As a lay investor I often ask myself, how do I participate in these trend?

I do not have sufficient fund to buy into a single stock, let alone a portfolio (which, incidentally, should be the preferred way).

So, how can I participate in the trend? The answer for me lies with unit trust.

Before going further, I like to point out that investing into themes such as Internet, Biotechnology, Nanotechnology is but one of many strategies of unit trust investing. Depending on your explosure to unit trust, you may or may not want to invest in themes.

The careful reader will notice the “?” added to the title of this article “Unit Trust as subsititute to Investing directly into theme?”

The question here isn’t whether unit trust can act as subsititute (or proxy). It can.

The real question is how?

Here, I like to suggest 2 simple steps.

1. Research the trend or theme.
2. Research the fund.

Research the trend or theme

First research the trend or theme you are interested in. It could be based on some headline in the newspaper or an article you read in magazines like Forbes or Fortune. Regardless of the source, you want to find out more about it.

Take for example the Gold theme in the last few years. If you had researched and buy into the gold theme, the result is pretty good to say the least.

How do you research?

Depending on your access to informational materials, you might want to visit the local library and read recent periodicals like Times, Forbes, Fortunes. A daily diet of news also helps.

If you have access to market research report, read them but also remember that many of them are written with an intention to turn you into a customer.

Research the fund

Although this step follow the last, it is not carried out in sequence but rather in parallel.

The reason is that not all theme has a fund available .

As soon as you noted a theme or trend, find out if there is a corresponding fund.

One useful source is the fund selector at FundSuperMart. Look under specialist sector and you will a list of investing themes that has funds catering to it.

Notice from the list that you can find biotechnology and internet theme. But if you are looking for nanotechnology, you are out of luck.

But how about the technology theme? Would some of the technology funds has an interest in nanotechnology? What about under other themes?

Well, this is where fund research comes in. Start by doing a filter on the funds you want to look at and scan through their prospectus. This can be dry and boring or fun and interest depending on how you approach it.

Another way is to look at what company the fund invest in. For example, you may be aware (from your theme research) that BASF is an innovator in nanotechnology. Knowing this, you may then want to find fund with holdings into BASF.

Unfortunately I have not come across tools that can assist in searching what companies a fund invest in.

Putting it all together

With some research, you will find that even with limited capital, you can use unit trust to participate in some of the up and coming “hot” trends and theme.

Of course it is worth repeating that this is but one of many strategies. But if you like a hands-on approach and enjoy the process of researching, the result can be fun and rewarding.

This article is part of a regular column on unit trust investing by Ken of 59Ideas published on Invest Insight. You may copy and use this article if you retain this message.

Founded in 1988 in Australia, First State Investments is the fund management arm of the Commonwealth Bank of Australia. The group is one of the largest fund managers in Australia with investment offices in Sydney, London, Edinburgh, Singapore, Hong Kong and Jakarta.

The Commonwealth Bank of Australia is listed on the Australian Stock Exchange and is the second largest bank in Australia.

First State Investments (Singapore) offers a range of retail unit trusts that includes global and regional funds, as well as specialist sector funds.

The First State Regional China Fund is one my favourite fund and has performed very well in my portfolio.

Funds under management (for Singapore)

Singapore fund prices

Regional equity

• First State Asian Growth Fund
• First State Regional China Fund
• First State Regional India Fund
• First State Singapore Growth Fund
• First State Dividend Advantage

Global equity/balanced

• First State Global 100 Growth Fund
• First State Global Balanced Fund
• First State GEM Leaders

Asian balanced

• First State Bridge

Sector

• First State Asia Innovation & Technology Fund
• First State Global Property Investments
• First State Global Resources

Website: First State Investment firststateasia.com

Reference:

• FundSuperMart introduction to First State Investments
• Finatiq Fund House profile
• Yahoo Singapore Finance Fund Manager Index

An investment in knowledge always pays the best interest.

- Benjamin Franklin

If you are reading this I can assume you know how to get online and is perhaps looking to do self-directed investing online. (Sorry for the jargon, it simply mean investing yourself).

In this first installment on Unit Trust Investing, I will introduce how to get started.

To begin, you need to have an investment account with one of the online unit trust vendors.

Using online Unit Trust sellers offers certain advantage over going through an agent or bank such as,

1. Lower transaction cost. Without a middle-man commission, most retailers pass the discount the saved to the customer.
2. Buy any time. Most working professionals research and make purchase at the comfort of their home at night.
3. Less pressure. Bank counter staff or agent can be pesky and pressurizing and their recommendation may not be in your best interest.

I personally recommends FundSuperMart (Shouldn’t they be paying me for sending customers to them?)

Other online vendors I know are Finatiq, DollarDEX and POEMS.

Even if you do not know anything about unit trust, get an account first. It will keep you excited and want to learn more.

Go ahead and setup an account with one of them. Or if you are like me, with all of them.

Any comments on the online retailers or tips for beginners? Share a comment.

This is something that I had been thinking about too. The only consideration is how to present the information and add value to them.

There are many sites that provide information on how to start unit trust investing. FundSuperMart‘s school is one such example.

My idea is to blend together part experience, part guide and part factual. Watch for this series on Unit Trust Investing which I will intersperse with my series on Technical Analysis.

CPF monies earn a risk free interest rate of 2.5% p.a. for Ordinary Account and 4% p.a. for Special Account. The interest is computed monthly and, compounded and credited annually.

To make things a little complicated, CPF investment is usually make through an angent bank which charges transaction fee and service fee. On top of that some unit trusts fund also charges a fee for purchase or redemption.

Taking all these into account, how to compare the return?

Let me introduce a tool to do that.

Perviously I use a spreadsheet to workout the returns. I found there is a quicker way.

Try the Unit Trust Investment Profit & Loss Calculator provided by CPF Board.

The calculator allows users to estimate the profit or loss on their unit trust investments. Both the CPF Investment Scheme-Ordinary Account (CPFIS-OA) and CPF Investment Scheme-Special Account (CPFIS-SA) are included.

Here is an example:

The next step is probably to include this calculator into a spreadsheet.

dollarDex transformed their business model from their original online loan and financing model to include distributing unit trusts.

Things I like about dollarDEX

1. Investing with credit card.
   This is a killer feature and appeal to those that likes to mange their finance with credit card. Effectively you can use the credit money in advance and at the same time accumulate reward points for your card.
   Although not all fund can be brought with credit card, this concept alone deserves full point.
2. Performance chart comparing to CPF and bank deposit.
   A nice simple chart that all other sites should have but don’t.

Things that dollarDEX can improve

1. Browser friendliness.
   Since I use Firefox, dollarDEX is the only site among the 3 that I have to switch to IE in order to use it. As a result I hardly ever visit it.

Of the 3 online unit trust retailers, Fundsupermart (FSM) is my favourite site for unit trust investing in Singapore.
What I like about fundsupermart.

1. Good, informative, original articles. Unlike the other sites, FSM has editors that research and write articles. This set them apart from sites that uses fund managers stories. They also publish a magazine. Having SPH as an investor does shows.
2. Simple and easy to use user interface.
3. Good set of functions to search, compare and chart funds.
4. Only unit trust site with a forum. This actually show that FSM “get it” when comes to online interaction and leveraging the online media to reach out and create community.
5. SGS bonds. Though I don’t buy them, they are a good concepts and add to the investment mix. This and beening the first CPFIS Investment Administrator show that They are creative in delivering value to customers.

What fundsupermart can improve on.

1. Articles are getting more “markety“. More objective and well-researched article please.
2. Function to chart investment over time.
3. Graph or table to compare invested amount against CPF or bank return.

I had been holding my unit trust funds and watching the current correction.

Originally my plan was to hold and wait out the correction. However, there are new signs to indicate that the current correct will be deeper than anticipated. In view of this, I’m switching strategy.

Most of my unit trust are invested with CPF monies. While some school of thoughts believe that dollar cost averaging is the best strategy, it is not for me.

Active management is my preferred strategy and I believe it is best for my situation. The point is not to catch the maximum (if I had taken action a month back) but to lock in profit.

It is painful to see the gain shrank. But it will be more painful if I had to cut at a lost later. I am selling my Asia, Japan, Korea, Thailand funds.

With commission of online unit trust retailers half that of banks/brokers, it make sense to use online brokers to save on the charges.

In Singapore, I know of 3 pure online distributors – FundSuperMart, FinatiQ and dollarDex. (Please share with me if you know of others)

Some banks and securities houses like Phillip Securities’s POEMS also allows buying of unit trust online.

Buying online is simple and easy, saving not only money but also time. In future posts, I will be sharing my experience with these distributors.

The question is, “Is there a cause for worries?”

Nowaday I hardly look at the market. With my business going on and my online projects, I’m thankful if I get to look at the charts and read the news on weekend.

Let’s take a quick look at the market. In my next post, you will see the STI charts and have a clearer picture.

The Singapore market (and generally many other markets worldwide) had been enjoying a sustained rally for the past 3 years. Conventional wisdom tells us that what goes up will come down, in what is known as correction.

So is the current correction a typical one or a sign of things to come?

The correction this time round almost wipe out all the gain STI had made in 2006. However, from a long term view, this correction is not significant.

From a technical perspective, there is still no formation of significant chart signs to tell us otherwise.

From a fundamental perspective, a little cooling down is good for the market. The threat of a global meltdown, while real should not be taken as doomsday story.

Day or short term traders might have suffer losses but long term investors, unit trust investors should hold. If you are active and savvy, this is a good time to buy and adjust your portfolio.

As for me, I’m holding and watching.

Good luck!