Unit Trusts in Singapore: A Complete Guide for Investors

I get it—growing your wealth sounds great, but who has the time to track the stock market every day? I know I don’t.

If you’re like me, you want to build a strong financial future, but between work, family, and everything else, managing investments can feel overwhelming. That’s where unit trusts come in.

Unit trusts (also known as mutual funds) let you invest alongside others, giving you access to a professionally managed portfolio of stocks, bonds, or both—without the stress of picking individual investments yourself.

But how do they actually work? And more importantly, are they the right fit for you?

In this guide, I’ll break down unit trusts in a simple way to help you get started. Let’s dive in!

What are unit trusts?

Unit trusts and mutual funds come with unique features that set them apart from other investment options. 

Here are some key characteristics to keep in mind:

#1 – Professionally managed

If you’re not a fan of researching stocks and tracking the market daily, good news! Unit trusts are actively managed by professional portfolio managers. 

These fund managers are backed by research teams to analyse market trends and make investment decisions on your behalf. 

This hands-off approach saves you time and allows you to benefit from professional insights. 

Though it’s worth noting that while mutual funds aim to outperform market indices, returns are never guaranteed.

#2 – You invest through third-party financial institutions

If you’re used to buying stocks directly on an exchange like the SGX, unit trusts work a little differently. 

They are typically purchased through third-party distributors such as banks or financial institutions. 

While this makes them accessible to a wide range of investors, it also means additional fees or commissions may apply, which can impact overall returns.

#3 – Priced and traded once per day

Unit trusts are priced based on their Net Asset Value (NAV), which is calculated at the end of each trading day.

This means you can only buy or sell at the daily closing price. 

While this means you’re less tempted to react to daily market noise, the flip side is that it limits your ability to make immediate trades in response to market changes. 

#4 – Designed for mid-to-long-term investing

Think of unit trusts like planting a tree. You won’t see massive growth overnight but with time and patience, your investment has the potential to grow. 

Since they invest in assets like stocks and bonds, both of which can experience short-term ups and downs, it’s important to adopt a longer investment horizon. 

This allows you to ride out market fluctuations and maximise potential returns.

What are the benefits of unit trusts?

Unit trusts and mutual funds offer a convenient way to grow your wealth without the need for constant market monitoring or extensive financial knowledge. 

Here are some key benefits:

#1 – Low barrier to entry

You don’t need a fortune to start investing. 

Some funds have a minimum investment of just SGD 1,000, and if you opt for a Regular Savings Plan (RSP), you can start with as little as SGD 100 per month. 

With an RSP, a fixed amount is automatically deducted from your account and invested every month. 

This allows you to take advantage of dollar-cost averaging, which helps smooth out market volatility and reduce the risk of investing at the wrong time.

#2 – Professional expertise

If analysing stock charts and tracking economic trends isn’t your thing, mutual funds and unit trusts give you access to experienced fund managers who make investment decisions on your behalf. 

These professionals use research, risk management strategies, and market insights to optimise returns. 

#3 – Diversification

Investing in just one or two stocks can be risky, if one company underperforms, your entire portfolio takes a hit.

Unit trusts and mutual funds spread your investment across multiple companies, industries, and even countries, helping to reduce the impact of a single poor-performing asset. 

For example, the Nikko AM Shenton Emerging Enterprise Discovery Fund holds shares in 89 companies across India, Taiwan, South Korea, and China. 

This broad exposure helps balance risks while keeping your portfolio resilient.

#4 – Liquidity

Unlike some long-term investments, unit trusts and mutual funds can be bought and sold online relatively easily, giving you flexibility if your financial situation changes.

What are the disadvantages of unit trusts?

While unit trusts and mutual funds offer many advantages, they also come with some drawbacks. Here’s what to keep in mind:

#1 – Lack of control

When you invest in individual stocks, you decide which companies to buy and sell. But with unit trusts and mutual funds, the fund manager makes all the investment decisions. 

This means you have no say in which stocks or industries your money is allocated to.

While funds generally are restricted from investing outside its pre-determined mandate, if the fund takes a direction you’re not comfortable with, your only option is to sell your holdings.

Also, not all fund managers beat the market. While mutual funds aim to outperform benchmarks, there’s no guarantee they will. 

#2 – Trading limitations

Unlike stocks and ETFs, which you can buy and sell at any time during market hours, mutual fund transactions only occur once a day—at the fund’s Net Asset Value (NAV), calculated at market close. 

This means you can’t react immediately to sudden market movements, which can be a disadvantage during periods of high volatility.

#3 – Fees can eat into returns

Unit trusts and mutual funds typically charge management fees, expense ratios, and sometimes sales charges, all of which reduce your overall returns over time. 

To illustrate:

A seemingly small 0.5% difference in fees resulted in $3,781 less in final value after 20 years. Over an even longer period, the gap would widen further, demonstrating why low fees matter.

What types of unit trusts can you invest in?

You’ll come across different types of unit trusts and mutual funds tailored to various investment strategies. 

Whether you're looking for stability, growth, or exposure to a specific industry, there’s a fund that fits your needs.

Broadly, unit trusts and mutual funds fall into three main categories: asset class funds, geographical funds and thematic funds.

#1 – Asset Class Funds

These funds focus on different types of investments (asset classes), such as stocks, bonds, or a mix of both. 

Equity funds aim for higher returns but come with more volatility, while bond funds offer more stability with lower potential returns. Read our complete guide to the best bond funds in Singapore.

Balanced funds provide a middle ground by blending both asset types. 

Besides equities and fixed income, there are also funds that invest in other asset classes such as money market funds, commodities, and real estate. 

#2 – Geographical Funds

If you want to invest in specific regions or countries, geographical funds offer exposure to markets such as Asia, Europe, or the U.S. 

Some funds concentrate on emerging markets with high growth potential, while others focus on developed economies for more stability.

#3 – Thematic Funds

These funds are designed around specific investment themes or trends, such as technology, healthcare, sustainability, or artificial intelligence. 

Thematic funds allow investors to capitalise on industries or innovations they believe will drive future growth. 

For example, if you believe AI and cloud computing will dominate the future, the Eastspring Global Technology Fund invests in leading tech firms worldwide.

These categories aren’t mutually exclusive. 

For example, a fund investing in semiconductor companies based in Asia could be both a geographical and thematic fund. 

Ultimately, the best choice depends on your investment goals, risk tolerance, and market outlook.

What to consider when choosing a unit trust?

Once you’ve narrowed down the type of fund that fits your goals and risk tolerance, it’s time to dig deeper and compare individual funds within that category. Not all funds are created equal, and doing your due diligence can make a big difference in your investment returns.

The key factors to we would consider when choosing a mutual fund and unit trust include track record, fund size, fund fees and fund management team.

Unit Trusts vs ETFs: What’s the difference?

When deciding where to invest, it’s important to understand how unit trusts and exchange-traded funds (ETFs) compare. Each has its own characteristics, risks, and potential rewards.

Unit trusts vs Stocks: What’s the difference?

When deciding where to invest, it’s important to understand how unit trusts and stocks compare. Each has its own characteristics, risks, and potential rewards.

Are mutual funds and unit trusts different?

You’ve probably heard the terms mutual fund and unit trust used interchangeably. In Singapore, both function similarly as collective investments and are regulated by the Monetary Authority of Singapore. 

The main difference lies in their legal structure.

Despite this distinction, for investors, the difference is just administrative. 

Whether you invest in a mutual fund or a unit trust, both provide professional management, diversification, and access to a broad portfolio of assets.

What would Beansprout do?

Unit trusts and mutual funds can be great tools for building wealth, but like any investment, they come with trade-offs. 

Understanding the pros and cons will help you make informed decisions that align with your financial goals, risk tolerance, and investment horizon.

However, it is important to take the time to research different funds, compare fees, and ensure they match your investment strategy. 

To find a mutual fund that allows you to earn a higher potential yield in a relatively safe way, check out our guide to the best money market fund in Singapore. 

To find a mutual fund that allows you to generate income, check out our guide to the best bond funds in Singapore. 

You can use our resources on mutual funds as a starting point too! 

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