How can we understand fees involved?

[Traumfanger]

Hi, this is my first thread here. Not sure if it is in the correction section as there were no examples/explanation on the sub-forum title.

Since it's regard to something related to my personal finance, I thought I should post here. Mod, please shift this thread as you deem fit!

May I ask you regarding how to look at the fees cost?

FUND CHARGES
Fundsupermart's Discounted Initial Sales Charge 0.5 %
Fundsupermart RSP Sales Charge 0.4 %
Fundsupermart Switching Charge(Same Tier) 0.0 %
Fundsupermart Switching Charge(Lower-Tier to Higher-Tier) 0.5 %
Annual Management Charge 0.8 %
Annual Management Charge (Mother Fund) -

Other Significant Fees Annual Management Fee: Max 1.2% Annual Trustee Fee: Currently up to 0.09%; Max 0.12% (subject to Minimum S$32,000) Fees and charges payable by the REITs - Annual management fee: Ranging from 0% to 1.0% of the Deposited Property value - Annual trustee fee Ranging: from 0% to 0.30% of the deposited property value - Performance fee Ranging: from 0% to 12% of Net Property Income - Acquisition fee Ranging: from 0% to 1% of Deposited Property value - Divestment fee Ranging: from 0% to 0.5% Deposited Property value - Development management fee: Ranging from 0% to 3.0% of total project costs
Annual Expense Ratio * NA

There are so much fees, how to I know which fee will be incurred by me and what are the extremes of it? i.e. max and min fees..

Thank you in advance. Hopefully my questions will benefit others like me.

[karlmarx]

1) You should only worry about the sales charge, which is paid for upfront.

The remaining fees are calculated and deducted daily. The nav price that is published a few days later has already taken these fees into consideration.

2) Apart from the sales charge, you should also pay attention to the expense ratio. The expense ratio (usually not more than 2% p.a.) is the sum of all the charges incurred (which you have mentioned) in the running of the fund. These are fees paid to the fund manager. As long as the expense ratio is low (you can do a comparison), don't get too caught up with the details. Bond funds tend to have the lowest expense ratio as they hold their purchases longer and make less transactions.

3) switching charge is only applicable when you want to switch to another fund. What you can switch to and how much it cost depends on fsm, or whoever it is you buy your fund from. This is charged by deduction from your invested capital.

4) annual management charge is, I believe, unique to fsm. This is charged by deducting some of your units on monthly basis, i think. This is their way of making some money from providing low/no cost switching and low sales charge.

Fsm provides the lowest charges you can find in singapore unit trust market. If you like to switch funds frequently, go for fsm.

[Temperament]

During my earlier days of learning how to invest, i had invested in some unit trusts. i found i never made any money in any of them. So i have been learning how to DIY investment. Even at times "Rojak" style of investment. But it's O. K. even at times i don't make money from selling, i makes all the money from saving from the funds's management fees and a lot of dividends from holdings. If you multiply by 10 to 20 years, it's no joke a lot of money. So it's worth to learn to DIY even at times makes mistakes. Hey do you really think the fund management can do better? Then go to them with your money.

[corydorus]

Hardly make money in Unit Trusts. A lot of time, potential learning and earning lost in the process.

Personally is still best to DIY to get you to FF. But you need to learn from small small amount.

[Traumfanger]

@karlmarx

Thanks for explaining man

@Temperament

Yeah I am looking for funds for my girlfriend, because she can't DIY, i.e. don't have the will and time to learn. And money being a sensitive issue + not my cfm wife-to-be, better don't help her manage also. lol

Can some one explain those in BOLD

Other Significant Fees Annual Management Fee: Max 1.2% Annual Trustee Fee: Currently up to 0.09%; Max 0.12% (subject to Minimum S$32,000) Fees and charges payable by the REITs - Annual management fee: Ranging from 0% to 1.0% of the Deposited Property value - Annual trustee fee Ranging: from 0% to 0.30% of the deposited property value - Performance fee Ranging: from 0% to 12% of Net Property Income - Acquisition fee Ranging: from 0% to 1% of Deposited Property value - Divestment fee Ranging: from 0% to 0.5% Deposited Property value - Development management fee: Ranging from 0% to 3.0% of total project costs
Annual Expense Ratio * NA

And what's the difference in Management and Trustee fees??

[karlmarx]

All funds require the engagement of a trustee, which is a third party. Monies that are invested into the fund are placed with the trustee. Whenever the fund manager buy securities, the monies come from this trustee, and when the fund manager sells securities, the monies return to the trustee. At no point will the client's monies be credited into fund manager's account. At least this is how I understand it. The trustee fee is paid for this service.

Management fees are paid for the daily operating expenses of the fund manager, such as rent, utilities, wages, and so on.

Performances fees are not common to all funds. It must be explicitly stated where there is one. Usually hedge funds impose a performance fee. This can be up to 20% of the increase from the previous high water mark. In a nutshell, fund managers don't receive performance fees unless they improve upon their previous nav.

E.g.
year Nav. Performance fee
2009 1.0
2010 1.2 Yes
2011. 0.9 No
2012 1.1 No
2013 1.3 Yes

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I have actually made money from unit trusts during the last bull market. About 200% returns from 2005 to 2008. It is prudential's china India fund. You can still make money inspite of the fees involved if 1) you don't trade it like stocks 2) picked the correct market to track 3) held it long enough and 4) chose a reasonably good fund manager/house.

[CityFarmer]

I have actually made money from unit trusts during the last bull market. About 200% returns from 2005 to 2008. It is prudential's china India fund. You can still make money inspite of the fees involved if 1) you don't trade it like stocks 2) picked the correct market to track 3) held it long enough and 4) chose a reasonably good fund manager/house.

I have similar experience during the last bull market. The funds were regional funds base on China and India. I can not recalled the overall return, but i recalled once the return is 10%/month lasted for close to a year.

I agreed with the suggestions, which i followed during my last fund selection.

[Traumfanger]

Thanks guys. Hmm, STI ETF seems to out-perform UT?
http://www.moneytalk.sg/2008/12/sti-etf-...trust.html

[corydorus]

Is true the regional fund of India and China because i have relative who gains as well. This is more of timing and the bull that time on specifically these two markets.
Ease ability to access those markets is the advantage.

[Muck]

Gave up on UTs a few years ago. Vast majority of funds cannot beat their benchmark index. Hence index funds are the way to go. Also helps that the expense ratios of passively managed index funds are expectedly lower than actively managed funds. The only reason my account with FSM still exists is my exposure to the Infinity class of index funds i had bought while with Finatiq. Finatiq eventually closed and FSM swallowed the orphaned accounts, including mine. Am not a happy camper with FSM's quarterly fees.