Wednesday, October 04, 2006

Which is better - combined or inexed fund?

Which is better - indexed or combined fund?

My answer: both are suitable.

Both funds have low annual charges:

- combined fund (from NTUC Income) charge about 1% annually
- indexed fund (not available yet) will charge about 0.5% annually

The difference of 0.5% is small. The combined fund is actively managed and is likely to earn more than this difference.

Both of these funds are much better than similar funds in the market where the annual charge could be 1.5% to 3% per annum (if other hidden charges are included).

I suggest that the investor can invest in the combined fund now, and decide at a later date, if you wish to switch to an indexed fund (when it becomes available).

The most important principle is:

- choose a large, well diversified fund
- look for low charges, ie 1% or less


The Thought of Life said...

How about the additional 45% advisory fee?

I see that ILP is a costly way of distributing Unit Trusts. People should forget about the "Protection" attribute of ILP as this is in-significant, buy Term Insurance if you really need.

Truth said...

Actually much research has shown that even fund managers do not beat the market, index fund always outperform all other funds in the long term..

Tan Kin Lian said...

Dear Thought of Life

There is no advisory fee of 45% when you invest a single premium under our Flexi-Link (Combined Fund).

For regular premium investment, the advisory fee of 45% is quite modest, compared to an average of 160% charged by other insurers on similar plans.

You get a much better deal from NTUC Income.

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