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How To Read A Fund Factsheet?

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Introduction to mutual fund investing

For busy Singaporeans who spend most of their time at work, unit trust, also known as mutual fund provides a very hands-off approach to investing.

Here are some quick pointers on what a mutual fund is:

  • It pools money from a large number of investors to invest
  • The money is managed by a paid Fund Manager, which determines the day to day investment decisions and operations of it.
  • The fund is then used to invest in various investment instruments such as stocks, bonds or other assets.
  • By investing in a mutual fund, an investor purchases “units” of the fund. The price of each unit is influenced by the total net asset value (NAV) of the fund, the liabilities that the fund holds and the number of units it issues.
  • Investors have zero control over the decision of the Fund Managers on the fund. These decisions, however, are made known to investors through a legal document known as the Prospectus.
  • Investors usually have access to the Prospectus, Semi-Annual or Annual Report, Product Highlights Sheet and Fund Factsheet of a fund to help them make a decision.

Fun Fact: “Fund Manager” can also be an algorithm running on the computer. 

Now Chill!

With the whole lot of information available for investors to find a suitable fund, chances are, it may end up confusing investors when little guidance is provided.

For that, the fund factsheet will be a good piece of information to kick-start your fund investing journey.

How To Read A Fund Factsheet?

Name of the Fund

The Fund name can usually be broken down into Fund manager-Geographic region covered-indication that this is a passive fund.

In this case:
Fund Manager: Aberdeen
Region: China
Indicator: Opportunities Fund

Fund Objective

  • A growth fund focuses on stocks that grow fast and higher potential in share price gains.
  • A value-oriented fund invests in stocks that appear undervalue or dividend-paying stocks.

Fund Facts

Thinks to take note of

  • Inception date: The starting date of the fund
  • Benchmark: What does the fund peg its performance against?
  • Management fees: Charges implemented no matter the fund being a winner or loser
  • Fund size: Total amount of money in the fund
  • Switching fee: Charges by the management group when an investor moves money from one fund to another within the same group.
  • Amount you need to invest

Top 10 Holdings (%)

  • A list of the top 10 companies or funds the fund manager invests the fund's money in
  • The percentage of the total fund in each holding is reflected too.

The choice of investing in blue-chips or high growth companies depends on the fund's objective.

Country Allocation

  • The percentage of the fund invested in different geographical locations.

Sector Allocation

How are the funds allocated in terms of the various sector?

Performance Chart

Pictures speak a thousand words!

Take note:

  • Sometimes charts can be misleading, look carefully at what the chart is telling you.
  • Newer funds may present "back-tested returns" or simulated data.

 

Past Performance

  • The table shows how the fund has performed year on year over the a certain period of time against the benchmark.
  • Investors can observe how the funds did when subjected to various economic conditions.
  • It is a good practise to look at a longer timeframe when investing

*Past performance is not an indication of future performance.

Annualised Return

  • The average return an investor will receive should he invested in the fund over a certain timeframe.

Codes

  • ISIN: The International Securities Identification Number is the best way to identify your tracker across platforms.
  • Ticker symbols can vary but as long as you can cross-reference the ISIN number then you’ll know you’re trading the right fund.
  • SEDOL: code for the London Stock Exchange
  • Bloomberg ticker code for tracking on Bloomberg Terminal

Risk Statistics

Standard Deviation

  • A common measure of volatility.
  • The higher the standard deviation, the wider the range of performance, the more volatile.

Sharpe Ratio

  • Another mean of measuring volatility.
  • The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance.
  • Negative Sharpe ratio represents performance of fund below risk-free rate or benchmark.

Fund Price

The price of buying a unit in the fund.

In this case, it shows the highest and lowest price over the past 12 months.

 

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