Monday, October 5, 2009

Shares, Unit Trust, ETF

In one of the posts in september, I mentioned that there are a few investment instrument that we can use. I will be explaining three investment instrument, namely shares, unit trust and ETF in this post.

What are SHARES:
The most commonly investment instrument is shares. Shares are normally distributed by companies to raise fund for their operation or expansion. You can buy and sell shares within the trading time provided by the exchange.

You earn money when your share price goes up, and you lost money when your share price go down. You will be given dividend if the companies make money and decide to give part of the profit to the share holders.

You will be charged commission when you buy or sell your shares, usually less than 0.5% of the total cost of your shares.

UNIT TRUST:
Unit trust is a form of pooled investment where a fund manager invests funds on different shares on behalf of a group of investors.

You earn money only when your unit trust price goes up, and lose money when your unit trust price goes down. Please take note, most of the unit trust do not give out dividends.

There are sale charges when you buy unit trust. Normally is about 1 to 5% of the total cost of the unit trust you buy. There will also be management fees which normally range from 0% to 5% per annual.

Please take note, the updated price of the unit trust is done in daily basis. Normally you do not know the exact price when you buy or sell the unit trust because it will be based on the next day price.

ETF:
Exchange-traded funds hold a basket of securities like unit trust but they trade like a stock which means that they can be purchased at any time of the day.

You earn money when your ETF price goes up, and you lost money when your ETF price go down. Some ETFs will give dividends.

You will be charged commission when you buy or sell your ETF, usually less than 0.5% of the total cost of your ETF. Like unit trust, there will be management fees which normally range from 0% to 1% per annual.

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