries, asset classes etc.
It is also important to take note of the implicit (or hidden) costs of unit trusts. These usually come in the form of annual management fees which are net off your investment holdings. There are a number of platforms offering low cost instruments via low cost unit trusts and ETFs. When you hear of a 6% p.a. return, that is just one side of the story. Always have this habit of probing further. Just like in the world of social media, you almost always only just hear of/see the good stuff. Nobody goes around sharing "Wow my portfolio has been yielding -6% year on year since I started x years ago!" It is highly possible his portfolio generated 6% p.a., but how consistent was this performance?
Sometimes we may become too caught up in the noises of geopolitical events and make short term decisions which affect our long term goals. Fund returns does not equal investor's returns due to many factors such as exiting the market at the wrong time etc. It does help to have an competent and qualified adviser to walk this investment journey with you through times when the most difficult thing could be to do nothing.
We have written some articles on Endowus Insights on investing in unit trusts that you will hopefully find useful:
Just to add on to Albert's point above on fees (very key!)
I am invested in UT too and it allows me to get access to market that is not so easily accessible. At the same time the diversification that a UT creates is something that I believe in too. What you should look at in UT depends on 1. risk appetite
Equities or bonds?
Do you want dividends?
What countries or region are you interested in?
What market segment are you favorable in?
These are the questions that you should be asking.