Put together a full charge sheet for one fund and share class.
To know what a fund costs you, gather every charge on it, write each one down with the document it came from, and reduce them to one yearly percentage. Most fund holders cannot give that number, though the information is available. It sits in several documents, each showing a different piece: the confirmation, the Product Highlights Sheet, the prospectus, the annual report, and the platform's or bank's fee page.
Do this for one fund and one share class. Take the fund you mapped in Lesson 1.4, "Trace one fund from your money to its holdings", and the share class you hold or are thinking of buying. The worked example uses Wei Ling's Asia equity fund from earlier in the course, with figures made up for the example.
There are three one-off charges to record. For the sales charge, write down the rate you actually paid or would pay. It can be lower than the maximum the fund allows, and Lesson 2.1, "One-off charges: buying, switching and selling", explains how that happens. Your confirmation shows the rate. If you haven't bought yet, ask the seller to state it in writing.
The switching charge applies if you might later move to another fund, and your bank's fee page usually lists it. For any redemption charge, look in the fund's offer documents. MAS requires an offer of units in a fund to be made in or accompanied by a MAS-registered prospectus and Product Highlights Sheet, so check both. If neither states a redemption charge clearly, ask the seller to confirm it in writing.
Wei Ling's confirmation shows a 2% sales charge. Her bank's fee page lists a 1% switching charge for switches within the same manager's range, and her fund's offer documents show no redemption charge.
You can find the management fee in the Product Highlights Sheet or the prospectus. Write it on the sheet for reference, but use the expense ratio from the latest annual report in your total. The expense ratio is the fund's yearly cost and already includes the management fee. It also includes the trailer fee, which is paid out of the management fee. Copy the trailer fee's range from the prospectus onto your sheet and leave it out of the total, since the expense ratio already counts it.
Your bank, platform or adviser may also charge you a yearly fee outside the fund, such as a platform fee, a wrap fee or an advice fee. These are usually a percentage of what you hold with them. Because they sit outside the fund's expense ratio, add any you pay to the total. A platform that holds a clean share class for you might charge a platform fee, for instance.
Wei Ling's management fee is 1.5% and her expense ratio is 1.75%. Her bank charges no yearly fee outside the fund.
Some costs vary or are harder to pin down. Record these as notes, and add a number where you can find one.
Trading inside the fund costs money. The annual report gives a turnover ratio, which shows how much the fund trades. It usually can't be turned into an exact cost, so write it next to your total line and keep it out of the sum.
If you pay in Singapore dollars for a class priced in another currency, your bank or platform converts the money at its own rate. The difference between that rate and the market rate is a cost you bear.
Some funds charge a performance fee when returns beat a stated hurdle. The prospectus sets out how it is calculated.
Wei Ling's fund reports moderate turnover, and she notes this. She holds a Singapore dollar class, so she has no currency conversion cost. Her fund has no performance fee.
Divide each one-off charge by the number of years you expect to hold the fund, then add the yearly charges. Simple division ignores compounding, so the result is approximate. That is acceptable here because the aim is to compare different funds and channels on the same basis. Lesson 7.3, "Model one-off and yearly costs together", builds a more exact model for the comparison at the end of the course.
The course uses a ten-year holding for that comparison, and Wei Ling expects to hold for ten years. Her 2% sales charge over ten years comes to 0.2% a year. Add the 1.75% expense ratio and no platform fee, and her total yearly cost is 1.95%. If you expect to switch, spread each switching charge the same way. Wei Ling expects one switch in ten years, so her 1% switching charge adds about 0.1% a year and her total becomes about 2.05%.
She was surprised the total came so close to 2% a year. When she bought, she had thought of the fund as costing a 2% sales charge, once.
Your finished charge sheet fits on one page in three short sections: one-off, yearly and variable. Every line gives a number, the document it came from and the date you checked it. The bottom line states the total yearly cost over your holding period, with a note on trading costs and turnover underneath.
Wei Ling's sheet follows this layout and ends with her total line and a note that trading costs are extra and turnover is moderate.
In the activity below, you'll fill in the charge sheet for your own fund and arrive at your own single number.
Fill in the charge sheet template for one fund, then write the total yearly cost as one percentage.
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