By: Tan Kin Lian

Hi Mr Tan,

Not really about specific financial product, but I’m keen to know the difference between Bid-offer spread to Single pricing Unit Trusts. Is there a better model or do they work out the same?

REPLY

tan-kin-lian.bmpMost unit trusts indicate the Offer price and Bid price separately. You buy at the Offer price and you sell at the Bid price. The difference is called the Spread. It may vary from 1% to 5%, depending on the fund.

For example, if the spread is 2% and the Bid price is $2,00, the Offer price will be $2.04.

Some unit trust, also called a “no load” fund, will use a single price. You buy or sell at the single price. In some cases, the fund manager may impose a separate charge when you sell the units, especially if the investment is for a short period.

Alternatively, a no-load fund may impose a higher annual charge. For example, if the typical fund charges charges an annual charge of 1.5%, a no load fund may charge 2% yearly.

Source: tankinlian.com

My Comments:

Offer Price = Buy Price
Bid Price = Sell Price
Offer Price is usually greater than Bid Price