Expense ratio of unit trusts

Dear Mr. Tan,

I have check that the upfront charge is 1% on POEMS and 2% on fundsupermart which is both lower than NTUC income fund. However, the annual expense ratio is normally around 1.5%, slightly higher than NTUC income.

These funds are not well diversified. They focused on certain sectors. Is it a good idea for me to buy according to the percentage allocation of NTUC combined fund, as it can reduce my upfront charge significantly.

Is the Annual Management Charge equivalent to expense ratio?

REPLY:

I suggest that you pay the higher sales charge and invest in the Combined Fund from NTUC Income. It is well managed.

Although the initial charge is higher, the impact is quite small if you spread it over an investment period of 10 years or more.

The expense ratio is higher than the annual management charge. There are other expenses added to the expense ratio. Dr Money has written about this matter in his website:

www.askdrmoney.com