Understanding mutual funds: a comprehensive guide for Singaporean investors

Unlike stocks, mutual funds are professionally managed investments which pool together the money of a group of investors to buy a more comprehensive selection of securities. Mutual funds are designed to provide better diversification and more professional management than most individual investors can achieve independently. As such, these funds are an attractive option for many Singaporean investors looking to build wealth without taking on too much risk.

When investing in a mutual fund in Singapore, you must ensure it meets your investment goals and objectives. This approach means you should thoroughly research the fund before committing. Here is what every investor should know about understanding mutual funds:

Understand your investment goals

Before investing in mutual funds in Singapore, it is essential to understand your financial goals. Are you looking for a long-term investment to achieve retirement goals? Or are you looking for short-term gains? Knowing what you want from an investment can help you narrow the list of funds and select one best suited to your needs.

Understand the fees

Mutual funds charge investors management fees covering managing the fund’s investments, varying from 0.5% to 1%. Being aware of these charges is essential as they will impact your overall returns from the fund. Some funds may also charge sales charges or redemption fees when buying or selling shares in the fund.

Understand the risk level

Mutual funds are categorised into three categories based on their risk level: low, moderate, and high. Low-risk funds typically invest in conservative investments such as government bonds and blue chip stocks. Moderate-risk funds tend to have more exposure to stocks and other higher-risk securities, such as real estate investment trusts (REITs). High-risk funds will be more heavily invested in stocks with the potential for more significant gains and losses.

Understand the fund’s performance

Understanding how the fund has performed over time is crucial to make an informed investment decision when delving into mutual funds. Look at the fund’s past performance to determine whether it supports your financial goals and risk tolerance. You can also compare the fund’s performance to other funds in the same category, giving you a better idea of how it compares to its peers.

Understand the fund’s strategy

Each mutual fund has a specific investment strategy when selecting investments. It is essential to understand the strategies employed by the fund manager to ensure that it aligns with your own goals and objectives. For example, some funds focus on growth stocks, while others may focus on dividend-paying stocks or index funds.

The benefits of using a broker when investing in mutual funds

Using a broker when investing in mutual funds can offer investors several advantages. Firstly, brokers are typically experienced professionals who understand the markets and have access to information that may not be available to individual investors. They can help you decide which funds to invest in and how to diversify your portfolio.

Brokers will often offer advice on managing your investments over time. They can guide you when buying or selling securities is appropriate and offer tips on diversifying your portfolio for maximum returns.

Brokers also offer various services, such as tax and estate planning, which could benefit investors looking for more comprehensive financial advice. Using a broker ensures that all aspects of your investment strategy are considered before deciding where to put your money.

Having a trusted professional handle your investments provide peace of mind knowing a qualified person is constantly seeking your best interests. Brokers will monitor the fund’s performance on an ongoing basis, so you don’t have to worry about missing out on potential gains or losses due to a lack of knowledge or trade experience in investing in mutual funds yourself.


Understanding mutual funds requires research and due diligence before investing in any. Understanding your performance and researching a fund’s fees and risk level, analysing its past performance, and reviewing its investment strategies are all essential steps to take before investing. You should select a mutual fund that best meets your financial and investment needs and risk tolerance by researching.