Fse Poly Weekly Report Q9

The factors the potential investors must consider before buying unit trusts and mutual funds are as follows:

1) Selection of funds

There are 3 steps. The first step is the self-assessment of investor’s own financial background. It includes reviewing monthly income, expenditure position, assets, family obligation and other financial obligations. The second step is to select the appropriate fund sector, based on investment objectives and risk/return expectations. The last step is the way to select a fund. Investor should try to obtain more information on funds by reading the details of explanatory memorandum or the prospectus before investing because it is a legal document that provides you with details of a fund's objectives, investment strategies, fees and charges as well as other important investment information (i.e. risk/return expectation). Also, investor should call the SFC to check the fund’s authorization status.

2) Selection of fund companies

The corporate background of the fund companies, the types of products and services offered, its investment philosophy and approach and also the point-of-sales are the factors that an investor can take into consideration before choosing a fund manager.

3) Fees/Prices

Investor has to know what types of fees they have to pay and when to pay. When we invest a fund, we basically have to pay initial subscription charge and annual management fee. For the initial subscription charge, it will be paid up-front, i.e. the time when you subscribe. While for the annual management fee, the potential investors do not have to pay out-of-pocket separately, the fund will accrue it on a daily or weekly basis, and deduct it from the pool of money before the returns are divided amongst investors.

4) Review the fund performance/return data

Fund performance data are compiled by Standard & Poor's Fund Services, Lipper Asia, and other independent companies that track fund performance. The HKIFA website carries...