Sunday, January 4, 2009

Unit Trust Investment - 11 Concerns The Novice Should Know

If you read my previous post on 7 Factors you should consider before investing in unit trust, you might roughly have the idea whether unit trust investment is right for you. Or perhaps, you are taking the factors into deep consideration before making your decision on unit trust investment. Apart from the 7 factors, there are other things a novice unit trust investor should know. I wish to share the 11 most important concerns:

1) Familiarize yourself with investment terms
Every field has its own language. It is the same with investment. I learned most of the terms from my readings materials and also from MAAKLMutual website. By learning the investment terms, it will enhance your investment knowledge and enable you to make wise investment decision.

2) There is no guarantee returns
Unit trust is unlike fixed deposit placement. For fixed deposit, you will get a guarantee return according to the term you have agreed when you deposit your cash. For fixed deposit, if you placed a principle of RM10k for a year at interest rate of 3.5% , after maturity you will have RM10350 (RM10k + (3.0% x RM10k)). For unit trust, the return depends on the performance of the fund and current share market prices.

3) Fund switching
If you are not satisfied with your current fund performance, you may switch to a different fund. Do check for the fees involved in fund switching.If there is a fee involved, do calculate and see if it is still worth for your to perform the switching.

4) Cooling-off period
When I was investing unit trust for the first time, I was not aware that there is cooling off period for first time investors. If you are personal investor and investing for the first time with a specific unit trust company and you decided to withdraw your investment, you may do so within certain business days from your investment date. For MAAKLMutual and Public Mutual is 6 business days.

5) Past performance of a fund does not reflect the future performance of the same fund
Some unit trust consultants might use the past performance of existing funds to convince investors to invest in particular funds.Though it can sometimes produce the same excellent performance but, always bear in mind that past performance does not reflect the future performance of a particular fund. There are so many factors involved to determine the performance of a particular funds. And the factors is changing from time to time.

6) No one can time the market
The market consist of complicated investors, fund managers, giant corporate leaders, political stability, consumers and many other factors. Since there is so many factors involved, so no one can time the market. Be alert to the current economy situation and invest wisely to get the most from unit trust investment.

7) Investment through EPF @ KWSP
Other than investing through your hard earned cash, EPF @ KWSP allows its member to invest certain amount from account I in selected funds.You may check how much you can investment from Public Mutual website. Just enter your current age and your current EPF savings, you'll know how much available amount you can invest in selected funds.

8) Earnings from unit trust fund
Unit trust brings profits in 2 ways. The first is from dividend or distribution. Depending on the funds, investors will received certain dividend per unit.The second is from the increase of Net Asset Value (NAV). Different funds might have different priority. Read the prospectus for more details.

9) Read the prospectus
It is wise to read the prospectus to understand your fund before you invest in one. The prospectus will tell you more about your fund managers and how your money will be invested to make more money. It is like a contract between you and the fund you purchased.

10) Be patience
If you want quick money, unit trust is not the right investment plan for you. Allow a minimum between 3-5 years before you can see the returns from unit trust investment. Unit trust is more of a long term investment strategy.

11) Do your own homework
Don't depend 100% on your unit trust consultant. Improve your financial literacy. Learn more on investment. Read the prospectus (Again?) before you make your investment decision. No one know you better than your own self. Thus no one can help you unless you help your own self.

I learned the above concerns the hard way. Most of them, I learned after I placed my first unit trust investment. I hope to be able to share the concerns with you so that you are aware of your rights. Let's make the most from our investment. I am still learning. Feel free to add more concerns to the list above. Happy Investing!


  1. epf allowed to transfer fund to unit trust investment is from account 1 NOT account II....pls amend it

  2. Hi Roy, thanks for the correction. I had corrected it to EPF account I. Thanks again.