Sunday, July 01, 2007

Ideal structure of an investment fund

What is the ideal structure of an investment fund for long term investments? Is it an indexed fund?

REPLY:

Here is my concept. The ideal structure has the following features:

* no upfront sales charge (except for a modest transaction fee)
* low fund management fee
* low expense ratio
* preferably an indexed fund, but with a certain margin to deviate from the index

It should be cheaper to invest in a fund, compared to buying a stock on the exchange.

The fund management company can cover its expenses and make a modest profit from the management fee. If the fee is high, the investor has the right to withdraw from the fund and invest elsewhere. This ensures that the fund will always be operated efficiently, for the benefit of its investors.
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1 comment:

Anonymous said...

Mr Tan, someone like yourself needs to tell the guys at CPF exactly that a fund is safer than buying a stock.

The guys at CPF are wasting money getting the fund rated by Mercer. This indirectly means that consumers wil end up paying for something that is actually better for them for the average conservative investor.

It is bizzare that CPF allows someone to buy up to their stock limit in one stock while "worry" about someone buying into a fund.

The CPF guys are either trying to protect themeselves by getting the fund mangement company to pay Mercer so that Mercer can be used as a scapegoat if something goes wrong.

July 01, 2007 11:42 AM

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