Absolute Returns

The percentage movement in the value of fund units from one period to the next.

Annualised Returns

The percentage movement in the value of fund units from one period to the next, adjusted to a compounded basis.

Annualized Performance

This is the performance of the fund expressed in terms of 12 months

Auditors

The professionals who check the accounts of a unit trust or company for accuracy, completeness and honesty.

Bid Price

The price at which you can redeem your units.

Bid / Offer Price

This is one of the pricing methods for Unit Trusts.

Bid / Offer prices are two prices quoted for a unit trust. An investor can buy at the offer price and sell or redeem at the bid price. The Bid / Offer price multiplied by the total number of units gives you the redemption proceeds / buy amount respectively.

The bid price is usually lower than the offer price. The difference between the bid and offer is the spread, which is equivalent to the sales charge. In Singapore, the spread is usually between 2% and 5.5 %.

Example of bid/offer pricing

Investment amount S$5,000

Bid/offer spread 5%

Bid price S$9.50

Offer price S$10.00

Total units issued at S$10.00 per unit = S$5,000 / 10 = 500 units

Bond

A security issued by a company or a government which promises to give you a fixed sum at a future date in return for a regular, specified level of income until that maturity date.

Benchmark

The performance of a basket of stocks or securities over a time horizon, against which the performance of an investment fund is compared against.

Capital Appreciation

Increase in the value of capital -  the objective of most equity - invested unit trusts.

CASH SURPLUS/DEFICIT (total income - total expenditure)

The Cash flow indicates how you are doing financially, month to month and for the year.

With a cash surplus, you can save it, invest it, use it acquire more assets or reduce debt. Increasing savings and investments will raise future income, while repaying debt will help cash flowing by reducing future expenditures. On the other hand, the undesirable cash deficit is likely to deplete savings, reduce investments and possibly caused debts.

CPF (Central Provident Fund)

Singapore’s state-run private savings and welfare scheme.

The Central Depository (Pte) Limited (CDP)

The CDP accounts keep your shares in custody as well as record the shares movement everytime the investors transact.

CPF Investment Administrator

A CPF Investment Administrator is able to draw a consolidated amount directly from your CPF agent bank for all your CPF investments. What this means is that you enjoy huge savings in agent bank charges when you invest your CPF monies.

CPF Risk Classifications

The CPF Risk Classification System splits the investment risk associated with an investment into two broad components. For purposes of the Risk Classification System, we will refer to these components as “Equity Risk” and “Focus Risk”. 

CPFOA-IA

CPFOA Investment through a CPF Investment Administrator. The investment fund source will be known as CPFOA-IA 

CPFSA-IA

CPFSA Investment through a CPF Investment Administrator. The investment fund source will be known as CPFSA-IA

Commodity

This is classified as an alternative investment class that entails higher risk as compared to equity. Commodity unit trust funds usually invest in an underlying commodities’ index e.g., corn, oil, agriculture or companies that have exposure in commodities.

Cumulative Returns since Inception

The aggregate amount that the unit trust has gained / lost since inception.

Debt Service Ratio
[total annual loan repayments/annual gross income]

Debts must be paid, an important aspect of a good financial plan is that it enables you to service your debt promptly and comfortably. This ratio allows you to monitor your debt obligations.

This ratio excludes liabilities to be repaid with one-year. It takes into account only long -term obligations
like mortgages, installments, and personal loans.

The lower this ratio, the easier it will be to service your debts as they come due. A good financial plan should keep the debt service ratio somewhere below 35 per cent.

Dividend

The cash payment that a company or a unit trust pays out annually or half-yearly.

Dollar - cost - averaging

The mathematical concept of regular investment of a fixed cash amount in a volatile asset (such as a unit trust), by which the average cost of acquisition is lower than the average value of the asset over a period of time.

Diversification

The concept of investing in various securities to reduce the risk of investing in one security.

EPS – Electronic Payment for Shares

The Electronic Payment Scheme for Shares is a payment scheme that allows investors to do a fund transfer payment via the ATM or Internet banking for purchase of their shares or unit trust.

Expense Ratio

An expense ratio is the percentage of a mutual fund's or variable annuity's total assets deducted to cover operating and management expenses.

Equity

The part of a company’s capital which is owned by its shareholders; shares

Fact Sheet

A short document produced by the fund managers containing useful information about a unit trust, such as recent performance, asset allocation etc. for the benefits of the investors.

Front-End Load

The initial service charge paid by the investors when purchasing the funds. This term is used interchangeably with sales charge.

Fund Manager

A group of people or organization with investment expertise in managing a unit trust.

Fund Size

The total net asset value (NAV) of the fund.

GIRO

GIRO is an auto-deduction of the money from a investor’s designated bank account for the payment of unit trust investment. In this case, it is referring the Regular Savings Plan.

GIRO form

Hedge Fund

An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).

Inception Date

The date on which the unit trust was introduced.

Inception Price

The price on inception date.

Income Distribution

The portion of dividends, interest and capital gains earned by the unit trust and paid out to unit holders.

Investment Objectives

What a financial instrument, such as unit trust, is trying to achieve, for example, to achieve a return of at least 3% within a time period of 6 months.

Lipper’s Ratings

The Lipper Leaders Rating System is a mutual fund rating system that uses investor-centered criteria, such as capital preservation, expense and consistent return.Funds are rated on a numeric scale of 5 to 1, with ‘5’ representing funds with the highest rating or Lipper Leaders, and ‘1’ representing the lowest rated funds.

Liquidity Ratio
[liquid assets/total current debts]

It indicates how low you can continue to repay liabilities with existing liquid assets in the event of income loss. A low figure will be a cause of concern. Current debts represent that must be paid within a year.

This means that you can cover < > % of your existing one-year debts with your current liquid assets or equivalent to about < > months. (One month is 11/2 or 8.3 per cent coverage)

The more number of months would indicate a better "cushion level" before creditors come knocking at your door it is recommended to have about three to six months of coverage. If your job is relatively secure, you may feel comfortable with just three months of liquid assets. However in bad times, you may want to keep six months or more of the income in liquid form.

Management Fee

The Investment Manager’s remuneration, which is calculated as a percentage of the total net asset value of the portfolio and is usually accrued at each dealing day.

Money Market Fund 

Money Market funds are unit trusts that invest in low-risk securities and thus pay low dividends that generally reflect short-term interest rates.

Morning Star Ratings

A system created by Morningstar Inc., which ranks unit trusts based on their risk-adjusted performance over various periods. 5 stars is the best ranking and 1 star is the worst.

Multi Currency Ledger Account

The Multi Currency Ledger account is an opt-in facility of a trading account. This facility allows the investor to hold up to 6 different currencies (SGD, RM, EUR, AUD, THB and USD) in the account for the purpose of buying and selling of investment products eg. unit trust.

N.A.

Not Applicable, unless otherwise stated.

Net Asset Value (NAV)

The market value of the fund’s total assets plus income less expenses.

Net Asset Value (NAV) Pricing

This is one of the pricing methods for Unit Trusts. NAV is the market value of the fund’s total assets plus income less expenses.

Example of NAV pricing

Investment amount S$5,000

Initial sales charge 5%

NAV price = S$10.00 per unit

Investment amount after deducting initial sales charge

= S$5,000 – 0.05X 5,000 = S$5,000 – 250 = S$4,750

Total units issued at S$10.00 per unit = S$4,750 / 10 = 475 units  

Net Worth
[total assets - total liabilities]

This is an excellent gauge of a persons financial health. A person is technically insolvent if net worth is less than zero, possibly due to lack of financial planning.

Net worth will vary through a person's life. If you have just started on a career, it is most likely that your net worth is relatively low as liabilities like a car loan, rent and utility bills are likely to make up a large portion of your balance sheet. As you grow older it is likely that you have accumulated more assets like a home and some financial assets that will increase your net worth substantially.

In long-term financial planning process, it would be a good idea to constantly monitor and even set a target net worth.

Offer Price

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

Open Ended Fund

A fund which increases and decreases in value with each subscription and redemption.

Performance

This is usually quoted as the percentage movement in the value of units from one period to the next. This is usually presented in a percentage format on an Absolute Return basis or an Annualised Return basis. Performance may also be judged on a relative basis against a benchmark.

Performance Returns (%)

This is the discrete performance of the fund in the relevant time period.

Phillip Cash Management Account (PCMA)

Phillip Cash Management Account (PCMA) is a trading account that allows you to trade unit trusts, shares, ETFs, treasury bills and other investment products. It allows an investor to hold excess funds in the account to facilitate investment transaction such as unit trust. An investor can also choose to automatically channel the excess funds into money market funds to potentially earn returns. (refer to money market fund for more info.)  

Portfolio

A collection of different types of investments.

Prospectus

The legal document that contains all the information about a unit trust.

PSPL Risk Classifications

This Risk Classification System developed by Phillip Securities splits the investment risk associated with an investment into two broad components, focus risk and expected asset class risk.

Redistribution

Unit holders who opt for reinvestment instruct the fund manager to use their income to buy additional units at the prevailing offer price.

Regular Savings Plan

A Regular Savings Plan (RSP) is a monthly investment plan that enables an investor to invest a fixed amount of money at regular intervals into a particular fund.

Risk Adjusted Performance

This is the ratio of the performance of the fund over the standard deviation of the fund in the same time period. 

Sales Charge

The initial service charge paid by the investors when purchasing the funds. It is alternatively known as front end load.

Savings Ratio
[annual cash surplus/annual gross income]

It reveals how much of your after-tax income is saved.

You have saved < >% of your after- tax income.

A ratio of 10% is considered healthy, however it depends largely on your own preference between consumption and saving or depending on situational needs. A person intending to buy a home may wish to save a large portion of his income versus one who has already bought most of the things he desires.

Solvency Ratio
[total net worth/total assets]

This ratio tells you by how much the value of your assets can fall before you are insolvent.

You can only withstand the < > % decline in market value of your assets before you become insolvent. A low percentage suggests that you should find ways to improve your net worth.

Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme (SRS) complements the Central Provident Fund (CPF.  CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement.  Unlike the CPF scheme, participation in SRS is voluntary.  Participants can contribute a varying amount to SRS (subject to a cap) at their own discretion.  The contributions may be used to purchase various investment instruments (including unit trusts).  The SRS offers attractive tax benefits.  Contributions to SRS are eligible for tax relief and only 50% of the withdrawals from the SRS are taxable at retirement.

Trust

A legal entity run by a group of people or an organization to protect the interests of a person or a group of people.

Trustee

An individual or 3rd party company who holds or manages assets for the benefit of another

Turnover Ratio

The turnover ratio indicates the percentage of holdings that the fund sells or turns over in a year.

Unit Holders

The owners of units in a unit trust.

Unit Trust

A pool of financial instruments that is sub-divided into smaller units, and managed by a fund manager.

Volatility

The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes.

Methodology

The concepts or ideas that are used to analyze and score the unit trust.