Tough Times For SGD Unit Trusts

MAS has recently announced to re-center the SGD currency band to allow the pace of appreciation to continue given the rate of inflation.

As a result, unit trusts denominated in SGD and investing in markets overseas whose local currency may not appreciate as much compared to the SGD will see their returns badly affected.

2 ways to minimize this foreseeable risk is to invest only in the Singapore market; Or select funds that have a SGD- Hedged version. This is to ensure any possible returns achieved by the fund will not be eroded away by forex conversions.

This is especially so for fixed income funds where the volatility of the forex market has overshadowed the returns from these funds in recent years.