Unit trusts- part 1

I figure that i will start posting financial stuff which has always been my area of interest. Through this, i hope to consolidate whatever i have learnt and share these info with my readers(if there is any in the 1st place). Should there by any absurd rubbish or wrong information posted, do pardon me as i am also learning with you. Lastly, Whatever i posted here is based on my personal opinions and so do not be surprised by my rather subjective views. Without further delay, let's begin!

The wrong mentality with most people is that when they think of investments, they only think of shares and real estates properties. In fact, there are many areas to look at when one is investing. Although shares is a hot favour, i will not blog on this today. Instead, i will touch on unit trusts, which is quite an interesting area for investors. FYI, a lot of info is obtained from books and websites. Therefore,i have to rephrase it in my own simple words in order not to risk copyright infringement.

What is Unit Trust?

A unit trust is a large portfolio of securities (that is equities / shares, bonds and other financial instruments) managed by a fund manager, which is subdivided into "units". It is normally designed for household savings.

How does it work?

Basically, you fill in a simple application form stating that you want to buy a particular unit trust. Your money will be credited into the account of the fund manager a few days later after purchasing. Most unit trusts require a minimun lump sum eg. $1000. In return, you get a number of "units". These units are proportionate to the money you invest in. Normally, you will get a confirmation which will tell you how many units you have bought and at what price. Note that your subscription forms just part of the cash holding of the unit trust's portfolio since you aren't the only guy investing! The fund manager will invest the the total cash holdings in secuities he deem fit in order to reap returns. Working with the manager is the trustee who holds legal responsibility for the running of the unit trusts. Therefore, how good a unit trust performs depends on i.)your manager and ii)the market the unit trust invest in. If the performance is good, your units will be highly valued and you can redeem it for a sizeable amount of cash.

When can i sell it?

You can sell your unit trust at any time by asking your fund manager who will sell the units for you. You will receive the proceed into your bank account most likely in 1 week.

I am tired now and got to sleep early because there is duty tomorrow. I will touch on why the fund manager and market matters so much in the performance of unit trust in my next entry. Here is a sample of a unit share site taken from poems( philips securities brokerage firm) More info on broking houses next time! http://www.poems.sg/FinancialServices/unitTrusts.asp

Other unit trusts sites
http://www.aberdeen-asia.com/aam.nsf/Singapore/Home
http://www.dbsam.com.sg/
http://www.nacm.com/
http://www.ocbc.com/personal-banking/investment/Inv_Unt_Listing.shtm
http://www.franklintempleton.com.sg/sinsite/home.jsp
http://www.uob.com.sg/pages/personal/investments/unittrust/index.html


Glossary

i.Equity is simply share. Some people like to use equity as a financial jargon for share just to appear chim and that's what i think. It means a part of a company's capital which is owned by shareholders. Although i read in SGX site that equity shares means a special kind of shares in a market..maybe it does have a different meaning. But all i know now is that equity is share.

2.trustee-Trustee is a legal term that refers to a holder of property on behalf of a beneficiary. In this case, the trustee makes sure that the fund manager manages the securities sensibly on behalf of the beneficiary which is you.

3.Portfolio- Investor’s holding of securities of various types. The wise investment policy is to build up a balanced portfolio according to personal requirements.

4.Securities- A term used to refer to all shares, debentures, notes and bonds