Q10: How does a unit trust work?
It's really very simple. The pool of money is split into a number of equal
parts called units. Each unit represents exactly the same proportion of
the value of the shares held by the unit trust. As an investor, you "buy
into" the pool by purchasing these units. Then, as the stocks held
by the unit trust increase in value, so does the value of your units.
Q11: What are the benefits of investing in a unit
trust?
· Low minimum investment
You can start investing with as little as S$500. This allows you to
buy into a unit trust that already has a diversified portfolio.
· Professional management
Few of us are experts of the stock market. The great thing about investing
in unit trusts is that you don't have to be one! You can sleep soundly
knowing that your money is in the hands of experienced professionals
who continuously monitor a fund's performance round- the-clock. These
fund managers have access to important, up-to-the-minute information
about markets and companies, and will decide when is the right moment
to buy or sell.
· Spreading the risks
When your money is at stake, it's important to spread the risks of your
investments as widely as possible. The advantage of investing in unit
trusts is that you pool your money with other investors and buy into
a range of shares which usually comprises between 40 and 50 companies.
Should the value of one company's shares fall, it's more often than
not made up for by a rise in the value of other shares in the fund.
As an individual investor, you wouldn't be able to achieve this kind
of risk diversification simply because you wouldn't be able to draw
on such extensive financial resources.
· You're in control
Although unit trusts are managed by experienced fund managers, you remain
in complete control of your investment portfolio, since you decide which
markets to invest in, how much to invest, and when to buy and sell your
units.
· Complete liquidity
With unit trusts, you never have to worry about finding a buyer for
your units. This is because the Fund Manager is obliged to buy back
your units whenever you decide to sell them. This is unlike investing
in stocks and shares where you may not be able to find a ready buyer
when you want one.
· Access to specialised markets and
Overseas opportunities
Unit trusts give you the opportunity to invest in specialised and Overseas
markets. Again, it would be difficult or impossible for an individual
to access such markets directly as to do so requires much time spent
on careful research to gain in-depth knowledge of these markets.
Q12: How do I choose a unit trust that is right
for me?
· Set your goals
Ask yourself what you are really trying to achieve. This may seem obvious
- you want to make money! But don't forget that risk and returns go
hand-in-hand; so you must determine your objectives and then balance
them against the risks you are prepared to take. It's important, therefore,
to identify your level of risk tolerance from the beginning and ensure
that you understand the risks associated with the type of unit trust
investment you have picked.
· Know what kind of an investor you
are
Are you a risk-taker, prepared to weather a few knocks in exchange for
the possibility of higher rewards? Or are you the steadier, more conservative
type who prefers to opt for lower returns but greater security and stability?
Know your risk appetite and you're on the way to choosing the right
unit trusts.
· Think medium- to long-term
Most unit trusts offer potentially good returns over the long run. However,
be prepared to hold onto your investments as unit trusts are regarded
as medium- to long-term investments. Just like many other investments,
the value of unit trusts can rise and fall on a daily basis. But don't
panic. If an investment temporarily falls, this can sometimes provide
an excellent opportunity to invest more money, averaging your price
while the market offers good value.
· Be sure to diversify
All unit trusts spread risks to some extent by investing in a range
of stocks. However, you can take this one step further. Spread your
own risks by investing in a variety of unit trusts which allows you
to meet all your investment objectives under the same "family tree".
You may want to use our Investment
Wizard to guide you in choosing the right unit trusts according
to your risk profile.
Q13: How can I monitor the performance of unit trusts?
There are several ways to monitor the performance of the unit trusts
you have invested in. You can check our daily unit trust prices publish
in Today and at our Fund
Price webpage. You can also check out these prices on Reuters at
"UOBAM" and on Bloomberg at "TKUOB". You can also
call our 24-hour hotline number to check the prices at 1800 222 2228.
To keep you updated over the longer term, we send you quarterly Fund
Focus magazine that summarise the main features of our unit trusts and
their performance, as well as market reviews and outlook.
Q14: Are there costs and charges when I invest
in unit trusts?
There are charges incurred when you invest in unit trusts. You buy
units at the offer price and sell back to the Fund Manager at the bid
price. The difference between the offer price and the bid price is called
the "spread". This is usually around 5%. As the sales and
transaction fees are already built into the "spread", you
don't need to pay these charges in cash.
There is also an annual management fee, ranging from 1% to 1.75% per
annum. This fee is, however, transparent to you as it is deducted from
the value of the funds.
Q15: How are dividends and income distributed?
Dividends may be declared and paid out annually, at the discretion
of the fund manager, after considering the cost of distribution.
Q16: Do I need to pay tax for the income earned
from my unit trust investments?
There is no capital gains tax in Singapore and you will not be taxed on your profit when you sell your investments in a designated unit trust unless the gains are derived from a trade of buying and selling the investments in unit trust.
In general, the tax rules for the distributions from a designated unit trust (other than those made out of underlying franked Singapore dividends received by the unit trust) are as follows:-
• If you are a Singapore resident individual investor, the distributions will be exempted from tax if the distributions are not considered as gains or profits from any trade, business or profession, or derived through a partnership in Singapore.
• If you are a Singapore resident institutional investor, or if the distributions are considered as gains or profits from any trade, business or profession, or derived through a partnership in Singapore , the distributions will be taxed.
• If you are a non-resident investor, the distributions will be exempted from tax.
Distributions from a designated unit trust paid out of underlying franked Singapore dividends will continue to be taxed. Singapore resident investors can claim tax credits against the income tax paid on the income. Investors should submit the tax vouchers to the tax authorities together with their tax returns.
Non-resident investors should seek professional advice regarding the legal and taxation implications in their country of citizenship or residence.
|