I like mutual funds (unit trusts, as they called in Singapore). I like them not because most are great performers, nor because they offer affordable diversification, but because we know what mutual fund managers do everyday. Broadly speaking, they manage their portfolios actively, as opposed to an exchange traded fund (ETF) which is essentially passive. Not only that, we also know that mutual funds are expected to be almost fully invested at all times because investors don’t pay mutual fund managers to hoard cash. Combining these two facts, we have a good picture of what mutual funds do – they spend most of their time picking securities such as stocks (equities funds), bonds (income funds) or both (balanced funds). To be brief, I will focus on equities funds for the rest of this blog.

Stock picking isn’t at all easy (see my previous blog). But since fund managers are supposed to be