Tan Kin Lian's Blog: Invest in a unit trust

Thursday, June 21, 2007

Invest in a unit trust

SOMEONE POSTED THIS COMMENT IN MY BLOG

The Ideal plan from NTUC Income is a regular-premium ILP. These kinds of products (including the ones from NTUC Income) have extremely high expense ratios compared to Unit Trusts and ETFs.

Before you decide to invest, remember to ask Income to quote you the expense ratio and compare it to a regular-saving Unit Trust.

You can check the FAQ of the Ideal plan. The plan charges 15% of the savings for the first 3 years and that's not including the loads and management expenses.

This is definitely a bad deal compared to a Unit Trust.

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REPLY:

If you can find a unit trust that accept regular savings that can be invested in a fund with low initial and annual charge, you can send them to me.

I understand that most unit trust have high annual charges and expense ratios (which include a trailer fee payable to the financial adviser).

But, if there is really a low cost unit trust, it will be great for consumers. And I shall be happy to recommend it.

6 comments:

Anonymous said...: Check out the GrowthPath funds from UOBAM. They look very similar to the NTUC combined funds, without the 15% charges for the first 3 years. Initial sales charge is 3.5% (1.75% online), annual management fee is only 0.95%.; June 21, 2007 10:48 PM
Tan Kin Lian said...: I looked at the website of UOB. The Growthpath fund is like a lifestyle fund, which aims to reduces the proportion invested in shares as it reaches the target maturity date.

I understand that this type of fund is quite popular in America.

The website does not show the charges, expense ratio, and the past performance of the fund. To do so, you have to visit the UOB branch.

That is all I can say at this time. (Note: I will not be visiting the UOB branch).; June 22, 2007 8:10 AM
Tan Kin Lian said...: Here is further information about the GrowthPath fund

The expense ratio is 1.2 per cent. That is about average for a combined fund that is half in bonds and half in stocks.

Calculation: If the expense ratio is 0.5 per cent for the bond portion, then it would be 1.9 per cent for the equity part. It compares to 2.1 per cent for all equity unit trusts. (So, the costs are about average.)

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If you buy through a financial adviser, the adviser may add another layer of annual fee. You have to check this out.; June 22, 2007 9:49 AM
Anonymous said...: If I'm not wrong, the Ideal Plan has a annual policy fee of $50. Say a typical person invests $100/mth totalling $1200/year, $50 would amount to 4.167% of the investment. This totally negates the low expense ratios of the Income funds. Add to that the 3.5% Sales Charge that you would incur when you can purchase most unit trusts at 1.5%-2% from most online distributors, investing through the Ideal plan would seem less than ideal. Moreover, Regular Savings Plans (RSP) through Unit Trusts cost nothing to setup and is flexible, it can be terminated at any time without any penalties.; June 23, 2007 7:53 PM
Anonymous said...: What you looking at is id2 ideal plan.Get id7 ideal from the business centre and you will notice the expense ratio drops substantially.
The NTUC insurance agents won't tell you of the existence of id7 because of conflict of interest, ie. less comm or no com for them.
Buyer beware and that is the name of this game. Go to a professional who is regulated by mas, and his professional.association.; June 25, 2007 1:58 PM
Anonymous said...: I have the id2 ideal plan. My agent left after the first year and its being transfered to the care of the business centre. However, my surrender value still take into account the 45% commission for the sales charge. Anyone have any idea if I can appeal to waive the charge since I am not getting any service from an agent for the next 2 years? I feel kind of unfair... -_-"; July 12, 2007 9:15 PM