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What are mutual funds and how do you invest?

Thinking about investing in a managed fund? Here's what you need to know.

Investing can be one of the best financial decisions you’ll ever make. Unfortunately, buying stocks, bonds and other types of investments can also be confusing and risky if you’re not an expert. This is where mutual funds can be a good option.

When you invest in a mutual fund, you get the benefit of expert decision-making. These fund managers do all of the investing for you so you don’t have to worry about the day-to-day.

With mutual funds, you’re able to pool your cash with other investors, which means that you can collectively make an investment in an asset that might otherwise have been too costly or out of reach.

What types of mutual funds are there?

There are many kinds of mutual funds (also commonly known as managed funds). For example, some managed funds may focus on a particular asset class such as property whereas other managed funds may offer investment in a variety of assets, which could include property, cash, shares and bonds.

No matter which type of mutual fund you choose to invest in, the principle is the same. You purchase units, which are of equal value in the fund. Like other types of investments, the value of the units that you buy can either increase or fall based on whether the value of the assets owned by the fund rises or fall.

It’s also important to remember that assets owned by the fund may be sold on and profits that are generated by these sales along with income generated from the assets are passed on to the unit holders by way of distributions. These distributions are similar to receiving share dividends.

Mutual funds vs ETFs

Mutual funds are simply one type of investment fund. Other kinds of funds are index funds and exchange-traded funds (ETFs). When you get down to it, these are actually all pretty similar – they invest your money into shares, bonds, property or cash – and often it’s a mix of all four and more.

If you’re keen to read a bit more about these, here’s a list of popular options for investment funds available in Singapore:

The definitions aren’t always clear cut, but most of the time a managed fund refers to a regular investment fund that is not listed on a stock exchange (i.e. an ETF).

Because they’re not listed on a stock exchange, you won’t normally be able to invest in managed funds via an online share trading platform. Instead, you’ll need to manually apply directly with the fund manager.

If you’ve done your research and want to invest in a mutual fund, you can compare brokers in the table below.

Invest in mutual funds through a trading platform

Name Product Brokerage Fee Tradeable Assets Market Access Trading Platform Offer
Interactive Brokers
SGX stocks: $2.50
US stocks: $1 per share
Stocks, ETFs, Futures, Bonds, CFD
SG, US, CA, AU, UK, IN, JP, HK, MX, FR & 17+ more
Client Portal, Trader Workstation, IBKR Mobile, IBKR GlobalTrader, Impact, IBKR APIs
CFD service. Capital at risk.
Take advantage of low trading fees, multiple platform support, and an extensive list of asset classes across global markets, including stocks, options, futures, forex, bonds, and funds.
SGX stocks: N/A
US stocks: $1.49 per trade (regular pricing)
Stocks, ETFs
Syfe Trade
Get $60 when you sign up on Syfe Trade (minimum deposit of $2,000 and make one trade). T&Cs apply.
Saxo Markets
SGX stocks: $5
US stocks: $4
Stocks, ETFs, Bonds
SG, US, CA, UK, AU, HK, CN, SG, JP, IT & 16+ more
SaxoInvestor, SaxoTraderG, SaxoTraderPRO
Trade 19,000+ international stocks on global exchanges with brokerage fees as low as $5. Low-risk account is also available for beginners.
Tiger Brokers
SGX stocks: $1.99
US stocks: $1.99
Stocks, ETFs, Options, Futures
Tiger Trade
Sign up and enjoy unlimited zero commission trades for US stocks for 180 days. T&Cs apply.
SGX stocks: $0.99 per order
US stocks: $0.99 per order
Stocks, ETFs, Funds, Futures
Access Singapore, Hong Kong, US stocks and ETFs with one account. Enjoy free level 2 market data and lifetime commission-free trading on US stocks.
Maybank Kim Eng
SGX stocks: $25
US stocks: $20
Stocks, ETFs, Bonds, CFD
Maybank Trade, Maybank Trade +
CFD service. Capital at risk.

Compare up to 4 providers

The benefits of mutual funds

For those interested in investing and hoping to reap financial rewards for the future, managed funds can prove beneficial in a number of ways. Some of the key benefits include:

  • Diversification. Because you’re pooling your money with other investors you can invest in multiple assets and company shares without paying an arm and a leg.
  • Expert assistance. Dealing with investments can be difficult and daunting. When you opt for managed funds you have access to the advice and assistance of expert fund managers. These are the people who not only have the knowledge and expertise that can prove invaluable to investors, but also the time to dedicate to managing multiple assets.
  • Save time. You won’t have to dedicate huge amounts of time to manage your investments because you have experts on hand to do all the heavy lifting for you.
  • Do more with your money. Using mutual funds means that you can still invest even relatively small amounts of money in a range of assets, rather than settling for one asset due to lack of finances.

Are mutual funds suitable for you?

Putting money into an investment of any kind is a big step. You need to determine whether this is the right route for you. Below is a helpful checklist to run over before you take the plunge:

  • How long do you intend to keep your money in the fund? Not all funds are suitable for short term investments.
  • Are you comfortable with someone else making investment decisions on your behalf?
  • What are the fees? Check the management fees (the management expense ratio / MER) and any performance fees
  • How well regarded is the fund manager? Do they have a good track record?
  • What assets is the fund investing your money into?
  • Ethical considerations – does the fund invest in industries that you don’t align with?
  • What are the risks?
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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