Unit Trust Investment

Unit Trust investment has become a common financial tool for people to park their life saving these few years. Due to it's higher than expected return.

But what is Unit Trust actually?
Here i would like to quote an explaination from Wikipedia " Unit Trust Investment is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so. "

Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs(Expense Ratio). Each fund has a specified investment objective to determine the management aims and limitations.

Generally, we can categorize unit trust into Equity fund, Balanced fund, Fixed Income fund & Money Market fund. Each category represents the underlying assets that the fund investing in. For example, Stocks & Shares, Bonds, Commodities, Currencies, Property, Gold and etc. Those funds are designed for investor with different risk tolerance. From high risk, moderate risk to low risk investor.

So what are the benefits of investing through unit trust?
-can start with small amount.
-we can have professional money manager to manage for us.
-the risk is diversified.
-easy access to oversea's investment and different asset classes.
-easily bought and sold, no liquidity problem.

Given the nature of unit trust, it is more of a medium to long term kind of investment, and very often, it is utilised by professional out there to do 'strategic asset allocation'. Where by they help the client to do a proper diversification of their funds into different asset classes, base on client's risk profile and objectives. A lot of time consumer in the market making a mistake to purchase a particular unit trust because they like the idea of the fund or because it's new, hot from the oven. They failed to do a proper planning, it is obvious, because most of the time all these investor purchase on an adhoc basic, or under a strong persuasion by promoter.

Failing to do a proper planning can cause a financial disastres sometimes. Cash flow issues will tie you down and force you to liquidate your fund even when the investment is making loses. Following blindly with the majority doesnt guarantee profits. Know yourself, and do your own research. How do we define the 'best' fund? It might not be the highest return fund, or most stable fund, it should be the one that fits your objectives and risk profile most.

So the advice here is do your own financial planning, spend time on reading and reseach before you make any move or seek advice from the professionals. Remember those are your hard earn money. Invest wisely !