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Invest Global Stocks And Bonds Through Unit Trusts

UNIT trusts are useful avenues for investors seeking to diversify their portfolios. Eugene Lai, Business Development Manager, Unit Trust Marketing, Phillip Securities Pte Ltd, explains what unit trusts are and why they are attractive for retail investors.

What are unit trusts and why should investors consider putting money in such funds?

A unit trust allows a group of investors to pool their money and invest in a portfolio of assets, i.e. stocks and/or bonds, in accordance to its stated investment objective and investment approach. Economies of scale can be enjoyed from the pooled money that translates to lower transaction costs. Unit trusts are managed by professional fund managers who are better qualified to make better investment decisions. In addition, each unit trust has to appoint an independent trustee to safeguard the fund assets in the investors’ interest. Such funds may also enable entry into certain assets or markets which would otherwise be difficult or costly for an individual to invest in directly.

Diversification in a portfolio means that risks are better spread over different assets within an asset class. Investors have a big array of unit trusts to choose from depending on their risk tolerance and investment objectives.

An important point to note is that fund management companies are mandated to ensure investors can easily sell their holdings.

What are the disadvantages of investing in unit trusts?

There are risks involved in all investments, including unit trusts, although the risks are relatively lower compared with investing directly in individual stocks and shares. Unit trusts are not capital protected and their prices fluctuate daily. Investors leave the investment decisions to the professional fund managers, of which, they are remunerated accordingly.

Other than stocks, what else can investors keen on units trusts put their money in?

While many unit trusts invest in stocks, there are some which invest in bonds. Bonds, also referred to as fixed-income securities or notes, are simply ‘IOUs’issued by companies, government-related agencies or governments to raise money. The bond issuers pay interests or coupons to buyers of the bonds. As the amount of money raised is usually large, bonds are typically sold to financial institutions or companies. For retail investors, an easier way to gain exposure to bond markets is by investing in bond funds.

What are the benefits of trading unit trusts through Phillip Securities’ specialised arm, Phillip Unit Trust?

We offer more than 400 unit trust funds with sales charge as low as 0%. We have a Regular Savings Plan which allows for disciplined regular investments into unit trusts. This takes advantage of dollar cost averaging where you will not need to worry about market timing and volatility. Instead of investing one large lump sum, you gradually build your portfolio by investing a small amount regularly over a period of time.

Moreover, through POEMS Mobile, you can invest on the go, wherever you are.

How can investing through Phillip Unit Trust help to cut costs?

As we do not charge any on-going or monthly fees, investors can significantly lower their investment costs. If you have unit trusts bought and held elsewhere, you can transfer them over to us and enjoy the zero fee benefit. This applies to unit trusts that are available on our online share trading system POEMS.

As Phillip Securities is a CPF Investment Administrator, investors can enjoy savings in agent bank and CPF service charges when investing using CPF funds. There is also the option to automatically park any excess cash in the account in the Phillip Money Market Fund at 0% sales charge.

If you have any questions regarding unit trusts, please visit www.poems.com.sg/unittrust or email us at unittrust@phillip.com.sg