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if you don't have time to monitor stocks, buy ETF....
if you want a wild profits, buy stocks.... it can give you a wild loss too....
if you just want to pay the fund manager a nice trip to Hawaii, buy unit trust...
got ppl still buy ut??? P.
Yes, buy stocks directly better. i tink UT is for sale person to earn commission, performance good or no good they also earn from you..
Just buy stock - in and out
Ya, I don't think unit trusts are more worth it than ETF. STI ETF volume not high and moreover now testing it's resistance, not the best time to buy right?
Don't buy unit trust
Why dont consider STI ETF? Heard got div too..
Hi All,
Is it a good time to buy US ETF like DIA and SPY as their P/E ratio is around 10. The average P/E is 15 so now they seems like a cheaper deal, although you'll need to hold for long.
As the ETF would incur a annual management fee, how would the payment be settled ? esp if you sell them off after less than a year? thanks
I am more pragmatic when it comes to investing. I will consider investing in only investments that are sufficiently low risk and yield high returns, For unit trusts that are overly diversified, it may not yield good returns in the long term though it may be low risk investment. I see ETFs as sufficiently diversified already (not too many stocks and not too little), so it is also low risk with potentially consistent higher returns than most unit trust funds. Just the high annual management fee payable to a unit trust fund is already to eat up a substantial pie of an investor's returns. The returns from unit trusts in my opinion must be consistently higher than ETFs to justify the higher management fee that an investor pays for the fund. Otherwise, what's the point of paying high management fee with no dividends from a unit trust fund that yields lousy returns year after year?
I think Unit trusts are still more diversified than ETFs because they have asia equity funds, bond funds, commodity funds, so while ETFs only diversify into a set of index equities in a country, unit trusts diversify into many different countries' equities in asia, in bonds and in commodities..but still it comes down to what is a person's risk appetite..
What about liquidity? Some ETFs are not liquid...
http://finance.yahoo.com/etf/education/05
http://www.wallstraits.com/wsforum/showthread.php?tid=1205&page=2
Haha......there are also ETFs available through the SGX which deals with overseas economy such as China and Hong Kong HSI. Therefore, whatever one can find in unit trusts, ETFs should have it as well......with all the advantages over unit trust funds. If ETFs are so good, why is it that there are still people who invest in unit trusts. I think there are two categories of people, those that are still unaware of the benefits of ETFs over unit trusts and those who are aware but still want to invest in certain unit trusts that provides them diversification into their overall investment portfolio. I have nothing much to comment on those that have strong reason for staying with certain unit trust funds as diversification and complement into their overall portfolio of investments. As long as their overall portfolio of investment is sound and acceptable to them, there is nothing wrong with having another investment type to gain diversification. However, those that invest heavily in unit trust funds and is not aware of benefits of ETFs as a potential better investment tool should consider carefully whether is it wise to stay on heavily in unit trust funds.
Look at most of the returns of unit trust funds and it is not difficult to see that most have mediocre returns and some even have no yearly returns or even net loss through the years since inception of the fund. This is because whether the fund makes money or not, the management fee is already factored into the calculation of yearly returns, so the investor is constantly paying yearly fees which eats into returns. If there is positive returns, so be it. What if the fund loses money? Investor still have to bear the loss and cost of management fee. It does not make sense to pay a fund manager to help one lose money.
Thanks. Great! I'll confirm with my broker on Monday about ETF. Thanks for the info.
Miss out one advantage of unit trust ==> it allows one to buy overseas funds using Cpf, like china etc.
jeremyow ( Date: 07-Feb-2009 23:28) Posted:
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With the infamous exposé of Madoff's dealing. Most investors will be very careful when it comes to Unit Trusts or ETF.
Forgot to mention also.....most ETFs will pay continuous dividends to investor. Only some unit trusts pay dividends to investor.
Haha.....One can invest up to 100% of all the CPF in most ETFs. At least I know that STI ETF can be invested with up to 100% of all CPF in ordinary account above the stock limit of 35%. Of course, this does not include the first $20k which cannot be invested in any investments.
Since that's the case, say bye bye to unit trusts as ETFs are a much better investment tool with all the right conditions for making sound investment over a long period of time. ETFs offers diversification similar to unit trusts. ETFs can be easily traded over the brokerage unlike unit trusts which has a lag time to sell off the fund units. The trading fee of sale of ETFs shares are much lower per transaction compared to sales of units of unit trusts. The annual management fee for ETFs are generally much lower than that of unit trusts. One can also invest up to 100% of CPF in ETFs. Therefore, based on so many advantages of ETFs over unit trusts, why will one still want to invest in unit trust funds and pay others to manage one's investments which can be easily done through a good ETF (e.g. STI ETF) with diversification and not much financial knowledge required since one is investing in the 30 component stocks of largest Singapore companies?
Good article! Thanks.
However, regarding unit trust, one can use the remaining CPF after the stock limit. I think not possible if ETF.
For those who bought their house cheap in the early years, there will be plenty of outside stock limit CPF for unit trust investment. Note that we must time the cycle for unit trust as well. Many bank people or insurance agent will tell you long term but actually, unit trust cannot be too long due to management fees etc. I think now is a good time if you want to hold 3 yrs. Just count the management fees for these 3 yrs and the amt can gain if market rallies... worth taking the risk. I'm doing it this way now.. but only puting about 30% first and will average up later on. My view only.
Pros of unit trusts:- It is less volatile than stocks. A professional manager manages the unit trust fund for the investor.
Cons of unit trusts:- Returns of most unit trusts are lower than stocks/ ETFs. Sales charges are incurred by investor when selling unit trusts. There is an annual management fee of between 2 to 5% for most unit trusts which eats into investment returns. Not all unit trusts provide dividends to investors.
Pros of ETFs:- ETFs tracks indexes of various stock exchanges as well as sectors and countries depending on type of ETF. It offers diversification as it tracks the performance of a basket full of stocks (depending on type of ETF). There is no sales charges (the investor only needs to pay a low trading fee for trading the ETF through the brokerage). There is an annual management fee (the annual management fee is usually much lower than that in unit trusts). Some ETFs provide continuous dividends to investors.
Cons of ETFs:-Investor still need to pay a small annual management fee though this is much lower than that of unit trusts.
Pros of stocks of individual company:- It offers a higher possible rate of returns for the investor (even higher than in ETFs depending on choice of stocks invested!). Some stocks provide regular dividends to investor. There is no sales charges (only a low trading fee for trading the stocks through a brokerage). There is no annual management fee for stocks (as the investor is the one to manage his stock investment instead of a fund manager).
Cons of stocks of individual company:- No matter how large a business is, it still faces a possibility of falling (e.g. look at all the big banks which have fallen so far and the big automobile players which are losing money due to the current financial crisis) and potential loss of invested money for the investor.
In terms of risk level (for an average investor): Stocks of individual company is the riskest, followed by ETFs, followed by unit trusts.
In terms of potential profitability (for an average investor): Stocks of individual company is most potentially profitable, followed by ETFs, followed by unit trusts.
However, if an investor understands and monitors the business of his invested individual company very well, investing in stocks of individual company is less risky than one would think. Therefore, profitability rewards the knowledgeable and experienced investor. Investing in unit trusts offers lowest returns because of the high management fees and sales charges. ETFs are a fine balance between risk and returns (as it offers diversification into a basket full of stocks instead of one stock) and has very low management fee.
Question:- Why let others manage one's investments and earn off from one's returns (as in unit trusts)? Even if an investor has average knowledge in investing, ETFs still offers a low risk and higher returns than unit trusts.
Conclusion:- I think anyone who is intelligent enough will see that it is better to invest in either ETFs (even if without much financial and investment knowledge) or stocks of individual company (if with high financial and investment knowledge with ability to evaluate businesses).