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As I have mentioned in my previous post,one of the reasons why I took up the journey of Unit Trusts is because of work-related limitations. Definitely, I would prefer to put my money into Stocks or ETFs, as I did for 3 years during my schooling years.

However, as I grow older, the pace of unit trust investing may be more beneficial. It is not real-time, as such, it forces me to take on a longer horizon for each investment. It does not has brokerages fees too, as I use DollarDex.

Most importantly, it gives me chance to get access to what I speculated on previously. During school years, I speculated heavily on Oils, Natural Gas, BioTech firms, Emerging Markets (Brazil!) and Volatility (VIX). Unit trust is a cheap way for me to speculate in such sectors too.

Now, lets see Pros & Cons of Unit Trusts, and see if they apply to you! :)

Pros of Unit trusts

Able to perform Dollar-Cost Averaging
Well, you cannot perform averaging on a stock? If you do, you are putting all eggs into one basket.

Diversified
For just $1,000, you are practically diversified to a range of stocks. For another $1,000, you could be hedging your equity portfolio with a whole bunch of Bonds.


More control – Able to diversify to different instruments / regions / sectors
Doing your homework on each Fund is important. Some funds offer up to 3 different asset classes - Namely Equities, Bonds & Convertible bonds. Some has a huge proportion of derivatives (derivatives are costly to hold or to purchase, so I will avoid such funds).

Hence, you would have to read up on the Fund factsheets, and decide if the portfolio and investment objectives suits your own investment aims.

Easily withdraw cash in a few working days
Most platforms allow you to cash out with T+6 or T+7. This means a wait of about 6 to 7 working days, and conveniently though iBanking.

No need for stock picking
As you are betting on Sectors and Indexes, you would not have to cherry pick, and plough through tons of Company Annual Reports to decide which stock to put your money in.

Well, if you wish for higher returns, stock picking is still better for you I guess?

Cons of Unit trusts

Management / Expense fees – Rate varies
Generally, the higher risk a fund carries, the higher the expense ratio.
An equity Fund will generally charge a higher Management fee as compared to a Bond fund.

*Expense ratio = Annual Management Fee + Any other fund expenses. Express in % terms

Non-real time trading – Heavy reliance on market closing price 
I have done charting myself, and found correlation of Unit Trust NAV prices to Index 1-day interval charts. 1-day charts are based on Day-closing prices of each Market Index, ie Straits Times Index.

May have other fees like platform / trailer fees
Please read previous post here!

Follow up with news depending on portfolio size
Being diversified, will mean that you have to keep up with current market news of the specific area you have invested in too. For instance, you have to watch Federal Rate increment stance of US for Bonds / Real-Estate related Funds.

If you are invested in Equity funds, it is important to stay updated on news like GDP announcements, or even Elections. Basically anything that affect businesses!

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