Many people choose to invest in unit trusts to have investment professionals manage their money and investments for them. In the current day and age, there are way cheaper and better alternatives that can end up producing mountains of cost savings for you! Read on to find out about one such alternative - Robo-Advisors.
Unit trusts have been the traditional way for investors to get professional investment management at a relatively high cost - Management fees of 2% to 3% of Assets under Management (AUM), expense ratios and other hidden fees. The high fees of unit trusts is the key motivation to the founding of AutoWealth, as well as other robo-advisors in Singapore. Robo-advisors replace some investment functions with technology, bringing majority of the processes online, and hence are able to pass on these cost savings to investors.
Compared to unit trusts with management fees of 2% to 3% of AUM per year, the management fees of robo-advisors are much lower at approximately 0.5% of AUM per year. With a $50,000 investment over a period of 1 year, the amount you save by using a robo-advisor vs a unit trust is about $1,288. This amount may just be a mere 2.5% of the initial $50,000 investment but let's not forget that these management fees are a proportion of your AUM.
In other words, as the value of your investment portfolio grows, the management fee paid each year also drastically increases. However, a robo-advisor will cost you much less in management fees! In the example of a $50,000 investment, using a robo-advisor vs a unit trust will help you save $1,288 in 1 year, $15,826 in 10 years, $40,400 in 20 years and $78,500 in 30 years. With that amount of cost savings accumulated over the years, you can comfortably save up for your needs and wants.
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