Common Terms

Investment Products

Exchange Traded Fund (ETF)

Investment funds listed and traded on the stock exchange. They generally track an index and are passively managed.

Unit Trust / Fund

Most unit trusts are open-ended, invest according to an investment objective, and are actively managed.

Index Fund

A unit trust which is invested in the exact same stocks (but may be in slightly different proportions) as a particular Index. It usually charges very low fees. Index funds are normally maintained by computerised orders.

Risks & Returns

Net Asset Value (NAV)

This is the total value of all underlying assets (stocks, bonds, etc) of a fund minus all expenses (management fees, advertising).

Capital Appreciation

The increase in the market value of an asset. This is the main objective of many equity funds.

Compounding

An investment's principal sum together with its interest earned in the period is added together and the interest earned in the following period is based on this new accumulated sum.  This process is termed as 'compounding' and the interest earned is termed 'compound interest'. As this process of compounding repeats over several periods, exponential growth in the returns on an investment can be reaped.

Annualized Rate of return

The return achieved over a period of time expressed as an annual compounded interest rate. Usually used to measure performance over long periods.

Volatility

A measure of how much the price of an asset fluctuates over short periods.

Sharpe Ratio

A measure of risk-adjusted return. The higher the ratio, the better the returns rewarded per unit of risk undertaken.

Riskless Asset

U.S. Treasury bills are commonly perceived as proxies of riskless assets. Given that riskless assets are void of risks, the return on a riskless asset should be the lowest acceptable return on any investment. In Singapore, the Singapore Government Securities (SGS) treasury bills may be a substitute.

Markets

Bear Market

When the market environment suffers from a general downward fall in prices.

Bull market

When the market environment experiences an upward rise in prices.

Developed Markets

Economies which are at a mature stage of development.

Emerging Markets

Economies which are at the early stage of development.

Index

A statistical representation of the price of a basket of securities representing a market (e.g. Stoxx 600 Index, Hang Seng Index (HSI)), a group of markets (e.g. MSCI Asia ex Japan Index) or a particular sector of a market (e.g. FTSE ST Oil & Gas Index). The movement of an index is often used as an indication of the general movement of the market(s) or sector which it represents.

Benchmark

Usually an index that a fund measures themselves against. Those that outperform the index are generally considered to be performing well and vice versa.

Portfolio

Portfolio

A collection of financial assets, including securities, funds and other pooled investment vehicles which are, themselves, collections of financial assets.

Sector

This refers to a particular segment of an economy in which business share similar characteristics, for example businesses which offer the same products or services.
Some ETFs and unit trusts are invested only in a particular sector, for instance, Healthcare, Finance, and Energy to name a few.

Asset Allocation

The allocation of weights to different asset classes (e.g. stocks, bonds) in a portfolio.

Prices & Charges

Bid price

The price at which the fund manager buys an investor's units back from him. The fund manager is obliged to buy his units back if he wants to sell them.

Offer Price

The price at which an investor can buy units in a unit trust.

Spread

The difference between the buying (offer price) and selling (bid price) prices of a unit trust.

Sales Charge

The initial sales charge, or "front-end load", is the fee that is charged when one buys a unit trust. At Fundsupermart, we offer good sales charge rates and the fee is taken away from your investment when you invest in a unit trust. Discount and bonuses reduce this figure.

Management Fee
(borne by fund)

This is an annual fee borne by the fund, however it will nevertheless reduce the return an investor gets from his investment in the fund. The fee, which is Usually expressed as a percentage of a fund's NAV, is charged by a fund manager for managing the portfolio of the unit trust or ETFs. Given that ETFs are passively managed while unit trusts are often actively managed, the former thus poses a smaller management fee.

Trustee Fee
(borne by fund)

This is an annual fee borne by the fund, however it will nevertheless reduce the return an investor gets from his investment in the fund. A custodian is a third party, usually a trust company or financial institution (e.g. bank), that holds and safeguards the assets of a fund. The fee is charged by the custodian for its custody services and is usually expressed as a percentage of a fund's NAV.

Expense Ratio

This is the percentage of a fund's operating expenses to its total assets. A large part of this is attributed by management fees and custodian or trustee fees.