You will be able to read a fund transaction confirmation and explain each date and the price shown on it.
Find a recent unit trust confirmation and keep it beside you as you read. Use your own if you have one. If you don't, your bank or platform can send you a copy of a recent one, and a fund's application pack often includes a sample. Look at the dates printed on it. Most confirmations carry three, and each one records something different. Once you can tell them apart, you can check two things yourself: whether your order got the correct price, and whether you were given the correct number of units.
Take Wei Ling (an invented example, as are all her figures). She is 31 and works in procurement. Three years ago she opened a holding in an Asia equity unit trust at a branch of her bank, and she tops it up through the bank's app every few months. One Monday at 9am, well ahead of the fund's cut-off, she places a buy order. All the app tells her is "order received". By Tuesday evening an email confirmation has come in. It lists a price, a number of units and three dates, and she has never really known what those dates stand for.
The first date is the dealing day, the date your order is treated as placed. Which day that is depends on the dealing cut-off, the latest time an order can reach the fund manager and still count for that day. If your order gets in before the cut-off, the dealing day is that same day. If it arrives after the cut-off, your dealing day becomes the following business day. Wei Ling's order came in at 9am, ahead of the cut-off, so Monday is her dealing day.
The second is the valuation point. This is the time when the fund puts a value on everything it holds and works out the NAV per unit for that dealing day. Many funds use close of business on the dealing day, and your fund's prospectus states the exact time. Until the valuation point passes, there is no NAV for that day. This is forward pricing. Lesson 1.1, "A unit trust is a pool you own a slice of", explained both NAV per unit and forward pricing. So on Monday morning Wei Ling's app logged her order but had no price to show, because Monday's NAV had not been calculated yet.
The third is the settlement date, when money and units actually change hands. For a purchase, it is the date your payment has to reach the fund and the units are formally issued to you. For a sale, it is the date the money from the units you sold lands in your account. The prospectus sets out how many business days settlement takes. Two funds sold by the same bank can settle on different timetables.
To put the three together: the dealing day fixes which NAV applies to your order, the valuation point is when that NAV gets calculated, and the settlement date is when money and units are exchanged.
A fund can only set a fair NAV once it has prices for everything in its portfolio. Stock exchanges around the world close at different hours, so a fund holding overseas assets will often set its valuation point at a time that suits those markets. This can push your confirmation out to a day or more after you placed the order. Wei Ling's fund owns shares listed in Hong Kong, Taiwan, Korea, India and a few other markets, so her Monday order produced a confirmation on Tuesday evening.
Funds holding US or European shares can price even later, since those markets trade during the Singapore night. Some funds are domiciled in Luxembourg or Ireland and may deal on that country's calendar. A public holiday there can then delay your order on a day when Singapore is open for business.
Being priced later does not cost you anything in itself. Read the dealing section of your fund's prospectus once and a two-day wait won't come as a surprise.
The units you receive equal the money you invested, less any sales charge, divided by the NAV per unit on the dealing day. The sum has two steps. First take the sales charge off the gross amount, which leaves the net amount. Then divide the net amount by the dealing day's NAV per unit.
For Wei Ling, the gross amount was S$3,000. The bank's sales charge of 2% came to S$60, which leaves S$2,940 going into the fund. Monday's NAV was S$1.25, and S$2,940 divided by S$1.25 gives 2,352 units, the number her confirmation should show.
The check uses four numbers from the confirmation: the gross amount, the charge, the NAV used and the units allotted. Work through yours in this order:
the dealing date, so you know which day's price you should have had the NAV per unit that was used the gross amount the sales charge, if there is one the units allotted whether the units allotted equal the gross amount minus the sales charge, divided by the NAV per unit
If your answer and the confirmation disagree, start with the charge and see whether a different rate was applied. Next, find out whether the fund rounds units to a fixed number of decimal places. The prospectus sets out the rounding rule.
The management fee and the fund's other running costs don't appear anywhere on the confirmation. The fund pays those costs from its own assets, so they are already included in the NAV per unit. Module 2 deals with these charges, none of which ever appear as a separate line on your statement.
A switch is usually two separate transactions: a sale of the fund you are leaving and a purchase of the fund you are moving to. Each of the two is called a leg, and a switch confirmation lists both. Check the sale leg and the purchase leg the same way you check an ordinary purchase.
If one manager runs both funds and a single system processes the switch, both legs may be priced on the same dealing day. Where that isn't the case, the sale has to be priced, and often settled, before the purchase can be placed.
Say Wei Ling decides to move from her Asia fund into a global bond fund. She sells on a Monday, and her bank waits for the cash before buying. The sale is priced on Monday. The cash settles a few business days later, and only then is the purchase placed and priced. For those days her money is in neither fund. If the market rises during the gap, she misses the rise. If it falls, she misses the fall.
The gap rarely makes much difference if you hold for the long term. If you switch often, the gaps add up. Before you rely on a switch, ask your bank or platform how it processes one.
In the activity below, you will label a confirmation line by line.
Take one confirmation from your own records, or use a sample. Mark the dealing date, the NAV used, the charges taken off and the units allotted.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).