Maximising Returns While Minimising Stress: Comparing Unit Trusts vs ETFs vs REITs

Is your hard-earned money doing all it can for you, or is it just sitting quietly in a savings account? While many Singaporeans dream of growing their wealth, some just don’t have the time to constantly monitor the market, while others prefer to leave investing to the experts.

If you’ve looked into hands-off investing, you’ve no doubt come across some of these terms: Exchange Traded Funds (ETFs), Unit Trusts, and Real Estate Investment Trusts (REITs). But what is the difference between them and which is right for you?

In this guide, we’ll compare ETFs vs Unit Trusts vs REITs, showing you how each works and more importantly, how some can offer a stress-free path to potentially better returns.

Understanding ETFs, Unit Trusts and REITs

So what exactly is an ETF, Unit Trust and REIT? Let’s explore each of these investment vehicles in greater detail. 

Exchange Traded Funds (ETFs)

An ETF is a type of investment fund that is designed to track a specific index (like the Straits Times Index), a commodity (like precious metals), or a sector (like technology). 

Depending on what it is tracking, an ETF will hold either stocks, bonds, or other securities. Unlike a Unit Trust, which is actively managed by a fund manager, ETFs rebalance themselves passively based on the index they are tracking.

For example, if a company's weighting in the Straits Times Index increases, the ETF will periodically buy more of its shares to match the change. This passive, rules-based approach requires no active decision-making, which is the main difference between an ETF and Unit Trust.

Unit Trusts

A Unit Trust, also referred to as a Mutual Fund, is basically a professionally managed "basket" of investments. 

When you invest, your money is pooled with that of other investors to purchase a diversified portfolio of assets, such as stocks, bonds, or other securities. You own "units" in this basket, and a team of expert fund managers handles the buying, selling, and rebalancing of securities within this basket for you, aiming to outperform the market with their active management. 

Real Estate Investment Trusts (REITs)

REITs are essentially investment vehicles that own, operate, or finance income-generating real estate assets, such as shopping malls, offices, or warehouses.

Investing in a REIT is like owning a diversified property portfolio without the hassle of being a direct landlord. As a unit holder, you can benefit from the rental income and potential appreciation of these properties, receiving a steady stream of dividends that are potentially higher than traditional stocks.

Comparing Unit Trusts vs ETFs vs REITs

Maximising Returns with Minimal Stress: Where Unit Trusts Shine

For many retail investors in Singapore, the idea of "maximising returns while minimising stress" is the holy grail. While all three options have their merits, Unit Trusts stand out for those seeking a professionally managed, diversified, and convenient investment journey. Here are some reasons why:

Let Experts Do the Heavy Lifting

The biggest difference between an ETF and a Unit Trust is the active management. With Unit Trusts, you benefit from the expertise of dedicated fund managers who continuously research markets, select assets, and adjust portfolios. Unlike passively managed ETFs, active Unit Trust managers can adapt to changing market conditions, aiming to outperform benchmarks and protect your investments during volatile periods.

Additionally, if you bought an ETF, you would have to manage it yourself (i.e. making the decisions to buy and/or sell), which can mean constantly monitoring financial news and making decisions regarding your investment if you wish to manage your portfolio actively. With a Unit Trust, the manager does all of that so you can spend that mental capital somewhere else.

Diversify with a Basket of Stocks

Unit Trusts often offer a high level of diversification across various companies, industries, and even geographical regions with a single investment. This built-in diversification helps to reduce risk, as you're not putting all your eggs in one basket.

Unit trusts allow investors to access asset classes – such as global bonds, emerging markets, or alternative investments – that are typically out of reach for individual retail investors due to high entry requirements or limited market access. This is a big consideration when debating Exchange Traded Funds (ETFs) vs Unit Trusts/Mutual Funds.

Accessible with Low Barrier to Entry

Unit Trusts often have low minimum investment amounts, making them highly accessible for everyday Singaporean investors looking to start their wealth accumulation journey. 

Many Unit Trust platforms also allow for regular savings plans (RSP), making it easy to automate your investments over time, helping you to dollar cost average into your investment. Some Unit Trust platforms even allow you to invest via your CPF or SRS as an alternative to cash-only investments, providing greater flexibility and choice.

Grow Your Funds Stress-Free with Unit Trust Funds from CIMB

If you are an investor looking for a more hands-off approach whilst still looking for active management, CIMB Unit Trust Funds provide a compelling pathway to growing your wealth. Get access to a wide range of asset classes and professional fund managers to help you build a diversified portfolio that spreads out your risk.

Here’s what you can expect when you invest with CIMB:

• Wide Selection: Access to a range of funds from different fund houses, giving you a comprehensive range of investment options.
• Expert Analysis: Our in-house investment and market experts  continuously analyses products to ensure they remain aligned with current market trends.
• Flexible Funding: Invest conveniently using cash via our app, or through our Relationship Managers if you wish to invest using CPF or SRS  funds.

Start investing with CIMB Unit Trust Funds today and let our experts do the heavy lifting for you as you work towards your financial goals. 

The information contained herein is believed to be correct at the time of issue and does not purport to contain all the information that a prospective customer may require. CIMB Bank Berhad, Singapore Branch (“CIMB”) makes no express or implied warranty as to the accuracy or completeness of any such information and opinion contained herein. Nothing herein is intended to be, or should be construed as an offer, recommendation, solicitation or invitation by CIMB to commit to any product. They are prepared without regard to the specific objectives, financial situation or needs of any particular person.