Learn about Funds

A collective pool of money from many individuals and invested by a fund manager in a range of assets. Funds can be categorised by asset classes and be further divided along geographical or industry lines. Funds which comprise more than one asset class (eg Bond and Equity assets) can be termed as Balanced Funds or Asset Allocation Funds.

Equity Fund: Usually invests in stocks of companies only and can be invested in a single country, on a regional or global basis. Equity funds can also be managed according to industry classifications (eg a property fund) or theme specific ones (eg fund focused on finding opportunities based on the rising consumption theme in China).

Bond Fund: Usually invests in bond securities of companies and/or governments. It is common to classify bond funds according to general risk levels i.e. investment grade bonds (majority of underlying securities would have to be rated BBB- and above by rating companies) vs high yield bonds (majority of underlying investments are non-investment grade securities). Bond funds are also offered based on geographical lines.

A money market fund's purpose is to provide investors with a safe place to invest easily accessible cash-equivalent assets, usually characterised as a low-risk, low-return investments. Money market funds may not be suitable as long-term investment options due to the low returns.

Balanced Fund: Usually comprises a mixture of equity and bond investments. A balanced fund aimed at providing regular income would have a higher proportion of bond investments, while one aimed at long-term capital appreciation would hold more equity investments.

Asset Allocation Fund: Like a Balanced Fund, Asset Allocation Fund also comprises a mixture of equity and bond investments. The difference is that the fund manager may have the discretion to adjust the ratio of bonds and equities mix in an asset allocation fund - this decision is usually based on the manager's analysis of the investment environment.

Prospectus: In Singapore, a fund prospectus has to lodged and registered with the Monetary Authority of Singapore. A prospectus contains information about a fund and includes, among other information, its investment objectives, performance, principle risks of investing in a fund, associated fees and expenses.

You should read the fund's prospectus before investing in a fund.

Benchmark: A market index by which the performance of a fund can be measured against. You should be mindful of comparing fund performance against a benchmark that is not reflective of the fund's investment objective.

Initial sales charge: This is a fee imposed by the fund distributor with the maximum amount chargeable as stated in the fund prospectus. The initial sales charge is deducted from your investment. This fee varies from distributor to distributor.

Switching fee: The fee payable when you liquidate a fund to invest in another fund managed by the same asset management company.

Annual management fee: This is a fee charged by the investment manager to cover the management and operation of the fund. As the fee is incorporated into the price of the fund, it would not appear as a separate charge on your holdings statement.

The fund prospectus will contain the details of charges and fees explained above.

he Fund Manager or Portfolio Manager decides on the underlying investments for a fund and is responsible for the fund's investment strategy. As fund performance depends, in part, on the decisions made by the Fund Manager, he is usually entrusted with the job only if he has the relevant professional experience and qualifications.

However, it is not possible for the Fund Manager to operate alone. He is usually helped by a team of experienced investment professionals - investment analysts, traders, fund administrators and support teams.