Introduction to Unit Trust

This is the article that  I wrote way back in 2006 and posted it to ezinearticles.com. I write it again here so that people can get to know what are unit trusts? Its benefits etc. So far those who would like to become a unit trust consultant has benefited from this blog. Thus, I wish to expand my readership to those who don’t want to become consultant but would like to invest in unit trust.

What are Unit Trusts?

Unit Trusts are a form of collective investment that allows investors with similar investment objectives to pool their funds to be invested in a portfolio of securities or other assets.

The manager of the fund then invests the pooled money in a portfolio which may include the asset classes such as Cash, Bonds & Deposits, Shares, Property and Commodities.

Benefits Of Unit Trust

It is tough for an individual to maintain his own portfolio of investments, he needs to keep up to date with market information and sentiment.

By investing in unit trusts most of the necessary ‘know-how’ of investing are transferred to those best equipped to handle it i.e. the professional fund managers.

The advantages and benefits of investing in unit trusts are:

Diversification

A larger pool of funds allows the fund manager managing the unit trust to purchase a wider range of investments. Rather than concentrating an investment portfolio into one or two investments or shares, a portfolio of market securities can be held. The wider the spread of investments, the less volatile (i.e. variable) the investment returns will be. In simple terms, investment into unit trusts means diversification of risk: “not putting all your eggs in one basket.”

Liquidity

Most investors require that their investment be liquid. That is, they can easily buy and sell within a short period of time. Unit trusts provide this benefit, being bought and sold easily. An excellent return that cannot be “cashed-in” (i.e. sold) does not necessarily mean a good investment as poor liquidity constitutes an additional risk factor for the investor.

Professional Fund Management

The people making investment decisions for unit trust holders are professionals. Their training and background ensures that decision making is structured and according to basic investment principles. In the process, unit trust funds enjoy the depth of knowledge and experience that fund manager bring. In the long term, it is this expertise that should generate above average investment returns for unit trust investors.

Affordable and Investment Exposure

For the individual investor, it is sometimes difficult to gain exposure to a particular asset class. For instance, if an investor with USD3,000 wanted to gain exposure to the property market, global equity markets and bond market, it would be impossible to simultaneously hold a direct investment portfolio in all of these markets. With unit trust investments, it is possible to spread your money around to all of these asset classes at the same time, so that the investor can gain the investment exposure he requires.

Wholesale Investment Costs & Access to Investments

When making small investments, the investor faces costs and charges that are much higher. Unit trust funds are investing with large amounts, so that the economics of the transaction are more favorable i.e. the fees and charges/brokerage etc. per investment ringgit are likely to be less.

Also, because fund managers invest in larger amounts, they are able to get access to wholesale yields and products which are impossible for the individual investor to obtain.

Funds for All Type of People

There are many different types of funds that will suit to any level of risk to cater different type of people.

Safe and Secure

Unit Trusts only make investment and do not give out loans thus, the situation where liabilities more than assets will never arise.

More free time

Yes, we have to monitor our investment performance but since the fluctuation of the unit trust fund is not as frequent as stock market and that we have our Professional Fund Manager to look after the investment, we may keep track the fund on a weekly basis. More free time for us.

Attractive Returns

Unit Trust has proven that it is an excellence hedge against inflation. Unit Trust in some countries has shown a return of between 10% to 15%.

Comments ( 2 )

  1. faiza
    saya ada soalan mengenai dividen dalam PUBLIC MUTUAL..kalau ASB dividen yg diberi kita boleh 'nikmati' masa tu jugak kan..berbeza dgn UT..satu perkara yang terjadi bila sesuatu dana istihar dividen maka pelabur akan dapat jumlah unit tambahan(hasil reinvest) sehari selepas dividen..maknanya itu bukan lah berita baik!!sbb NAB juga diturunkan mengikut kadar dividen..dengan kata lain,nilai pelaburan adalah sama sahaja/jumlah unit bertambah tp NAB pula turun..so,apa beza nya sebelum n selepas dividen??nilai pelaburan xterganjak kemana pun..dan jika selepas dividen harga lak turun lagi(mgkin atas sbb ekonomi atau saham dll) maknanya kita bukan sahaja 'xdapat dividen' malah rugi lagi..so pada pendapat saya 'DIVIDEN' mmg xwujud pun dalam UT..apa pandangan UTC2 semua..
  2. Ajumain
    Salam cik faiza, Begini berkenaan dengan pemberian dividen (distribution) oleh UNIT TRUST...sebenarnya dividen ada diberikan tetapi bergantung kepada dana apa dan mana yang telah dipilih...ada dana yang menyatakan pemberian dividen secara tahunan...ada dana yang memberi dividen secara optional sahaja dan ada juga dana yang tidak menyatakan secara terus mengenai pemberian dana (dana ini lebih kepada pertumbuhan modal). Apa yang saya lihat sebelum ini ... KEBANYAKKAN dana2 di PUBLIC MUTUAL ada memberi dividen cuma mungkin kita agak terkeliru dengan cara pengiraannya based on NAB (yang berubah2) dan juga jumlah bilangan unit yang dipegang ole seseorang pelabur tersebut. Memang harga bagi NAB sesuatu dana tersebut akan menurun setelah pemberian dividen TAPI harus diingat bilangan unit yang dipegang adalah kekal malah unit pegangan kita akan makin bertambah jika kita reinvest. Apa2 pun saya rasa better kita tengok dulu DIMANA OBJEKTIF KITA...kita nak simpan untuk apa? Pelan Persaraan (rasa klu pilih pelan ini klu xkeluarkan dividen pun xper...just reinvest je), Pelan Pendidikan Anak-Anak (pun sama), Pelan Haji / Umrah / Melancong (yang ni temph mungkin sederhana -3-6tahun), Pelan Nak Kahwin (pun sederhana 3-6tahun) dan sebagainya. Unit Trust ini adalah salah satu kenderaan yang boleh kita gunakan untuk mencapai matlamat kewangan kita....setiap individu mungkin ada cara tersendiri dan berbeza dan begitu juga dengan Agen/Consultan. Ada yang bagus (means dia terang segala selok-belok pasal UT nie dari A-Z kekadang sampai boring pun ada :P) dan ada juga yang baik (terang ala-kad jer...tu yang kekdang klien dok blame UT nie rugi la apa la...bla...bla..bla...), dan juga ada yang kureng sikit...(nie xyah lah saya terang paham2 sendirik la...). Dalam UT nie juga ada pelbagai strategi dan skill yang boleh diguna pakai (boleh tanya pada consultant yang expert2 dalam myunittrust) untuk mendapatkan hasil yang mksima kerana x semestinya nak kene tunggu 3-5 tahun baru dapat untung....apa2 hal belajar...dan kaji pro dan kon bagi setiap cara...insyaallah saudari akan paham....dan klu dah consultan tu...tanye je dia biar dia jawab...sebab dia perlu responsible dengan setiap klien dia apa...and sebagai pelabur...saudari juga perlu tahu hak2 pelabur bagaimana.... hmmm. dah letih la nak menaip...maklumle biasa menulis ngan tangan jer....SALAM... PS: En. Arip sori banyak2 x dapat hadir meeting 2 minggu berturut2 dan rasa dalam bulan March nie mungkin saya xdapat nak hadir weekly meeting...skali lagi mintak mahap...bos...adios muchachos)

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