Is it worth putting $500/month into Unit Trust Funds?

I met with a financial advisor recently and he suggested for me to invest $500/month into UTFs. The projected earnings in 20 years would be almost $200k.

Does anyone here invest in UTFs? If so, what is your take on this? Is this amount justifiable/achievable? Thanks!

Added context: Fresh grad currently earning $3k incl. CPF. Current "debt/loans" would be paying off $100/month for CPF education loan.

Discussion (10)

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Elijah Lee

03 Nov 2019

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi anon,

$500/mth into UTs to get $200K in 20 years is doable, but this is provided that you are investing directly and not via an insurance policy. Reason being you do not want to be locked in to the terms and conditions of the policy. You should be able to withdraw the investments at any time should the need arise, switch around the UTs freely, and not have to pay for a fee to maintain this arrangement. If your portfolio is being overseen by an advisor, a 'wrap' fee as a per cent of your total would likely be payable, this is ok. Sales charges should be zero. No bid-offer spreads too, UTs are not stocks.

I do UTs myself and to reach $200K is quite doable in 20 years. However, to justify the amount, consider that $500/mth is 20% of your take-home pay after CPF, so that is really the maximum you should be putting into savings/investment, under my 4-3-2-1 expense framework.

Make sure your insurance portfolio is sorted out first and at least 6 months of emergency funds ready before you commence any investments. I'd actually suggest that you consider splitting the $500/mth over guaranteed and variable investments if your purpose is to prepare for retirement. You can always step up the injection into variable investments later as your salary increases. By starting something guaranteed now, you benefit from having time on your side.

Feel free to reply to this post if you have further queries or need to clarify any part of my answer.

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Hariz Arthur Maloy

03 Nov 2019

Independent Financial Advisor at Promiseland Independent

$500/mth over 240 months resulting in $200k is a 4.76% return after fees.

I mean that's definitely doable on a balanced portfolio of about 50-60% in equity and 40-50% in bonds. But again this is all based on projections. It can be more or less than that.
As long as you understand the investment philosophy of the financial advisor, his/her choice of funds, understand the fees and risks involved, and ultimately believe and trust in the process and willing to invest throughout the 20 years, I don't see why not.

That's a decision you need to make.

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