Mutual funds are pooled money invested in various securities like stocks, bonds, and other financial instruments to generate returns for the fund’s investors. Singapore is a bit of an anomaly when it comes to mutual funds. While the country does have a few local mutual fund companies, the industry is dominated by foreign players. In fact, out of the top 10 largest mutual fund managers globally, eight have a presence in Singapore.
This means for investors that there’s a wealth of choice when it comes to investing in mutual funds. There’s something for everyone from low-cost index funds to more sophisticated offerings that focus on specific sectors or geographies.
Mutual Funds can be traded during market hours or pre-market hours. There are multiple types of funds available, including index funds, equity funds, balanced funds etc. The type of charges applied on mutual fund trades varies with different providers opting for transaction fees, redemption fees or both. Different types of charges directly impact the number of gains accrued by you as an investor at the end of each trading day.
Factors to consider when choosing a mutual fund
When it comes to choosing the best mutual funds in Singapore, there are a few factors that you need to take into account. Here are some of the most important things to look at when making your decision:
Fees and expenses
One of the most important things to consider when choosing a mutual fund is the fee structure. Funds that charge high fees tend to perform worse than those with lower fees. Regardless of how good a fund’s investment strategy is, you’ll likely get a better result if it charges lower fees and expenses. When comparing funds, make sure to factor management fees, administrative fees, and performance-based fees such as entry and exit loads. That way, you can weed out the best value options from the rest.
When it comes to investing in mutual funds, risk and reward usually go hand in hand. The higher the potential returns, the greater the risk of losing money. How much risk you’re willing to take should depend on your financial situation and tolerance for volatility. Are you investing for short-term goals or long-term ones? Are you putting very little money into mutual funds or a large sum?
What are you hoping to achieve with your mutual fund investment? If you want to generate income, you’ll want to look for funds that invest in fixed-income securities. If you’re looking for capital appreciation, you’ll want to focus on equity funds. There are also a variety of hybrid funds that invest in both equities and fixed-income securities, so they can be a good option if you’re not sure which one you want.
Another thing to consider is the geographical focus of a particular mutual fund. Some funds concentrate their investments in a particular region or country, while others invest globally. If you have specific interests or know something about a specific country or region, it’s worth knowing whether the fund you’re looking at covers that area.
It’s also important to look at the performance of a mutual fund before investing. You want to ensure that the fund has a history of outperforming its benchmark index. Otherwise, you’re likely better off investing in the index itself.
Cash flow requirement
Some mutual funds require you to invest a certain amount every month to be invested in the fund. Make sure you check whether or not your fund has this requirement before investing, and if it does, make sure you have the money available in your account every month when it’s time to pay. Otherwise, you will miss out on extra returns that could make your overall investment more valuable.
Investing in Mutual Funds has its benefits; however, investors need to go about it cautiously and ensure they do adequate research before investing their hard-earned money. If you are new to trading and looking for top-rated mutual funds, we recommend using a reputable online broker from Saxo Bank to help you get started with a demo account.