Invest Made Easy
Charges For Purchasing Unit Trust / Mutual Funds
Shane My
Publish date: Wed, 05 Dec 2012, 12:16 AM
Shane My
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Like many of us, we seek for financial security and ultimately financial freedom. This blog is intended to act as a journal of investment as I journey towards that dream. At the same time, I hope that the articles written here would also benefit many others who share the same vision as me.
Charges for investing into Unit Trust / Mutual Funds are normally in the form of percentage (%) and consist of two types:
1. Initial Sales Charge - once for every time you invest an amount into Unit Trust
2. Annual Expense ratio - annually by deducting certain % of the Net Asset Value of the fund
1. Initial Sales Charge - once for every time you invest an amount into Unit Trust
2. Annual Expense ratio - annually by deducting certain % of the Net Asset Value of the fund
In order to make this post easier to understand, lets make a case comparison of incurred charges between Unit Trust / Mutual Funds and the typical Fixed Deposit offered by the bank.
Type of Charges | Fixed Deposit | Unit Trust / Mutual Fund |
Initial Sales Charge | None | 0% - 7% (once for every invested amount depending on type of fund) |
Annual Management Fee | None | 1% - 1.5% annually (depending on type of fund) |
Trustee Fee | None | 0.06% - 0.08% of NAV (subject to a minimum of RM18,000 per annum) |
Annual Expense ratio* | None | 1.5% - 2.5% annually |
*Annual Expense ratio is the various expenses that a unit trust incurs to keep it running, expressed as a percentage of the unit trust's net asset value (NAV) per annum and is deducted from a unit trust's asset. Expense ratio includes annual management fee, trustee fee, administration fee, accounting and valuation fee, audit fee, custodian fee, legal fee, registrar fee, printing and distribution costs and other expenses. Expense ratios for equity funds typically range from 1.5% to 2.5%, and for fixed income funds, the expense ratios typically range from 1% to 1.5%.
From the table above, we can summarized that on the average we are charged with the following:
1. One time "Initial Sales Charge" for each investment made : ranging from 0% - 7%
2. Annual Expense ratio : ranging from 1.5% - 2.5%
While we need not know about the details of the charges, it is important that you make a comparison of charges among funds of the same investment nature. Here's a sample comparison of a few funds of the same investment nature:
Fund Name | Initial Sales Charge (from Fundsupermart) | Annual Management Charge | Trustee Fee | Annual Expense Ratio |
Eastspring Invesment Asia Pacific Equity My Fund | 2% | 1.5% | 0.07% | 1.89% |
Hwang Asia Pacific (ex Japan) Infrastructure Fund | 2% | 1.8% | 0.08% | 2.26% |
Pheim Asia Ex -Japan | 2% | 1.5% | 0.07% | 1.68% |
The obvious option is to select Pheim Asia Ex-Japan fund as your fund of choice. However, do note that selecting a fund based on the charges just one of the many criteria of selecting a fund. There are also other considerations such as:
1. Fund historical performance
2. Fund area of investment
3. Fund risk rating
Find out more about how to reduce your Initial Sales Charge from 5% to 2%.
For future updates/tips in Investing, just bookmark http://invest-made-easy.blogspot.com or just subscribe to me using the "Subscribe to Invest Made Easy" located at the top right of the right column.
Cheers and happy investing
MY Investor
Cheers and happy investing
MY Investor
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