Forward Pricing of Unit Trust

Hi Mr Tan,

I'm really glad that I had the chance to come across your blog and gain so many valuable information from your posting. Your effort in your blog really inspired me and many others. I sincerely hope more people, include myself, can benefits from you and putting forward our gains, to build a better sociality.

As I am not well educated, there are lots of financial terms that I really hope to understand. What does "Forward Price" means and how it works?

I have searched the websites but none of them looks simple to me. I have been struggling with those terms and conditions, regulations and report statements given to me by the investment agent.

REPLY

If you buy or sell shares through a stock exchange, you transact based on the price that the other party is willing to transact with you.

When you buy or sell units in a unit trust, there is no party that is transacting with you through an exchange. The price that you will transact will be based on the price of the units computed by the fund manager (usually based on the net asset value of the fund) at the end of the current or following day. This is called "forward pricing". It means that you are using a price at a future time. Usually, the unit trust will tell you how the forward price is computed.

Do not be shy that you are not familiar with this concept. I was not familiar with it, until recently.