Unit trust in laymen term is describe as either a lump sum(5000and above) or a small and continuous sum (100-150) monthly Investing in a basket of stocks managed by a group professional fund managers provided by companies such as prudential, ntuc, greateastern.
I am more familiar with prudential, ntuc and great Eastern unit trusts as I am vested in them.
1.What do we buy from 100 dollars
We are buying units for a fund chosen . We will use
Amount invested divide by the offer price
For instance Singapore managed fund = 100/3.25= 30.76 units
2.The cost of transacting
3-5%
3.how do we calculate the final value
We will take the existing units multiply by the bid price
for instance
30.76 units x $3.10= $95.38
4. Advantages compared to stocks
-Dollar averaging results a constant savings and regular investment
-basket of stocks from a small amount
-for capital constrain investors lower minimum transaction cost
-does not need self management
5. Disadvantage compared to stocks
- higher % cost of transaction ,
3-5% as compared to 0.5-1 %
- usually no dividend payout
- management fee incurred
- may result in over reliance
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