February 15, 2017 0

What is a Fund Fact Sheet?

What is a Fund Fact Sheet?

A Fund Fact Sheet can be used as a summary guide before selecting and investing in a unit trust fund. We can treat the Fund Fact Sheet as an infographic summary of the whats and hows of a unit trust fund. Fund Fact Sheets are made to be read by the average investors, so we do not need to have a wealth of investment or financial knowledge to understand what we are looking at.

Other recommended reads and important documents that we should look at before investing: Prospectus, Product Highlight Sheet, Information Memorandum (if any) of the Unit Trust Fund that we have selected and going to invest in. There are some terminologies and details that can be found in these documents which will help us to understand more about a unit trust fund, which the process can be shortened by engaging a Financial Consultant, Advisor or a Planner.

What Fund Fact Sheet contains? Generally, a Fund Fact Sheet will have the following items:

a) The Objective

Each funds has a specific objective that tells investors what the funds aim to achieve. Examples of objectives include Capital Appreciation, Regular Income or Liquidity. As investors, we must be aware of the objectives of the funds before investing into it.

b) The Portfolio Allocation

Funds in Unit Trusts are actually portfolio of various securities – spread across sectors and stocks with the aim of effective diversification.  Generally there are two sections of allocations for Unit Trust Funds:

  • i. Sector allocation
  • This section highlights the sectors involved in the investment. Why various sectors? Mainly because concentration in one sector can make the fund prone to a relatively high volatility. Sector allocation is depicted along with the weight of the investment.
  • ii. Portfolio holdings
  • This section highlights the top 10 stocks that the fund invest in across sectors, along with the weight of investment.

These information gives us idea of where and how effectively, the fund manager is investing our money.

c) Performance

Please do remember that performance of a fund is only history and in the past. Performance is not advisable to be used as indicator of future returns. Performance is mainly used to understand how a fund has been doing against its benchmark over a period of time. We can also use performance as a parameter to compare against other funds in their own categories. This information is considered crucial as it gives a snapshot of the fund’s history and current trajectory.

d) Entry Fees, Redemption Fees & its period and Annual Management & Trustee Fees

This is important as this is where we are shown how much does it cost to invest into or exit from the fund. Please do take note on the charges before investing in a fund.

e) NAV

NAV is Net Assett Value. NAV is the price of one unit of the fund. NAV is a relatively crucial element to look at before investing in a unit trust.

f) Fund Manager

A Fund Manager is the one who invests the money collected by a unit trust scheme. The fund manager’s name may also be mentioned in the fund fact sheet to maintain utmost transparency with the investors.

g) AUM

AUM is Assets Under Management. AUM is the total size of a unit trust fund. For easy understanding it is the total money ‘collected by’ / ‘invested into’ the fund.

h) Benchmark Index

The benchmark index is the stock market index that the unit trust fund can be compared to. Performance of a unit trust fund is always set against to the benchmark to gauge its performance over a period of time. In Malaysia, for most Syariah-compliant Malaysian equity funds, it is always being compared against FBMEMAS 100. And for most non-Syariah-compliant Malaysian equity funds, the benchmark is against FMBKLCI 30.

i) Minimum Initial, Lump Sum and Regular Investment

This is the minimum amount that an investor needs to commit to invest into the fund.

j) Standard Deviation

Standard Deviation is a statistical measure of the range of investment’s performance. When a unit trust fund has a high standard deviation, it means its range of performance is wide, implying greater volatility. Volatility is a statistical measure of the dispersion of returns for a given security or market index, and can be measured using the variance between returns from that security or market index. Commonly, the higher the volatility is, the riskier the security is. This information is useful as it will show how risky a fund is. Depending on our age and other holdings in our portfolio, a fund may be too risky for us to tolerate or too income-focused.

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There are many other items listed in a Fund Fact Sheet. But generally, the above listed items can be found in a Fund Fact Sheet.

Talk to me and set an appointment with me to understand more about the techniques on reading Fund Fact Sheets. Click here to contact me.

Source and article flow from Investopedia and various sources from the web.
This article is edited and structured by Fahmie A. Hamid.

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