A unit trust is an unincorporated mutual fund structure that allows funds to hold assets and provide profits that go straight to individual unit owners instead of reinvesting them back into the fund. The investment fund is set up under a trust deed. The investor is effectively the beneficiary under the trust. from investopedia.com
There are so many Financial bodies actually provide Unit Trust Facilities, and the Unit Trust fund manage by experienced Fund Manager. Investor gains either from Capital earns or Dividend per annum, mainly based on each fund portfolio (This information can refer from Fund Factsheet or Master Prospectus).
Why people go for Unit Trust Investment saving instead of Bank Saving Account?
There are many reason for this. Basically both facilities allows us to save money and we gains interest in return based on the period we’d parked our money in it. Even they’re almost same in functional, but Unit Trust eventually will allows you to gains more, based on each fund performance.
No doubt, Unit Trust is more to Equity, and there are risk to use it, but the risk can consider minimum due to very low Volatility. Most of the Unit Trust fund gives Dividend, and that’s can be a compounded earning throughout the period of saving in it.
What is Compounded earning?
For instant we take a example of a Saving in a Unit Trust Fund based on past performance history of 10% per annum. We put RM1000 in to it.
First Year RM1000 + 10% (estimation)
Second Year RM1100 + 10% (estimation)
Third Year RM1210 + 10% (estimation)
This is compounded gains. When it roll bigger and bigger, that’s where Unit Trust can give you more in return than Conventional Bank Saving Account.
Why we choose Unit Trust instead of Equity Investment?
Equity Investment means Stock Market Trading, it can gives very high income, as it is Very Aggressive and very high volatility. Which means you might lost your investment money in very fast mode too. Of course Higher risk gives Higher return, that’s the attractive part of Stock Market Trading.
Unit Trust is a longterm investment to gains extra for our retirement or for future. We don’t look for overnight gains from Unit Trust, as it is not design for that. Unit Trust is a longterm saving, and we leverage our investment consistently to get the max return.
What do you means of Leverage in Investment?
Let’s see an example of leverage in investment.
If you put money into a Unit trust fund at price of RM1.00/unit on Jan 2018. Fund Net average value, NAV will be around RM1.00 to RM1.10.
Later, you put again an amount of money into it on Feb at the price of RM0.90/unit. You put another amount of money into it on Mar at the price of RM0.85/unit. By doing this, the NAV of your fund, will be leverage and at new lower NAV price, maybe in between RM0.85 to RM1.00.
These kind of activities, we call it as leverage in investment. It allows you to have better NAV price, and when the Fund price went up to RM1.00, basically you’d already start to gain.
WHY I DO NOT earn in Unit Trust Saving Plan?
There are few reasons to the question above.
1. Had you done basic study on the fund you going to invest in?
You need to at least have a look on their Fund Factsheet/Prospectus to understand their fund performance and the area they’re invested into. If you’re Muslim, please make sure it is Shariah Complied.
2. Do you do leverage methods in your investment saving?
This is a MUST DO, you must do the leverage methods to maximise the earning gap. If you have agent/consultant manage the Investment for you, please consult them, or follows their leverage plan for you.
Above are the Main reason why others gains in Unit Trust Investment and not you.
We will talk more about how to pick the right Fund for you in upcoming post. Stay Tuned.
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