Sunday, May 04, 2008

Indexed funds or unit trust?

I made a posting about the unit trust that can be purchased through Fundsupermart. They allows regular savings plan at only 1.75%.

The expense ratio of several of the unit trusts marketed by Fundsupermart are between 1% to 1.5%. They are not low, but not too high (i.e. high cost fund charges between 1.5% to 3%). You can select a broadly based unit trust that shows a good yield over a 10 year period.

Some people have recommended to invest in indexed funds, which have low expense ratio. I agree. I hope that the low cost indexed funds will be available within the next 6 to 12 months. In the meantime, the StateStreet STI ETF is a good option, but it requires an investment of $3,300 each time.

For those who wish to invest in monthly sums, the unit trust offered by Fundsupermart is a good choice. The fee of 1.75% is much lower than the charges imposed by ILPs sold by insurance companies.

These high fees charged by ILPs are:
> allocation rates that take away two years of savings
> investment spreads of 3% to 7%

Apart from Fundsupermart, you can also study the options provided by DollarDex and by POEMS (Philipps Securities). I am sure that their marketing people will be posting their offers in my blog.

Lesson: Avoid ILPs sold by life insurance agents, as they have high charges that take away up to two years of your savings.

1 comment:

  1. Mr Tan, i am invested with POEMS (Phillips securities).

    The sales charges is only 1.5%. I think they have further reduced to 1%.

    Previously i bought ILPs from NTUC. Now, i am doing DIY without the need for any insurance advisers.

    It is better this way. I can monitor my investments.

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