Best Mutual Funds And How To Invest For Singapore Investors

>> Read: Best brokers for mutual funds

When looking at mutual funds gaining traction among Singapore investors, several established options stand out. We've focused on funds with accessible entry points, reasonable costs, and a track record of strong potential returns. These funds have demonstrated appeal within the Singaporean investment landscape:

If you’re ready to start investing in mutual funds, take a look at our comprehensive guide below:

Your first choice is a crucial one: Should you aim to beat the market, or simply track it? This decision significantly impacts your costs, potential returns and the level of involvement required in managing your investments.

Active funds are professionally managed and aim to outperform the market. While some managers may succeed in the short term, achieving consistent long-term outperformance can be challenging.

Passive investing, on the other hand, is a hands-off approach that is gaining popularity due to its simplicity and consistent results. Passive funds, such as index Exchange-traded Funds (ETFs), typically have lower fees, and are generally more efficient and cost effective, making it appealing to many Singaporean investors.

>> Read: What are exchange-traded funds

Before diving into mutual funds investment, it's essential to determine how much you can comfortably invest. Consider your broader financial goals. Are you investing for retirement, a down payment on a house or your children's education? Aligning your investment budget with your objectives will provide clarity and help you stay on track.

Mutual funds often have minimum investment amounts, which can range from a few hundred to a few thousand Singapore dollars. Factor this into your budget, but remember that you can often contribute more after meeting the minimum. Also, consider your risk tolerance. Younger investors might opt for higher-risk, higher-reward funds, while those closer to retirement may prefer more conservative options.

>> Read: The best brokers for mutual funds 

In Singapore, investing in mutual funds offers flexibility beyond brokerage accounts. You can use online brokerages for wide fund selections and competitive fees, banks for convenience or robo-advisors for automated management. Contributing to the CPF Investment Scheme (CPFIS) plan is also considered a mutual funds investment. 

When choosing which platform or partner is best for you, make sure to consider the following:

• Cost: Factor in brokerage fees, such as transaction costs and fund expense ratios which directly impact your returns. Look for platforms with transparent fee structures and competitive rates to maximise your investment gains.

• Available choices: Ensure the platform offers a variety of funds aligning with your investment goals, be it local Singaporean funds, regional Asian funds or global funds. A wider selection allows for better portfolio diversification, crucial for managing risk and achieving your investment objectives.

• Tools provided: Access to comprehensive research reports, market analysis and educational resources is crucial for informed decisions. Choose a platform that empowers you to understand fund performance, risk profiles and market trends, helping you make investment decisions that align with your financial goals.

• How easy to use: Choose a user-friendly platform that suits your needs and investment style. A platform with an intuitive interface, clear navigation and mobile accessibility makes online investing in mutual funds easier and more efficient.

>> Read: How to pick the best mutual funds

Regardless of whether you choose active or passive funds, mutual fund companies levy annual fees for fund management and operational expenses, known as expense ratios. For instance, a fund with a 0.75% expense ratio will cost you S$7.50 for every S$1,000 invested.

While expense ratios might not be immediately apparent, they are vital to understand, as they can significantly reduce your returns over time.

>> Read: How to invest in stock in Singapore

Mutual funds have varying structures that affect costs:

• Open-end funds: These are the most prevalent in Singapore. They allow for unlimited shares, meaning the fund can issue new shares as more investors buy in. The Net Asset Value (NAV) per share fluctuates daily based on the fund's underlying assets. This is the common fund type you'll find in most brokerage platforms and bank offerings.

• Closed-end funds: These funds issue a fixed number of shares during an Initial Public Offering (IPO). After the IPO, shares are traded on exchanges like the Singapore Exchange (SGX). The trading price may differ from the fund's NAV due to market supply and demand. These are less common than open-end funds in Singapore.

Additional fees may also include platform fees from brokerages, custody fees for holding assets and transaction fees for trades. Make sure to review the fund's prospectus and broker's fee schedule to understand all costs before committing to a fund.

>> Read: Online brokerages in Singapore

After selecting your mutual funds investment, consider how to effectively manage your portfolio. A key strategy is to periodically rebalance your holdings, ideally annually, to maintain your diversification plan. 

For instance, if a particular asset class has experienced significant growth, you might reallocate some gains to other assets to restore your desired asset allocation. This is essential for Singaporean investors, who should aim for a well-diversified portfolio encompassing local and global funds to mitigate risk.

Adhere to your investment strategy and avoid chasing short-term performance. While past performance can be tempting, it's not a reliable indicator of future returns. This doesn't mean you should never adjust your portfolio, but avoid impulsive decisions based on recent market trends. Periodic rebalancing, aligned with your investment goals, ensures your portfolio remains on track for long-term success in the Singaporean market.

In Singapore, mutual funds offer diverse investment options to match various risk appetites and financial goals. Understanding the different types available is crucial for building a well-rounded portfolio. Just as in global markets, Singaporean investors can choose between stock, bond and money market funds, each with distinct characteristics and potential returns. 

Additionally, Singapore-specific funds focusing on local real estate or regional equities are popular choices, offering exposure to the unique dynamics of the Singaporean and Southeast Asian markets.

In Singapore, investing in stock mutual funds, or equity funds, offers the potential for higher returns, but also comes with greater risk. For instance, a technology sector fund focused on Singaporean and regional tech startups might offer higher growth potential, but also experience greater volatility compared to a Straits Times Index (STI) ETF, which aims to mirror the performance of the broader Singaporean stock market. 

Similarly, a fund focused on emerging markets in Southeast Asia will have higher growth potential, but also higher risks, when compared to a fund that only invests in the well established companies listed on the STI.

>> Read: The best index funds

In Singapore, bond mutual funds offer a less volatile investment option compared to equities, providing a more stable, albeit lower, return. For example, a fund investing in Singapore Government Securities (SGS) bonds would offer relatively low risk and steady returns, as the Singapore government is considered highly creditworthy.

Similarly, a fund holding investment-grade corporate bonds from Singaporean companies would provide a more predictable income stream compared to a stock fund. However, these bond funds would typically yield lower average returns than funds investing in the Straits Times Index (STI) or regional equity markets.

>> Read: Bond options in Singapore

In Singapore, money market mutual funds are considered one of the safest investment options, offering low returns but minimal risk to your principal. They're suitable for retirees or for conservative investors seeking to preserve capital, providing a stable, albeit modest, return.

>> Read: Best performing mutual funds this month

Yes, it is possible to lose money in mutual funds. Like any investment, they carry risks, and your investment's value can fluctuate depending on market conditions and the performance of the underlying assets. However, if you invest in well-diversified mutual funds and maintain a long-term investment horizon, you're more likely to benefit from compounding and potentially achieve positive returns.

Establishing precise financial objectives is fundamental, akin to steering clear of the pitfalls of chasing fleeting market trends. A well-defined investment goal should serve as the bedrock upon which your entire mutual fund strategy is built, ensuring every decision aligns with your long-term vision.

Equally critical is the selection of the appropriate fund type. Just as you would avoid the allure of short-lived gains, carefully choose funds that resonate with your individual risk tolerance and investment time horizon, guaranteeing long-term suitability and performance.

The meticulous control of investment costs is paramount. Excessive trading, much like a restless pursuit of short-term opportunities, can significantly diminish your returns. A steadfast focus on minimising fees and maximising the operational efficiency of your investment portfolio is essential for sustained growth.

Finally, consistent, periodic reviews are essential. Much like evaluating the strategic role of each fund within your comprehensive portfolio, these regular check-ins ensure your investments remain diversified and aligned with your evolving financial goals, adapting to changing market conditions and personal circumstances.

>> Read more: Why mutual funds are great during volatile periods