What are the criteria to choose a unit trust fund? When your consultant recommends you, ask the below questions. By the way, don't buy new fund because there is no track records.
1. Past performance - even though past performance is not an indication of future performance, we still believe that it is more likely for a fund with good past performance to perform better in the future. You can also study the sharpe ratio, r-squared, beta, standard deviation if you are savvy investors.
2. Annual Expense Ratio - compare that with other funds of the same group. e.g local equity fund compares with local equity fund
3. Front end sales charge - different fund houses may have different sales charges for the same type of funds. Choose lower sales charge funds so that you have more capital to invest in.
4. Certain funds may have high Sales charge but low annual expense ratio. Others may have low sales charge but high annual expense ratio.
5. Fund size - if the fund size is too small, the fund managers may have difficulties to do diversification and allocation.
6. Top 5 holdings - if you like, you can check what are the top stocks holdings of this fund. Just check. In Malaysia, we may have some listed companies that need attention.
7. Switching fee - When we do asset allocation, switching will occur. Take note that switching can be expensive if you have many funds to switch at asset allocation. Public Mutual gives a number of free switches to their Mutual Gold members but if you have too many switching to do, it will still incur unnecessary expenses.
8. In insurance policies, we can appoint nominees in case dxxxh should occur and the nominees can receive the compensation. How about unit trust? Ask your consultants. Or write a will to cover for that.
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