Reading a fund factsheet is like reading 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 factsheets and the amount of information it contains.
Let us show you how reading a fund factsheet can be just as easy as reading a movie poster.
What is a fund fact sheet
Fund houses will issue a fact sheet for every fund it manages, where it explains the fund’s investment strategy. While the format of fact sheets varies across fund managers, most of them will provide key information such as:
- Fund name and share class
- Investment strategy / objective
- Key descriptive information such as the fund size, launch date, benchmark, and International Securities Identification Number (ISIN)
- Historical performance
- Portfolio overview of what the fund is invested in
- Fees and charges
How to read a fund fact sheet
#1 Fund name vs 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: Fund description vs 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: Main asset classes vs 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: Fund performance vs Film review and rewards
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: Fund’s launch date vs Movie release date
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.
Read More about analysing funds
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Disclaimers and Important Notices
This article is for information only and should not be relied upon as financial advice. Any views, opinions or recommendation expressed in this article does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability. This article is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
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