You might be wondering if you’ll ever get to buy your dream house, run that business you’ve longing to do, or travel across the world’s most beautiful places. Right now, you probably have a 9 to 5 job, earning just enough for your needs and wants, but you may still be living from paycheck to paycheck, with just enough funds. You do the math and you figure out that the time and effort you spend working will never reach your goals.

Don’t worry, there are a lot of people in the same situation that you’re in. The fact that we’re living in one of the costliest countries in the world doesn’t help either. The solution? Turn your income into an asset! Instead of working for money, let money work for you. One of the best ways to do this is to invest in Singapore’s financial markets.

Singapore’s diverse economy makes it a rich investment hub as companies, real estate, industries, foreign currencies, and other securities make up the financial markets. There are various kinds of investments out there that offer promising returns – stocks, bonds, ETFs, and Index Funds. This article will give you a brief overview specifically on mutual funds.

For a quick guide to ETFs, go and check out our article Exchange Traded Funds – Everything You Need To Know.

The New Savvy --Money Savvy--A Quick Overview on Investing in Mutual Funds in Singapore 1So what exactly is a mutual fund?

A single person’s earnings will take much time and effort to see its profit in the long run. Not only that, there is much risk of exposure to newbie investors. So instead of working on your own, why not work with others collectively, for the mutual benefit of all? This is why people get into mutual funds.

A mutual fund (or a unit trust) is simply a pool of money garnered from various individuals and groups of investors that are invested in stocks, bonds, and other securities. In most cases, the fund is managed by management firms (like Amundi, Blackock, and Fidelity) that offer a variety of fund products with particular goals from which investors can choose. As an investor, it is commonly practiced to invest in mutual funds through these firms.

Mutual funds invest in a variety of products and services. This diverse nature of mutual funds minimises the risk involved as the fund is “placed in different baskets”. This mitigates potential loss from failures of other industries that can negatively affect the fund as the investment is diversified to many other sectors.

Let fund managers take care of your investments

Unlike other investments, you do not have direct control over your portfolio. With mutual funds, you hand over the responsibility of your investment to seasoned and experienced market professionals called fund managers. These fund managers are well versed with trading and market culture making them more qualified to do the job. They can make or break a mutual fund since it is their job to actively buy and sell assets to try and generate profit and higher returns. Though, with this kind of professional working for you, their services are not free.

When you decide to purchase a share in a mutual fund, you are buying the Net Asset Value (NAV) of the share. The NAV is simply the company’s assets minus its liabilities, then divided by the total number of shares. For example Company A’s investment is $100 million (assets). It needs to pay $10 million dollars to its employees and for rent (liabilities). The company has issued 5 million shares. So the NAV per share of Company A would be $18 [($100 million – $10 million) / 5 million].

You start to gain when the price of your shares increases from the price of when you bought it. This again depends on how good the management firm or fund manager is. Though, on top of your initial purchase of shares, there are other service fees that you pay as these are the costs in running a portfolio. Sometimes, mutual funds do not “beat the market” as the overall gain of your investment will simply cover the service fees charged. This is why mutual funds are more for long term investors with a low-risk appetite.

So, are mutual funds for you?

The New Savvy --Money Savvy--A Quick Overview on Investing in Mutual Funds in Singapore 3Yes, if you are someone who does not have the time or proficiency to monitor and manage your investments. It’s best to let someone else do the hard work for you. Stay focused on the job you are currently in and let the experts take care of your wealth.

Yes, if your investment approach is in the long term. If you are wanting to generate passive income slowly and somewhat safer than other investments then mutual funds are for you. The investment strategies and methodologies that mutual funds entail create lower risks to its investors. Though, the lower the risk, the lower the gain. So if you are patient, then invest in mutual funds. If you are wanting short term or immediate gains, then it is suggested to invest and trade in stocks directly.

Yes, if you are new to investing. Let’s face it, the financial world comes with its own paradigms and jargon that can be overwhelming to many. Also, new investors have a higher pull to be emotional (or worse yet, greedy) when they see the immediate rewards of their investments. This can cause much stress and trouble when the market plummets and catches new investors off guard. So, if you are still learning the ins and outs of investing and working on your investment attitude and discipline, then mutual funds are for you.

Interested in learning more? We’ve got a primer on Funds, FX, Real Estate, REITs, Commodities & ILPs that will surely be beneficial for you!

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Founder @ The New Savvy
Anna Haotanto is the Advisor (former CEO) of The New Savvy. She is currently the COO of ABZD Capital and the CMO of Gourmet Food Holdings, an investment firm focusing on opportunities in the global F&B industry. She is part of the founding committee of the Singapore FinTech Association and heads the Women In FinTech and Partnership Committee. Anna is the President of the Singapore Management University Women Alumni. Anna invests and sits on the board of a few startups. Anna is also part of the Singapore Chinese Chamber of Commerce & Industry Career Women’s Group executive committee. Anna’s story is featured on Millionaire Minds on Channel NewsAsia. She hosts TV shows and events, namely for Channel NewsAsia’s “The Millennial Investor” and “Challenge Tomorrow”, a FinTech documentary. Anna was awarded “Her Times Youth Award” at the Rising50 Women Empowerment Gala, organised by the Indonesian Embassy of Singapore. The award was presented by His Excellency Ngurah Swajaya. She was also awarded Founder of the Year for ASEAN Rice Bowl Startup Awards. She was also awarded the Women Empowerment Award by the Asian Business & Social Forum. Anna has been awarded LinkedIn Power Profiles for founders (2018, 2017), Tatler Gen T, The Peak’s Trailblazers under 40 and a nominee for the Women of The Future award by Aviva


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