71) Benefits of Unit Trust vs Share Investment.
1) Easy to buy & sell Unit Trust in small amount. Determined in Dollar value, and not units quantity.
2) Low Unit Trust initial starting amount compared to high value shares.
3) Initial Service fee is based on percentage of Dollar value invested. Not on minimum fees charged per transaction.
4) Pay only initial service charge when buying Unit Trusts. Normally no fees when selling units. Shares charge fees when buy and sell.
5) Unit Trust fund is managed by professional fund managers. No need to study the details of company’s financials. Also not easy and costly to get access to company’s information.
6) Avoid issue of buying shares based on hot tips & recommendations from others. Most investors buy shares without understanding the company’s business.
7) Not much study required to invest in Unit Trusts. A lot of work and time to study many different companies before buying shares.
8) Need a lot of time to monitor share price movements, while no need to monitor unit trusts prices regularly.
9) Not easy to buy foreign shares. Have to open different trading accounts.
10) Unit Trusts are a diversified investment, while each share is specific to one company only. Buying only a share has a specific risks of that company.
11) Easy to switch Unit Trust between local and foreign investments.
12) Easy to switch Unit Trust between equity, bonds and money market.
13) UTMCs are paid by percentage of NAV. So the motivation to keep increasing the Net Asset Value. Share Brokers are paid by trading transaction commissions. Motivation to buy and sell more often.
14) Shares price volatility is much higher than Unit Trusts. Potentially Higher Return, but with Higher Risks.
15) Unit Trusts distributions can set to be auto-reinvested. Share dividends are normally paid out as cash; not able to maximize the compounding returns.
16) Shares may issue share splits and bonus units. Without the proper share quantity, it will make your share holdings into odd lots. Odd lots means you hold shares not in multiples of 100 units and become more difficult to sell. Share trading are in lots of 100 shares. Unit trusts has no lot size in units.
17) For shares, you have to monitor rights issue to purchase shares at a lower price. If you do not take up the offer, you missed the full benefits. Many small investors do not track their long term holdings. For unit trusts, all the monitoring done by the fund managers.
18) You can buy and sell Unit Trusts any time. Buying and selling of shares depend on the demand and supply. You can't buy a share if nobody wants to sell the shares. You can't sell your shares if nobody wants to buy the shares. Many shares are untraded.
19) You risk the effect of emotionally involved in your shares. Your mood will be affected by the daily share performance. You feel happy when the shares price go up. Feel sad and angry when the shares price dropped.
20) Unit trust fund managers consists of teams of experts. For shares, you have limited resources and expertise.
21) Unit Trusts are for long term investments. Most share investors keep shares only for the short term. They tend to speculate the price movements and do trading. Some even do Contra Trading.
Disadvantages of Unit Trust vs Shares
1) You can buy and sell any share you like at any time. The unit trust fund manager decides when and what to buy and sell in the unit trust funds.
2) You have to rely on the expertise of the fund manager. Your funds performance will be dependent and affected by their decisions and expertise.
3) Funds have the restrictions of minimum and maximum exposure in any asset class. For example, an equity fund may have to hold 70% to 98% in stocks. The fund manager cannot sell all the stocks and keep 100% in cash.
4) You can do margin trading in shares. Unit trusts are fully funded by your money.
More readings:
Time In vs Timing the Market
https://highlevelrules.blogspot.com/2017/10/time-in-vs-timing-market_24.html
Investing vs Trading
https://highlevelrules.blogspot.com/2018/05/timing-vs-trading.html
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