Sunday, June 17, 2007

Fund earned 20% during past 8 months

There is an advertisement showing that a unit trust earned 20% since its launch 8 months ago.

Before you invest in this fund, you have to consider the following:

* many other funds also earned a similar or better return
* the upfront cost of investment is 5% (which is high)
* the stockmarket is now at a high level and is risky

If you invest in the stockmarket now, you should be prepared to suffer a correction (ie drop in prices), if it happens.

Do you want to take the risk?


Anonymous said...

Does it matter if I am to invest in the fund for 20 years?

Also, you will never know if it will go up or down, just like you never know whether the STI will go up or down.

In fund investment, I am more concern whether the fund will beat the benchmark and whether the benchmark is acceptable for my investment for the long haul. If not, just stick to index fund (not ETF as it encourages you to trade :>)


Tan Kin Lian said...

If you hold the investment for 10 years, the upfront charge of 5% works out to 0.5% per year. This is acceptable.

But, why pay 5% in sales charge, when you could invest at much lower cost?

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