What do we have to look out for before investing in UT?

Hi Adam,

Great question! General things to look out for when investing in one Unit Trust or a portfolio of Unit Trusts are:

1.) Cost. As Boon Tat helpfully pointed out - there are often Upfront Sales Charge that is taken from your initial investment amount and then management fees that are taken from the Net Asset Value. Very often distributors would charge between 1-3% of Sales Charge and then the Management Fee would typically be from 1-1.75% per annual. And as Boon Tat rightly pointed out - they are exorbitantly expensive.

2.) What is your investment goal? Are you utilizing the Unit Trust to supplement an existing Stock portfolio? Or would the Unit Trust be the primary investment instrument to fulfil your financial goal? These questions would then determine whether you buy a specific focus fund or you would buy a more diversified fund.

3.) It's a great idea to utilize your CPF OA to invest. Investing in a cost-efficient globally diversified portfolio that is appropriate for your risk profile for over 20 years would give you a statistically higher chance of reaping rewards more than the guaranteed 2.5%.

I am the Client Experience Lead from Endowus - a fee-only digital advisory fee and we do not take an upfront sales charge and does not take any trailer fees, therefore, the total expense ratio of our customized portfolios are significantly lower than the industry norms.
We create cost-efficient diversified portfolios for investors with different risk profiles - expressing the investment ideals of "global diversification, cost efficiency and staying invested" through a seamless digital platform.

We will be launching our investment portfolios for CPF-OA monies very shortly - please do visit us at https://endowus.com/ or PM me if you are interested.

All the best!

"Be Globally diversified, Keep cost low, Stay Invested"

Hey there!
I'm assuming you're referring to Unit Trusts. In general, the downside of investing in professionally managed funds is that they charge high fees. Especially for unit trusts, there are many many many fees involved (management fees, trustee fees, marketing fees, and even switching fees and sales fees). If you're buying from a bank or a platform, guess what, these people need to get paid too, for referring you to the unit trust (will anyone do it for free?). There's a general term that you need to look out for: TER (Total Expense Ratio). This is a recurring fee that you incur every month/year and it could be very expensive, between 1 - 3 %.
If you're just looking to participate in the public markets, I suggest you spend no more than 1 week of time (40 - 44 hours) to go study a couple of books in the library and build up your own stock portfolio of good, value stocks (do check out my other posts as well).
Let me know what you think of this.