Understanding Funds and Unit Trusts

Guide to Funds and Unit Trusts

What are Funds and Unit Trusts?

Guide to Funds and Unit Trusts

 

What are Funds?

A fund pools money from a group of investors to invest in a range of assets based on the fund’s investment objective. Funds are professionally managed by fund managers, and successful investments add value to a fund and their returns are distributed back to investors.

This form of collective investment gives rise to economies of scale and access to a wider range of assets that may not always be available to an individual investor. At the point of investment, each investor receives units of the fund based on the amount invested; this is why the terms "fund" and "unit trust" are often used interchangeably. Sometimes, "mutual fund" is also used to describe this form of investment.

Funds are a collection of different assets and they commonly invest in equity (stocks) or debt instruments (bonds) or a mix of both. To reduce risks, these assets are diversified across geographical markets and industry types.

 

Types of Funds

Equity Funds

They invest in company stocks and may have a particular focus, such as geography, sector or strategy (growth or income).

  • Provide returns in the form of long-term capital appreciation and to a certain extent, dividend income
  • Can potentially outperform a certain pre-determined Benchmark
  • Prices of stocks in a portfolio may be influenced by political and economic conditions, changes in interest rates, earnings of companies whose stocks are represented in the portfolio, as well as market perception of these stocks

Fixed Income Funds

They invest in a range of debt instruments, such as bonds, loans and asset-backed securities.

  • Provide returns in the form of steady income with potential capital appreciation
  • Provide diversification for a portfolio of debt instruments
  • Exposure to credit, interest rate and currency risks

Balanced Funds

They are a hybrid of equity and fixed income funds. By investing in equity and debt instruments, their objectives are both growth and income.

  • Provide a mix of safety, income and potentially modest capital appreciation
  • Provide diversification across asset classes
  • Similar risks as equity funds and fixed income funds

An example of a balanced fund would be the Global Multi-Asset Income (GMAI) solution

Market Funds

They invest in short-term debt instruments such as repos, treasury bills and commercial paper. They may be issued by governments, municipalities and corporations.

  • Generally invest in assets with relatively lower risk and pay dividends reflective of short-term interest rates
  • Returns commensurate with the relatively lower risks involved
  • Exposure to credit, interest rate and currency risks
 

Benefits

Professional management

Fund managers have greater access to investment information and tools. You can benefit from their expertise and full-time attention given to research and monitoring.

Risk management

Investing in diversified assets helps to spread risks.

Liquidity

Most funds can be redeemed daily, freeing up cash when you need it.

Affordability

Investments start from just SGD100/month or a minimum lump sum of SGD1,000.

Greater diversification

A bigger investment capital pooled from a group of investors can achieve greater risk diversification.
 

How to Invest

Use the Fund Search tool to view and select your preferred funds.

For existing clients, login to invest now.

Invest now

For Unit Trusts using CPF/SRS account.

Sign up now

Note: If you need physical copies of the Unit Trust offer documents, please speak to your relationship manager.

 

Apply now

To open a DBS Wealth Management Account for trading.

Contact me

Explore more

InvestingUnit Trusts

Thank you. Your feedback will help us serve you better.

Was this information useful?

That's great to hear. Anything you'd like to add?
We're sorry to hear that. How can we do better?
Enter only letters, numbers or @!$-(),.