dbs unit trust

DBS Unit Trust: Everything You Need to Know Before Investing

A unit trust is an excellent investment in today’s economy because it offers diversification and safety. Having access to huge potential returns and reducing risk by pooling your money with like-minded investors and fund managers at a low cost of entry is one of the biggest perks of UTs. Plus, you’re a direct beneficiary of this trust as your fund manager and other qualified service providers act as trustees acting to your benefit on your behalf.

DBS is a great bank to start with for UTs because of their funds’ solid track record and strong performance through the years. If you plan to start on DBS UT investments, here’s a primer we highly guarantee you’ll want to read.

What are Unit Trusts?

A unit trust is a type of mutual fund in which investments are pooled together and made available to the public. In return for investing in the fund, investors receive shares in the company or entity that manages the fund. 

Investors’ amount on these shares depends on how well the investments perform. Investors can select from various investment strategies where their risk and returns are assessed through detailed evaluation and professional management.

 

3 Important Characteristics of Unit Trusts

Collective Investments

A collective investment is a type of investment made by many people and pooled together. Unit trusts are an excellent choice for this type of investment because they can help divide up risk in a group of people. Risk-sharing enormously reduces possible losses while maximizing potential gains for everyone in the group.

A Diversified Fund

Unit trusts are investment vehicles that offer a diversified portfolio of stocks and bonds. To effectively diversify unit trusts, managers can choose to balance between the two asset classes to achieve greater diversity. Managers can also consider how far investments are away in time or geography and how different their risk-reward profiles may be.

In short, fund diversification is a priority for most fund managers who ensure the trust always has enough profit to provide its beneficiaries and investors.

Professionally Managed 

The fund manager is a vital part of the unit trust industry as they are in charge of managing its funds. The fund manager ensures that all investments are made in accordance with the rules, regulations, and risk guidelines set by the company. As a trustee, their primary role and objective are always to increase profits and hit milestones set during their meetings with investors.

How Does DBS Unit Trust Work?

Singaporeans who work with DBS and POSB can conveniently use their DBS iBanking app to access the available unit trusts in its list of 500-plus investment fund options. Some of them have foreign exchange strategies and varying risk profiles. 

Among the many DBS Unit Trusts, you can find Focus Funds. These are specially-selected investment vehicles by DBS’ in-house fund selection team, and they regularly update this list every quarter according to each financial instrument’s performance.

DBS unit trusts will require you to deposit small monthly amounts that can reach S $100 monthly or beyond or do a lump-sum payment as a starting seed towards your investment’s growth.

Fees Involved in DBS Unit Trusts

Fee Description Expected amount
Initial service charge Fund buying fee Up to 5% of your investment
Realization Fee (or Redemption Fee) Fund selling fee Up to 5%, but usually none if you had to pay initial service charge
Switching fee The fee paid to your fund manager when switching to another fund under their management. 1% of your investment
Online sales charge Online fund buying administration fee 0.8% to 1% of your investment
Management fee Goes to your fund manager 1.5% to 2% of NAV per year
Trustee fee Custodian services fee for trustees the fund manager (another trustee) works with. 0.1% to 0.15% of NAV per year
Miscellaneous fees Admin fees, audit fees, and others Variable

 

Alternatives to DBS Unit Trust

DBS isn’t the only one providing high-quality unit trusts to investors. Other Singaporean banks can provide you with excellent ones, too.

OCBC

OCBC provides you with high-quality unit trusts with low costs of entry. After you’ve set up your OCBC online banking account, you can get started investing on unit trusts once you have enough capital. 

The bank organizes its funds based on its performance. For example, OCBC-selected funds give you the best-performing funds so far. In addition, OCBC can alert you for any new progress and activity in your unit trust watchlist. Most funds require you to pay a S $1,000 lump sum or S $100 monthly to start.

UOB

UOB offers its own list of unit trusts, allowing you to choose funds that resonate with your financial goals after you’ve registered and opened for a regular savings plan. 

The plans available in UOB are the following:

  • Global: Focuses on multi-region investments for optimal diversification
  • Asia: Concentrates on Asian-region investments focused on high growth
  • US: Access to US funds with varying risk
  • Equities: Unit trusts that can provide high potential capital growth but have a high risk
  • Fixed Income: Low-risk investments on government and corporate bonds
  • Dividend: Focuses on high-dividend stocks but can include other assets.

The interface allows you to sort all funds available by top-performing funds, fund size, fund allocation, and more.

POEMS

PhillipCapital’s POEMS helps you find high-performing unit trusts from an online broker that focuses on investing. Thus, it has no fees when you want to switch, sell, or change platforms. However, you’ll still have to pay your fund manager and collective fund fees for the unit trusts you choose. 

If you’re quite disappointed with the few UTs available from most banks, PhillipCapital’s POEMS has over 1,000 unit trusts available, including non-bank type UTs, such as alternative investments, derivatives, and commodities. 

Unfortunately, you’ll want to study up a bit more about UTs if you want to take advantage of everything that PhillipCapital has to offer. Things can get quite technical, especially if you’re evaluating thousands of UTs

bank with coins green sprout

Other Things to Know

How To Choose a Good Unit Trust?

Identify The Basic Performing Fund

The basic performing fund is the one that has the lowest management expense ratio with the biggest rate of return. The management expense ratio is a fee a mutual fund charges and is expressed as a percentage of the total assets under management, so the lower this figure is, the rate of return becomes much higher.

Find The Right Unit Trust For You

There are four types of unit trusts available in Singapore’s market today.

1. Equity Funds

Equity funds hold stocks and other securities that represent ownership in companies. Investors purchase shares in equity funds that represent a percentage of the fund’s value. 

2. Balanced Funds

Balanced funds are a type of mutual fund that invests in a mix of stocks, bonds, and cash. They are typically recommended for long-term investing rather than speculating. 

3. Fixed Income Funds

Fixed-income funds are a type of mutual fund that invests in fixed-income securities. They usually invest in bonds and other debt instruments. These funds typically have low volatility and low correlation with equities, making them an important part of a diversified portfolio.

4. Money Market Funds

A money market fund is a type of mutual fund that invests in low-risk securities such as government and corporate debt. Money market funds are meant to be a stable, low-risk investment for investors looking to avoid riskier investments. 

The Fund Manager

Your fund manager’s expertise and experience are the unit trust’s growth anchor. Therefore, you’ll want to make sure you’re working with a professional that can give you a guarantee of their experience and knowledge.

Cost of Entry

Cost of entry refers to the amount you need to invest in a unit trust. Higher-performing and popular unit trust with larger investor pools will have higher costs of entry. On the other hand, you can have lower costs of entry for new and upcoming unit trusts.

Investment Costs

Investment costs are the fees associated with investing in unit trusts. They are typically expressed as a percentage of the investments and cover the fund’s management expenses and administrative costs. In the next section, you’ll see all the average fees you’ll deal with the DBS Unit Trust.

Is a Unit Trust Much Better Than a Mutual Fund?

Unit trusts are offered by private banks and require a higher minimum investment. However, unit trusts offer better diversification than mutual funds because an investor can choose from a large number of investments. In addition, unit trusts have been linked to higher returns than mutual funds. Read more on the best mutual funds in Singapore.

Mutual funds have a much lower expense ratio than unit trusts, which means that more of your investment dollars are going towards buying shares and less going to the management team. In addition, mutual funds are professionally managed, which removes the need for investors to do the work themselves.

Our Final Thoughts

Maximizing your investment portfolio through a unit trust is easy. Plus, the costs of entry into DBS unit trusts and Singapore’s general UT market are quite low. Make sure to keep in mind everything we’ve included here to achieve your goals with your chosen unit trusts.

  • Unit trusts are similar to mutual funds, but investors are beneficiaries, and fund managers are trustees acting on their behalf.
  • These trusts are collective investments that are greatly diversified and professionally managed by experienced fund managers.
  • Investors pay various fees, including their fund manager’s fees, when using UTs
  • Choosing the best unit trust for you requires identifying the best base fund in the UT, the right type, the fund manager’s experience, cost of entry, and overall investment costs.

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