Trailer Fee

Question: In your blog, you recommend to invest in decreasing SA term and invest the balance in a low cost diversified fund. Are you referring to a unit trust right?

Reply by Tan Kin Lian: The large, well diversified, low-cost fund can apply to both unit trust or an invvestment linked fund (offered by an insurance company). The Combined Fund from NTUC Income fits into this category. You can read about it in www.income.coop/faq. You can ask read www.askdrmoney.com to see if other unit trusts meet this criteria.

Question: I recently read some articles that lump sum unit trust investment have shown historical better returns compared to regular saving plan invested in unit trust through dollar cost averaging? Which might be a better option giving higher returns?

Reply by Tan Kin Lian: It depends on when you invest your lump sum. If you invest it when the market is low, you will get a better return compared to regular investment. If you invest the lump sum when the market is high, you will get a comparatively lower return. I believe that the market is too high now. I will not make a lump sum investment now, if I intend to invest for the long term.

Question: Is the trailer fee mentioned by you included in unit trust vs investment linked plan (ILP)? What is this trailer fee? Does it apply only to unit trust and not ILP? Does it applies to all unit trust offered by banks and other insurance companies?

Reply by Tan Kin Lian: The trailer fee can apply to both unit trust and to the investment-linked fund. It is usually added by the financial advisor (in lieu of the upfront fee). You should add the trailer fee (if applicable) to the fund management fee to get the total fee that you have to pay.

I recommend you to visit the business center in NTUC Income and talk to an adviser. You can get their contact information at www.income.coop.