The performance of unit trusts is often compared with a benchmark index. Thus, for unit trusts which are focused on equities listed on SGX, the appropriate benchmark would be the Straits Times Index. Any unit trusts that are worth your salt must be able to beat the Straits Times Index if you compare them with an appropriate time frame that is sufficently long.
Using data from fundsupermart, I have selected local unit trusts which are focused on equities listed on SGX and compare them with their annualized returns for the past 5 years against the Straits Times Index. You can see the data of these unit trusts in the diagram below and their annualized returns for the past 5 years are highlighted with a purple box.
Data of selected unit trusts from fundsupermart
So how do the performance of these unit trusts fare against the Straits Times Index for the past 5 years ? You can see their performances in the diagram below.
Out of the 8 unit trusts that I have used as a comparison, half of them managed to beat the Straits Times Index and that is quite decent after all. So the STI ETF is not such a terrific investment after all ?
There is one slight difference which is often overlooked. That one crucial difference is that the Straits Times Index, which the unit trusts are benchmarked against, does not take in the account of the giving out of dividends but the STI ETF does give out dividends.
So how much difference do the dividends play a part in affecting the performance of the STI ETF ? This time round, I calculated the 5 years annualized returns of the STI ETF with the effect of dividends being given out using Excel and it can be seen in the diagram below. If you wish to know more about the calculations, Mike from stistocks-info blog has an excellent article which can be found here.
Do take note that the dividends are adjusted for a stock split and the reason why I did not use a longer time frame was because I only managed to find the annualized 5 years and 10 years data for the unit trusts and the STI ETF was only listed in 2002.
As you can see from the diagram above, if you take into the account the effects of dividends, the returns are very different indeed. So how does that stack up with the performance of the unit trusts once again ?
The result is rather obvious. None of the unit trusts managed to beat the STI ETF when the effects of dividends are accounted for in the 5 years time frame that I selected. Do take note that the performances of these unit trusts are calculated on a bid to bid basis, in Sing dollars, with dividends being 'reinvested' at the dividend date as taken from fundsupermart.
However, 5 years is a rather short time frame to be used to compare between different investments. Preferably, I would use a time frame of at least 10 years but due to the limited data that I had, I can only use a time frame of 5 years. Otherwise, this serves well as a preliminary gauge on the performance of the STI ETF and the unit trusts.
Personally, I'm rather surprised by the results of my findings if the data that I have used are indeed correct. So if you are planning to buy a local unit trust that have their focus on equities listed in Singapore, do make a serious consideration before making your decision.
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