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Important Information
1)
Studies have found fund performance is not consistent from year to year.
It means that past performance is not a good indicator of a fund's future
performance. This leaves "costs" as a primary criteria for fund
selection.
2)
The two major fund costs are annual expense and initial commission. Annual expense is
the more important since investors must
pay it yearly. Initial commission is a one-time cost.
3)
Most funds show historical returns on a bid-bid basis. This
implicitly assumes initial commissions are zero, which is not correct
since all funds in Singapore charge an initial commission or "load".
In marketing brochures, funds usually show bid-offer returns, which
shows the effects of initial commissions on returns. Brochures
will often show the higher bid-bid returns along with the bid-offer
returns.
4) On-line vendors like Finatiq.com,
FundSupermart.com and DollarDex.com offer
initial commissions of 1 to 3 per cent for certain unit trusts. (Initial commissions
of 2 per cent shown for the UOB funds are for on-line purchases only.)
5)
The column "expected long-run returns" are average after-cost returns for
various asset classes. (It does not consider possible market-timing or
stock-selection skills of individual fund managers.)
6)
The STI ETF is the "Straits Times Index Exchange-Traded Fund". It
is the only equity ETF approved for CPF investments. It trades like a stock (symbol: STTF). Its
"initial commission" of 0.6 per cent is the brokerage
cost to buy and sell on-line. Expected returns for the ETF are higher
than other funds (11% vs. 8%) because of its lower costs in 3 categories:
(i) initial commission, (ii) expense ratio and (iii) hidden expenses.
7) Sources:
Fund fact sheets, annual reports and prospectuses.
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