Unit Trust

Unit Trust (also known as a collective investment scheme) is a pool of money managed collectively by a fund manager. The pool of money usually comes from retail buyers, such as you and me. Unit Trust is started with investors buying units in a particular trust / fund, e.g. usually at least $1K per investment. All these money are pooled together to buy a portfolio of assets such as other unit trust, stocks and shares, bonds, or treasury bills, etc. The portfolio of assets purchased by the fund depends on the investment objective of that unit trust.

Usually, there are 3 types of unit trusts:

1. Equities (consists mainly of Stocks and Shares, most risky)
2. Bonds (consists mainly of bonds, treasury bills, notes, least risky)
   
3. Balanced (a balanced mix of the 2 types mentioned above, risk level is in between the above)

And these basic type of unit trusts are then further dividend into various categories:

1. Money Market Fund
2. Global Fund
3. Sector Fund
4. Country Fund
5. Income Fund
6. etc..

For all unit trust, past performance are not indicators for future performance and there's always a chance of losing all your capital. So please ensure that you do know what exactly are you buying and make sure that the sales personnel do countersign your application form with the claims they mentioned if they claim that the returns is guaranteed. If they don't dare to countersign with their name and ic no as well, with all the claims they've made, do reconsider your decision in the purchase.

The risk factor varies between the various type of funds, which is not covered under this article. Alsoe, I need to mention about the sales charges. There are basically 2 types of sales charges, front end and back end. Most of the time, it's either front end or back end charges for a particular fund but rarely both. So it's best to check with the person that you buy the fund from or read the information carefully.

Front end sales charges are deducted from your initial investment amount upfront, the moment that unit trust is purchased, as a result, you will be purchasing less units. Usually, the sales charges varies with the mode that you purchase a fund. If you buy it over the internet such as POEMS, fundsupermart, etc, the sales charges is lower, it may varies around 1 - 2.5% depending on the fund. If you purchase it through agents from the bank, it's usually about 5%. If you purchase it through agents from NTUC income, it's usually about 3% but the funds available are quite limited and I personally won't do that ever again due to the low returns and high charges. If you purchase it through agents from various financial consultant, the sales charges may varies, there's a slight chance that you might be able to negotiate the sales charges.

Back end sales charges are deducted when you sell your investments, usually this will be waived or decreased gradually when you hold the investment over a period of 5 years or more. For this case, do take note of the details before purchasing but it can be negligible if you intend to hold it for long term, e.g. more than 10 years, but still check about whether the fees will be waived or not as well.

Switching Fees may or may not be applicable depending on the policy of the particular plan that you've purchased and depending on the company itself. Usually it varies from 0-2.5%. Anything higher does not really makes sense.

Do take note of all the fees / charges that may be involve and the risk level of the unit trust should you purchase any. :)

Lower Outpatient Bills..

If it's not an urgent case, it's actually worth your time to undergo the long polyclinic queue and get a referral letter before seeing a doctor, especially specialist at hospital. The bills will add up to actually quite low. Because the cheapest means is to go from polyclinic to hospital, then from normal private clinic to hospital, then directly to hospital.

Bonds

Bonds, also known as Fixed Income Securities, is a debt instrument that may or may not give you fixed interest payments (coupons). Most bonds pay interest on a annually basis and the full principle on maturity.

Some variants are:

• Zero-coupon bonds
  Those bonds that does not give fixed interest payments but are sold at deep discount of the maturity (par / face) value. In other words, you don't get the fixed interest payment but do get them at maturity as these interest are paid in terms of the discount, and you only get them at the end of the maturity.
• High Yield / Junk Bonds
  These are in fact from the name itself, junk bonds. They do not provide any security in default payment and the company selling such bonds gives high interest as their credit rating is lower than BBB in general.

Please be aware that Bonds have certain risks and are never "risk-free" as anyone would claim. If anyone ever tries to convince you that that it's "risk-free", make it a point to get their name card and make them write that term down into the contract itself. If they refused to, especially in writing that term down, it's probably a scam. Try asking them, which line in the contract says that it's "risk-free"? Just remind yourself of the lehman brothers' case and be wary of such things.

Some Risks of Bonds includes:

• Interest Rate Risk (when interest rate increase, bond's market price will drop and the inverse if true)
• Reinvestment Risk (you can't be sure if you can reinvest the interest payment in a interest rate of something similar)
• Timing / Call Risk (if you bond has a call option that the issuer can redeem your bond before maturity, you'll lose all future income when the market interest rate drops)
• Default Risk (the issuer may go bankrupt like Lehmen Brothers, or may be unable to pay off your interest / the maturity value on a temporary or permanent basis.)
• Liquidity Risk (If the market lacks people that are willing to buy over your bond readily, you may face such problem if you needs the money and is unable to sell your bond.)
• etc...