Mutual funds are a popular investment vehicle in Singapore, allowing individuals to diversify their portfolios and invest in various assets without actively managing them. Mutual funds pool money from different investors and invest it in stocks, bonds, or other securities based on a specific strategy. Many types of mutual funds are available in Singapore, each with its risk profile and investment objective. This article will discuss the different types of mutual funds commonly traded in Singapore and how investors can trade them effectively.
Equity funds, also known as stock funds, are one of Singapore’s most popular types of mutual funds. As the name suggests, these funds invest primarily in stocks or equities of different companies. Equity funds can be further categorised into growth funds and value funds.
Growth equity funds aim to invest in companies with strong potential for growth and capital appreciation. These companies are usually in their early stages and have the potential to generate high returns for investors. However, with higher potential returns comes higher risk. As growth companies are not yet established, they may face challenges or fail to meet expectations, resulting in losses for investors.
On the other hand, value equity funds focus on investing in undervalued stocks of established companies with a strong track record and stable financials. These funds aim to generate returns by buying stocks, trading at a discount, and selling them when they reach their actual value. While value equity funds offer a more conservative approach than growth funds, they still carry market risk.
Investors can trade equity funds in Singapore through various channels, such as brokerage firms or banks. They can choose to invest in individual equity funds or a diversified portfolio by investing in an equity fund that tracks a specific index, such as the Straits Times Index (STI).
Bond funds, also known as fixed-income funds, invest primarily in bonds issued by governments or corporations. These funds provide investors with a steady income stream through interest payments while offering the potential for capital appreciation. Bond funds can be further classified into government and corporate bond funds.
Government bond funds invest in government bonds, such as Singapore Savings Bonds or US Treasury bonds. These bonds are considered less risky than corporate bonds as the full faith and credit of the government backs them. However, government bond funds may still carry interest rate risk and inflation risk.
Corporate bond funds invest in bonds issued by corporations of varying credit ratings. These bonds offer higher yields than government bonds but also have higher risks. Corporate bond funds can further be categorised into investment-grade and high-yield bond funds based on the credit quality of the underlying bonds. Investors should consider their risk tolerance and investment objectives carefully before choosing a corporate bond fund.
Investors can trade bond funds in Singapore through various platforms, including online trading platforms or robo-advisors. Bond funds are also available as part of unit trusts, which provide investors with an easy way to access a diversified portfolio of bonds.
Money market funds
Money market funds are mutual funds that invest in short-term, low-risk securities such as Treasury bills, commercial paper, and certificates of deposit. These funds offer investors high liquidity and stability while providing higher returns than traditional savings accounts.
One key feature of money market funds is their ability to maintain a stable net asset value (NAV). Therefore, the value of each share remains constant at $1, making it an attractive option for investors looking to preserve their capital. However, money market funds are not entirely risk-free and may face credit or interest rate risk.
In Singapore, investors can trade money market funds through various platforms such as banks, brokerages, or online trading platforms. It is essential to choose a money market fund from a reputable and established fund manager to ensure the safety of your investment. Saxo Markets is a well-known and reliable platform offering investors various money market funds.
Real estate funds
Real estate or property funds invest primarily in residential, commercial, or industrial properties. These funds expose investors to the real estate market without dealing with the hassle of owning and managing physical properties.
Real estate funds can be further divided into different types based on the type of properties they invest in, such as office buildings, shopping malls, or residential properties. These funds generate income for investors through rental income and may also provide capital appreciation when the value of the underlying property increases.
Investors can trade real estate funds in Singapore through various channels, including online trading platforms or unit trusts. Researching the fund’s portfolio and underlying properties before investing is essential, as real estate funds can be illiquid and face market risk.