How to read a fund factsheet

5 Ways a Fund Factsheet is like a Movie Poster

Understanding the different types of information on a fund factsheet can help you get a summary of the investment you are interested in. However, most novice investors are daunted by the factsheet and the amount of information it contains.

Let us show you how to hack it for a quick summary – analysing a fund factsheet can be just as easy as reading a movie poster.

 

#1 Movie Title vs Fund Name

movie-title

Film addicts can guess a lot about a movie from its name and the same goes for funds.

For instance, here’s what we can tell about ‘Yellow Pebble U.S. Technology Equity Fund –SGD-ACC:

  • The fund is managed by Yellow Pebble
  • In invests in technology in the US market
  • It has a primary asset class of equities
  • Apart from the base currency, the fund can be purchased in SGD
  • ACC refers to the way dividends are received. In this case, dividends are accumulated and reinvested into the fund

Learn more about Fund Names and Share Classes

#2: Film Synopsis and Fund Description similarities

film-synopsis

Just like how you use movie synopsis to figure out the plot, you can use the fund description to understand its strategy.

Geographic descriptors like ‘Asia’, ‘Europe’ or emerging markets let you know the markets the fund will predominantly invest in.

Terms like ‘growth’, ‘alpha’, ‘quality’, ‘income’ and ‘dividend’ indicate the investment style. Some investors might have the misconception that ‘dividend’ or ‘income’ means the fund will pay dividends. The truth is, all funds can pay dividends depending on the fund manager.

#3: Lead Actors vis-à-vis Main Asset Classes

lead-actors

The cast of a film may be a big draw for movie-goers. In the same way, specific asset classes may attract you to invest in funds.

When you look at a fund factsheet, you can quickly figure out the key assets. This usually falls under equities, bonds and commodities while balanced funds hold a mix of these assets.

You should also take note of the total fund size, which is the total worth of all the assets in the fund. Think of this as a measure of how reputable and highly paid the lead actors are. The more well-received an actor is, the higher the salary. Just like the fund size, a larger fund size generally means that more people trust the fund manager that is managing the fund.

However, a larger fund does not imply a better fund, despite its successful track record. Having to manage a larger portfolio may affect the overall performance of the fund. The fund manager may need to consider lower returns investments too, which are more commonly identified, so they are able to deploy all the cash effectively.

Some investors might be keener on well-established funds that are similar to summer blockbusters, whereas some might invest in smaller funds just like picking a lesser known arthouse film.

#4: Film Review and Rewards = Fund Performance

film-review

Great movies are often lauded with awards at festivals and are acclaimed by film reviewers. In a fund fact sheet, the track record is shown through its performance charts.

Look at the funds’ annualised returns or the averaged-out returns over different time periods (e.g. 3 or 5 years) to see how well the fund has performed. A 5-year period is considered long enough to capture the fund’s performance in the economy, so it can provide an idea how well the fund’s strategy holds up in a downturn.

Another key measure often used in assessing a fund’s performance, is the benchmark index. If the fund is pegged to the Straits Times Index, and the STI is up by 3.76% in the year, the fund should deliver or outperform the index.

#5: Movie Release Date vs Fund’s launch date

movie-release

Just like a movie release date, a fund’s launch date tells you when the fund started.

Whilst most viewers want to catch the latest movie, it is actually the inverse for funds. Most investors want an old fund that has been around for at least 5 – 10 years as its perceived to be more established. But bear in mind that past performance does not necessarily dictate future performance.

Spot your next blockbuster fund

A fund factsheet is a great tool to use when researching a fund that you are interested in. Use it wisely to compare between various funds so that you can decide what best fits your portfolio or risk profile.

 

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