A Beginner's Guide to Unit Trusts in Singapore

There are many investment vehicles for Singaporeans to choose from, but one that is gaining popularity is the unit trust. In the second quarter of 2024, authorized and recognized unit trusts registered for sale in Singapore attracted net inflows of S$1.8 billion, marking an impressive 88.9% increase from the first quarter. 

Total assets under management (AUM) for Collective Investment Schemes in Singapore, which include unit trusts, reached S$146 billion in 2023, a 15% increase from the previous year. The industry also saw growth in its infrastructure, with 1,250 registered and licensed fund management companies as of 2023—56 more than the previous year.

Unit trusts provide investors with access to a professionally managed, diversified portfolio, making them an appealing choice for those looking to grow their wealth without the complexity of managing individual assets. In this guide, we’ll walk you through how unit trusts work, their benefits, and how to start investing in them.

What are unit trusts?

A unit trust is a type of collective investment scheme that pools funds from multiple investors to invest in a diversified portfolio of assets such as stocks, bonds, and other securities. Each investor, known as a unit-holder, owns units that represent their share of the trust’s assets and profits.

Unit trusts are professionally managed by fund managers who follow an investment mandate—guidelines that define the markets, industries, and asset types the fund will invest in. This structure provides individual investors with access to a broad range of investments that might be difficult to achieve independently.

One key feature of unit trusts is that they are open-ended, allowing investors to buy or redeem units at any time. This liquidity, combined with professional management and diversification, makes unit trusts a popular investment choice in Singapore’s financial market.

How do unit trusts work?

Unit trusts operate by pooling money from investors into a common fund, which is then invested in various financial instruments based on the fund’s investment mandate. Fund managers make decisions on behalf of the investors, aiming to achieve the best possible returns while managing risk.

When you invest in a unit trust, you purchase units priced according to the fund’s net asset value (NAV). The NAV is calculated by dividing the total value of the fund’s assets (after deducting expenses and liabilities) by the number of units available. This price is updated regularly to reflect the current market value of the underlying investments.

Investors can enter or exit the fund by buying or redeeming units at the prevailing NAV. The fund’s returns can come from capital appreciation when the value of its assets rises or from income distributions such as dividends or interest payments. A trustee, typically an established financial institution, oversees the fund’s operations to ensure transparency and protect the interests of investors.

Top unit trust fund house to watch in Singapore

Fund managers play a pivotal role in the investment landscape. They are responsible for implementing a fund's investment strategy and managing its portfolio trading activities, directly influencing the fund's performance and, consequently, the returns to investors. 

As of the end of 2023, Singapore is home to 1,250 licensed and registered fund management companies. Here are some of the top fund managers with the most funds that can be found in the two largest UT online platform:

What are the different types of unit trusts?

Unit trusts come in a variety of forms, each designed to cater to different investment goals and risk appetites. Some focus on capital growth, while others prioritize income generation or stability. Understanding these fund types helps investors build a portfolio that aligns with their financial objectives. Below is an overview of the most common unit trust categories available in Singapore:

Each type of unit trust serves a different investment purpose. Choosing the right one depends on your financial goals, risk tolerance, and market outlook

Why invest in unit trusts?

Unit trusts provide a simple way to invest in a professionally managed and diversified portfolio without the complexities of direct investing. Here’s why they are a popular choice:

1. Capital growth potential

Unit trusts invest in a portfolio of stocks, bonds, or other assets. As these assets appreciate over time, so does the value of your investment, making them a viable option for long-term wealth accumulation.

2. Income generation

Some unit trusts distribute dividends or interest payouts from their holdings. These distributions may be paid quarterly, semi-annually, or annually, making them a convenient option for passive income seekers.

3. Diversification with lower capital

Investing in a mix of stocks and bonds on your own can require significant capital. With unit trusts, you gain access to a diversified portfolio even with a small initial investment, reducing exposure to any single asset’s poor performance.

4. Professionally managed portfolios

Fund managers actively monitor markets and adjust portfolios to mitigate risks and seize opportunities. This can be particularly beneficial in volatile markets, where expert oversight helps navigate changing economic conditions.

5. Low entry barrier

Many unit trusts in Singapore allow investments starting from as low as S$100 to S$1,000. Some also offer regular savings plans, letting investors contribute smaller amounts monthly, making it easier to start investing.

6. Wide range of investment options

Unit trusts cater to different risk appetites and investment goals. Whether you prefer growth-oriented equity funds, stable fixed-income funds, or sector-specific investments like technology or real estate, there’s a unit trust to suit your needs.

How to buy unit trusts

1. Assess Your Investment Goals: Determine your financial objectives, risk tolerance, and investment horizon. This self-assessment will help you choose unit trusts that align with your goals.
2. Choose a Platform or Institution: Select a financial institution or online platform that offers a range of unit trusts matching your investment criteria.
3. Open an Investment Account: Depending on your chosen provider, you may need to open a specific investment account. This could often be done online for convenience.
4. Fund Your Account: Deposit the required funds into your investment account. Some platforms allow investments starting from as low as S$100.
5. Select and Purchase Unit Trusts: Research and choose the unit trusts that fit your investment strategy. You can invest a lump sum or set up a Regular Savings Plan (RSP) for periodic investments.

Where to buy unit trusts

Several financial institutions and platforms in Singapore offer access to a wide array of unit trusts:

Unit trusts vs ETFs vs mutual funds: What’s the difference?

When choosing an investment vehicle, understanding the key differences between unit trusts, exchange-traded funds (ETFs), and mutual funds can help you decide which best suits your financial goals. While all three are pooled investment products, they vary in trading methods, fees, liquidity, and management styles.

Understanding unit trust fees: What you need to know

Investing in unit trusts comes with various fees that can impact your returns. While some fees are one-time charges, others are recurring and cover fund management and platform costs. Understanding these fees helps you make informed investment decisions and assess whether the costs justify the value provided by fund managers and distributors.

Below is a breakdown of the different types of fees involved in unit trusts:

One-time fees

Recurring fees

Investing in unit trusts using CPF funds

The CPF Investment Scheme (CPFIS) allows CPF members to invest their Ordinary Account (OA) and Special Account (SA) savings in CPFIS-approved unit trusts to potentially achieve higher returns. However, CPFIS investments come with unique fee structures and restrictions compared to cash investments.

Key fees and differences when investing CPF funds in unit trusts

CPFIS Total Expense Ratio (TER) Caps

CPFIS-approved unit trusts have regulated TER caps to ensure cost efficiency for CPF members. The TER is a measure of a fund’s total annual expenses as a percentage of its Net Asset Value (NAV).

Key factors to consider when choosing a unit trust

Selecting the right unit trust requires evaluating multiple factors to ensure it aligns with your financial goals and risk tolerance. Here are the essential aspects to consider:

A unit trust should fit your financial strategy, risk appetite, and investment horizon. Evaluating these factors will help you make a well-informed decision that aligns with your long-term financial goals.

How to start investing in unit trusts

Investing in unit trusts is straightforward and accessible through various channels. Whether you're making a lump sum investment, opting for a regular savings plan (RSP), or using CPF or SRS funds, here’s how you can get started:

Ways to invest in unit trusts

Getting started with unit trust investments

1. Choose your investment platform

• You can invest through banks (e.g., DBS, OCBC, UOB), online investment platforms, or financial advisers.
• Some platforms provide curated fund lists to help you choose funds aligned with your goals.

2. Decide on your investment approach

• Lump sum investment: Suitable if you have capital ready to invest. Provides full exposure to the market immediately.
• Regular savings plan (RSP): Ideal for beginners or those who prefer gradual investments. Helps mitigate market volatility through dollar-cost averaging.
• CPF or SRS investment: A great option to grow your retirement funds while enjoying tax benefits. Ensure the fund is CPFIS-approved or SRS-eligible.

3. Select a unit trust fund

• Compare fund objectives, past performance, risk levels, and fees.
• Look for funds that align with your financial goals, whether it's capital growth, income generation, or risk management.

4. Make your investment

• Once you’ve chosen a fund, complete your purchase through your selected platform.
• If investing via CPF or SRS, ensure that the returns and dividends will be credited back into your respective accounts.

StashAway General Investing: Experience low fees, minimised risk investment

Investing isn’t just about selecting assets—it’s about keeping costs low to maximize returns. While unit trusts come with multiple layers of fees, StashAway General Investing offers a simpler, more transparent fee structure, helping investors retain more of their earnings.

The cost of investing in unit trusts

Unit trusts often charge:

❌ Upfront fees (1.5% - 5%)—reducing your initial capital

❌ Management fees (1% - 2%)—eroding returns every year

❌ Additional platform, redemption, and switching fees

Over time, these fees significantly impact long-term wealth accumulation.

How stashaway keeps investing costs low

✅ No upfront, exit, or switching fees

✅ Lower management fees (0.2% - 0.8% per year)

✅ ETF expense ratios (~0.2%) for cost efficiency

With a transparent pricing model and lower fees, more of your investment stays in the market, compounding over time.

Investing, as it should be

• No lock-ins—access your funds anytime
• Risk-adjusted investing—portfolios adapt based on economic trends
• Flexible portfolios—customizable to different financial goals

By reducing costs and providing greater flexibility, StashAway offers a modern approach to long-term investing.

Frequently asked questions

1. What is a wrap account?

A wrap account is an investment account that bundles multiple financial services into a single structure for a flat annual fee. Instead of paying separate transaction costs for each investment, you pay a fixed percentage of your total portfolio value (typically around 0.4% per year under CPFIS).

Wrap accounts provide:

• Convenience – Manage multiple unit trusts under one account.
• Lower transaction costs – No individual switching or redemption fees.
• Ongoing advisory services – Fund managers or financial advisors may offer investment guidance.

However, the annual wrap fee applies regardless of performance, so it’s important to assess whether the service justifies the cost.

2. Do unit trusts pay dividends?

Yes, but not all unit trusts offer dividend payouts.

• Income-focused unit trusts – Pay regular dividends from earnings on dividend stocks, bonds, or other income-generating assets.
• Growth-focused unit trusts – Reinvest profits into the fund instead of distributing them, aiming for long-term capital appreciation.

Check the fund’s dividend policy before investing to see if it aligns with your income goals.

3. Can I invest in unit trusts that are set up overseas?

Yes, many unit trusts in Singapore offer access to international markets through foreign-registered or globally diversified funds.

However, investing in overseas unit trusts comes with additional risks:

• Foreign exchange risk – Currency fluctuations may impact returns.
• Different regulations – Some funds are subject to foreign investment rules.
• Market conditions – Economic and political factors may affect the fund’s performance.

Ensure the unit trust is authorised for sale in Singapore and understand its risk profile before investing.

4. What happens if I change my mind after buying a unit trust?

Most unit trusts provide a cooling-off period, typically 7 calendar days from the date of purchase. During this period, you can cancel your investment and get a refund.

However:

• The refund may be adjusted for market fluctuations if the unit’s value has changed.
• The cooling-off period applies only to first-time purchases (not additional investments).
• Some funds may have specific cancellation terms, so check with your provider.

5. What is the minimum investment for unit trusts in Singapore?

The minimum investment varies by provider and fund type. Generally:

• Lump sum investments start from S$500 to S$1,000.
• Regular savings plans (RSPs) allow investments from as low as S$100 per month.
• CPFIS-approved unit trusts have varying minimums depending on the fund.

6. Can I use my CPF or SRS savings to invest in unit trusts?

Yes, you can invest in CPFIS-approved unit trusts using funds from your CPF Ordinary Account (OA) and Special Account (SA). SRS (Supplementary Retirement Scheme) funds can also be used for investment.

• CPF investments are subject to regulated fees and expense ratio caps.
• Returns and dividends are credited back into your CPF or SRS account.

Ensure the unit trust you’re considering is approved under CPFIS or SRS before investing.

7. Are all unit trust funds CPFIS approved?

Not all unit trust funds are CPFIS approved. The CPF Board has specific criteria for screening investment products to be included in the CPF Investment Scheme (CPFIS). Here are some key points:

Key admission criteria for CPFIS unit trusts

• Performance Benchmark – The fund must rank within the top 25% of its global peer group based on qualitative and quantitative assessments.
• Total Expense Ratio (TER) Cap – The fund’s expense ratio must not exceed CPF Board’s prescribed limit for its respective risk category. This requirement applies to all existing CPFIS funds from 1 January 2008 onwards.
• Sales Charge – 0% sales charge, ensuring investors are not burdened with front-end costs.
• Track Record – New funds applying for CPFIS inclusion should preferably have at least 3 years of strong performance history before admission.

Additional considerations for CPFIS-approved funds

1. Funds must be recognized by MAS (Monetary Authority of Singapore) – They must comply with Sections 286 & 287 of the Securities and Futures Act (SFA).
2. CPF Board approval required – Fund managers must submit applications and provide compliance reports.
3. Investment restrictions – Funds must invest at least 95% of their assets in compliance with CPF guidelines.
4. No cash rebates – Fund managers cannot retain cash rebates for themselves when managing CPFIS-approved funds.
5. Wrap account fees – CPFIS wrap accounts are subject to a 0.4% per year fee on total investment value.

Evaluation Process

• The CPF Board has outsourced the evaluation task to Morningstar, which assesses whether unit trusts seeking admission meet all the criteria.
• As of January 2025, there were 108 List A Unit Trusts under the CPFIS.

8. How do I withdraw money from a unit trust?

To redeem your investment, submit a sell request through your fund provider, bank, or investment platform.

• Funds are typically processed within 3-7 business days.
• Redemption fees may apply depending on the fund’s terms.
• If using CPF or SRS, the proceeds will be returned to your CPF/SRS account, not directly to you.

9. How are unit trust fees different from ETFs?

Unit trusts are typically actively managed, while ETFs often follow a passive index strategy, resulting in lower costs.

10. Can I transfer my unit trust investment to another provider?

Yes, some providers allow unit trust transfers between platforms, but conditions apply:

• Some transfers may incur administrative fees.
• You may need to sell and repurchase the unit trust if the new provider does not support direct transfers.
• CPF/SRS-linked unit trusts must remain within CPFIS-approved or SRS-eligible platforms.