Article from ACCA (The Association of Chartered Certified Accountants) on Unit Trust Jika anda ingin tahu lebih lanjut pasal unit trust, please read on. Is Unit Trust for You? Let’s imagine this scenario. Suppose we are just getting started to invest and have RM5,000 to spare. While we do not wish to lose our money in a risky venture, we definitely wish to make the most out of the investment, and since we do not have the time and sufficient knowledge, we want assistance from a professional. Now, what investment options do we have that suit the criteria? We have the option to invest in fixed deposit that offers security, but it often comes with a low rate of interest. We also have the option to invest in stock market that have great potential for growth, however RM5,000 is not a lot of money to invest and if we put it all in one share, we risk everything if it performs badly. And of course, we can get advice from brokers or financial advisors but the thing is, we have to pay for the service, which reduces further the amount we have available to invest. Given the circumstances, the other option that we can invest our money in is unit trust. So what is unit trust and what are its benefits? What is unit trust? Unit trust allows investors with a common interest to pool their money and invest in a variety of different securities. Investments can be in the form of shares, bonds, property and commodities that are professionally managed on behalf of the investors and each investor holds a pro rata share of the portfolio. For those with no or little investment background, unit trust provides the benefit of having someone else manage our investments, take care of the record of our account and diversify the money over many different securities that may not be available or affordable to us otherwise. In fact, the minimum requirements on many unit trusts are low enough that we can even start investing with RM1,000. Unit trust is fast gaining momentum in Malaysia where as at 31st July 2004, there are around 36 unit trust management companies that manage 10,387,568 accounts with 107.495 billion units in circulation. To ensure that the interests of the investors are always protected, unit trust in Malaysia is governed by the Securities Commission (Unit Trust Scheme) Regulations 1996 that among others, requires the manager and the trustee execute a Trust Deed. What are the differences between unit trust and fixed deposit? Fixed deposit is generally safe even though the return is relatively lower compared to unit trust. On the other hand, unit trust is able to generate better return but with greater risks. However, fixed deposit is a better option for a short-term investment whereas unit trust for the medium and long-term investment period. The following is the explanation on the advantages of a unit trust. Advantages of Unit Trust? Professional Investment Management By pooling the funds from thousands of investors, unit trust provides full time, professional management that we otherwise cannot afford to obtain individually. Such management level is vital in the wake of today’s complex markets for the managers have access to crucial market information and are able to execute trades on the largest and most effective scale. Diversification Unit trust invests in a broad range of securities that limits the risk by reducing the effect of a possible decline in the value of any one security. For instance, Security A might register a loss, which however “absorbed” by the more profitable securities. This type of investment portfolio is usually enjoyed by investors who are wealthy enough to buy significant portions in a wide variety of securities. But through unit trust, the privilege is now opened to anybody. Liquidity We can easily redeem the units when we are in need of instant cash compared to selling of shares, which very much depend on the supply and demand of the shares at that time. Low Cost If we try to create our own portfolio of 15 shares for instance, we will definitely need thousands of ringgit plus the commissions to assemble the portfolio. A unit trust however, lets us participate in a diversified portfolio for as little as RM1,000. Despite its advantages, unit trust charges certain fees that we should know to avoid being caught off guard. The fees are: Initial service charge – may be included in the fund’s unit selling price Repurchase fee and – may be included in the fund’s unit buying price Management fee – directly charged to the fund Guides to Selecting Unit Trust With the many unit trust companies in the market, we have the advantage to pick and choose the one that is similar to our aspiration and the level of risk that we are willing to take. In doing so, we have to examine at least three types of information before selecting a fund. The information includes – the prospectus of the fund, the trust deed and the financial statements that contain both the annual and the interim reports. This information is available for free and can be obtained upon request form the unit trust agent. In a nutshell, unit trust is one of the best types of investments for those who are looking for long term investment with relatively low risk and reasonable rate of return. In fact, it can be part of our investment portfolio that may include shares, bonds and cash, of which the compositions depend on individual preference. Please call me, Tahir Hasmuni, at 012-3249786 if you need further information or clarification.
Posted on: Sat, 07 Sep 2013 03:41:23 +0000
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