Should You Invest in Unit Trust Funds from the same company? Or a combination?

Liew asked,

If I want to buy unit trust, do we need to invest only one company or a few companies?

Whether an investor purchases unit trust funds only from one company, or spreads it among others, there are pros and cons.

Invest only in one fund house

This happens to most of us. Most people invest in unit trust after being approached by a friend or relative who are tied with certain unit trust company. For example, your brother becomes a Public Mutual agent and sells you several funds all from Public Mutual. Since you trust him and want to support his business, it makes sense that you only buy Public Mutual funds.

Pros

• Ease of dealing – you only need to meet the same and only agent when you want to rebalance, switch, reallocate and repurchase your portfolio
• Minimum switching fees – switching charge is low when you are switching unit from Fund A to Fund B in the same fund house.
• Ease of monitoring performance – your agent can easily generate an overview report of your portfolio anytime

Cons

• Limited fund choice – some big fund houses provide more than 20 funds selection, which is more than enough though. However, there are hundred of funds available nowadays. Sometimes, certain theme-based funds are not available.

Invest in several unit trust companies

Instead of investing in the same funds house, you can actually spread your investment among different unit trust funds from several companies. You can opt to buy from several tied agents, through banks, through online banking, through unit trust platform such as iFast and also from financial planning firms.

Pros

• Even more diversified – when you invest simultaneously in several companies, you will diversify your portfolio and get exposure to different investing styles of fund managers. Actually, I don’t regard this as a big plus point because unit trust funds are already well-diversified.
• More fund choices – you are able to choose the most suitable funds from hundred of funds available out there.
• Served by more consultants – three brains are better than one. You can ask opinion about the market trend from several consultants and won’t feel guilty about doing it.

Cons

• Hard to monitor your portfolio return – you will need to have all reports on hand from different sources to review and revise your portfolio. It will be easier if you engaged a financial planning firm or use the online platform like iFast.
• Not cost effective when you want to switch funds from Company A to Company B – technically, you will need to repurchase (redeem) your unit from Company A, then purchase fund from Company B. This means you will have to pay the upfront fees twice. This doesn’t apply to online platform like iFAST, where switching between different companies is achievable.

There are certainly many ways to get the same thing done. Just choose what works for you.

I only discussed a few points above. Do you have anything to tell from your experience? Share with us in the comment section below.