In a basic definition, a mutual fund is a collection of stocks and other forms of securities pooled together to grow in value over time. It is a form of alternative investment that has been available internationally since the late 1930s. In Singapore, funds can be set up for several reasons, including retirement planning, education financing, and wealth creation through capital appreciation.
Funds are managed by experts who use their expertise to grow your money faster than if you were to do it yourself. They are generally riskier than traditional savings accounts but generate higher returns on average due to the scale these funds operate. Visit this website to find out more.
In terms of classification, there are called ‘open-ended’ and ‘closed-ended’ mutual funds. The former is where the value of a fund’s shares will fluctuate as investors purchase and sell them, while the latter remains fixed as to how many shares are outstanding. Closed-ended funds can be subdivided into ‘real estate investment trusts (REIT)’ and ‘unlisted funds’.
The first will provide returns by earning income from rental payments for properties it owns. At the same time, unlisted funds typically offer long-term capital appreciation through equity and equity-related securities listed on an exchange like Singapore Exchange (SGX).
The most crucial factor you should consider when investing your money would be fees. These include flat management fees charged annually, entry fees whenever you make a transaction to buy, sell or switch units in your mutual fund, redemption fees if an investor sells his units before a certain period, and performance fees charged based on the benchmark set the fund manager.
You can start investing in open-ended funds through online platforms offered by brokerage firms like Hantec Markets or bank channels, including DBS Vickers Online Trading, OCBC Securities Direct, and UOB KayHian. You have to bear in mind, though, that investment methods differ across banks, so you must check with your financial institution first beforehand.
The simplest way would be through a stockbroker. Usually, there are no restrictions when it comes to buying open-ended mutual funds, which makes them accessible even if you’ve never invested before. Brokerage fees are typically low, which is another plus point, especially if you choose to invest for the long haul.
Remember that you should be comfortable making financial decisions on your own before signing up to work with a broker, as there’s no one there by your side to help once money has changed hands.
We have selected the top 5 Singapore mutual funds based on historical performance over three years and other critical criteria like fund size, share class structure, minimum investment amount, etcetera.
There are several other popular fees you’ll need to consider when investing in mutual funds. They include brokerage commissions if you plan on trading or switching your units within the same fund (which is typically charged by the stockbroker) bid-ask spread. It is essentially the difference between the buying price and selling price of stocks bought/sold through a broker, stamp duty, legal expenses, etcetera.
Exit loads are penalties imposed on investors who want to sell their mutual fund holdings before a particular period or due to specific reasons. Make sure you check the applicable fees and conditions before making any decisions.
If you think your broker has let you down, don’t be afraid to raise it with the Monetary Authority of Singapore (MAS), responsible for monitoring brokers working in Singapore and ensuring they abide by fair business practices. Should that fail, feel free to take a legal course against them in a bid to tackle the issue head-on!