Unit trusts can offer diversification with lower volatility
As markets slowly recover from the impact of the COVID-19 pandemic, it may be time to consider a more diversified approach to your investment portfolio.
How should you position your investments in the new normal?
No one has a crystal ball. We still really don't know which direction the pandemic is headed or how long it will last. Markets have been trending upwards in recent months, signalling that the worst may be behind us, but there is still uncertainty. 1
While you may be apprehensive about betting your hard-earned money on the markets at the moment, experts believe long-term market uptrends remain intact despite the volatility we are seeing.1
But unless you are a seasoned investor, trying to pick the right investments yourself - especially amidst current market volatility - can be challenging.
An option to consider is investing in unit trusts. Unit trusts give you access to a wide range of professionally managed investments to suit your requirements while minimising the need to spend countless hours managing your portfolio yourself.
Benefits of unit trusts2
They have a relatively low cost of entry for investing.
Unit trust offers a wide spread of investments to diversity your risk, which also provides lower volatility.
Unit trusts can be easily bought and sold, providing liquidity if required.
- Professional fund management
Fund managers have in-depth knowledge and experience to professionally manage your investments.
- Investment exposure
Unit trusts allow you to gain exposure to different asset classes simultaneously, without having to make large investment commitments.
- Comfort of regulation
Unit trusts are regulated, so you're investing in a safe investment vehicle.
Things to look out for when choosing unit trusts3
Understand the different types of funds
Different unit trusts focus on different asset classes. Learn the differences and choose funds that complement your financial goals.
Investigate the historical rate of return over the mid- to long-term to determine a fund's potential future performance.
Awards and recognition
Awards and recognitions that the company receives can help you gauge the credibility of the fund manager.
Determine the entry cost
Unit trust funds have an initial minimum investment amount. Find one that fits your financial circumstances.
Calculate the cost of investment
Consider all the costs of investing in a fund. Upfront sales charges, ongoing management fees and switching fees can eat into your returns.
3 strategies to consider for your unit trust investment in the new normal.
Asian high-yield strategy4
Against a historically low interest rate environment, an Asian High Yield strategy may provide an optimal solution for investors looking for yield. As of August 2020, yields of Asian high-yield bonds were approximately 7.5%, and default rates for the asset class are expected to be lower than other regions. This is anchored by strong fundamentals of Asian high-yield issuers that are more equipped to weather economic headwinds.
There is growing awareness that looking at companies' Environmental, Social and Governance (ESG) records can be beneficial for the performance of your portfolio over the long run. Adding these factors to your investment decisions could potentially help you manage risk and generate sustainable, long term potential returns. A sustainable investing strategy that is based on Sustainable Responsible Investing (SRI) not only enables investors to invest in companies with strong ESG records, but also bring about positive and measureable impact to society.
An index-linked strategy is where you build your portfolio to match or track components of certain financial market indices. One primary advantage of an index-linked strategy is that it tends to have lower costs than other actively managed strategies. In many instances –especially in the developed markets or global equity space – index-linked strategies may outperform other actively managed strategies. This strategy could be ideal for investors who want exposure to a broader market with a relatively low cost option.
To start investing, speak to your Relationship Manager today.