You will be able to read a fund transaction confirmation and explain the dates and price on it.
Wei Ling is 31 and works in procurement. Three years ago she bought an Asia equity unit trust at her bank's branch, and every few months she adds to it through the bank's app. She taps buy on a Monday morning, the app says "order received", and nothing else happens. On Tuesday evening a confirmation lands in her inbox with a price, a number of units and three different dates. She has never been sure what any of them mean.
This lesson reads that confirmation with her. It follows on from lesson 1.1, A unit trust is a pool you own a slice of, where you met NAV per unit and forward pricing. All the figures here are made up for the example.
The first date is the dealing day: the day your order counts as placed. If your order reaches the manager before the dealing cut-off, that day is your dealing day. If it arrives after the cut-off, your dealing day moves to the next business day. Wei Ling ordered at 9am on Monday, well before her fund's cut-off, so Monday is her dealing day.
The second is the valuation point. This is the moment the fund values everything it holds and works out the NAV per unit for that dealing day. For many funds it is the close of business on the dealing day, but the prospectus sets the exact time. The NAV for Monday is not known on Monday morning, which is why Wei Ling saw "order received" and no price.
The third is the settlement date. For a purchase, it is when your money has to reach the fund and the units are formally issued to you. For a sale, it is when the cash from the units you sold arrives in your account. The prospectus states how many business days settlement takes, and it can differ between funds sold by the same bank.
So three dates, and three jobs. The dealing day decides which NAV you get, the valuation point is when that NAV is worked out, and the settlement date is when money and units change hands.
Wei Ling's fund holds shares listed in Hong Kong, Taiwan, Korea, India and a few other markets. Those markets close at different times of day. A fund cannot work out a fair NAV until the prices of what it holds are known, so a fund holding overseas assets often has a valuation point set to suit those markets, and the confirmation arrives a day or more after the order.
Funds holding US or European shares can be later still, because those markets trade while Singapore sleeps. A fund domiciled in Luxembourg or Ireland may also run its dealing on its own home calendar, so a public holiday there can delay your order even when Singapore is open. None of this is a problem in itself. It just means you should read your fund's dealing section once, so a two-day wait does not surprise you.
Switching from one fund to another sounds like a single action. Underneath, it is usually two: a sale of the old fund and a purchase of the new one. If both funds are run by the same manager and the switch is handled inside one system, the two legs may be priced on the same dealing day. If not, the sale has to price and often settle before the purchase can go ahead.
Suppose Wei Ling sells her Asia fund on Monday and the bank waits for the cash before buying a global bond fund for her. The sale prices on Monday, the cash settles a few business days later, and only then is the new purchase placed and priced. For those days her money is in neither fund. If markets jump in that window she misses the rise, and if they fall she misses the fall. Over a long holding this rarely matters much, but if you switch often, the gaps add up. Ask how a switch is processed before you rely on it.
Here is the calculation on every purchase confirmation. Units bought equal the money invested after any sales charge, divided by the NAV per unit on the dealing day.
Wei Ling invested S$3,000 on Monday. Her bank charged a 2% sales charge, which is S$60, so S$2,940 went into the fund. Monday's NAV per unit came out at S$1.25. Divide S$2,940 by S$1.25 and she gets 2,352 units. Her confirmation shows all four numbers: the gross amount, the charge, the NAV used and the units allotted. If the units on your confirmation do not match this sum, check whether a different charge was applied or whether the fund rounds units to a set number of decimal places, which the prospectus will state.
Notice what the calculation does not include. The management fee and other running costs are not on the confirmation at all. They come out of the fund itself and are already inside the S$1.25. Module 2 deals with those charges you never see as a line on any statement.
Once you know the pattern, any confirmation reads quickly. Find the dealing date first, because it tells you which price you should have been given. Then find the NAV per unit used, the gross amount, any sales charge and the units allotted, and check that the units equal the net amount divided by the NAV. A switch confirmation will show two legs, so check both.
If you have no confirmation of your own, ask your bank or platform for a copy of a recent one, or use a sample from a fund's application pack. In the activity below you will label one, line by line.
Take one confirmation from your own records, or a sample, and label the dealing date, NAV used, charges deducted and units allotted.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).