Unit Trust Investment: 11 Concerns the Novice Should Know

In this post, I will be sharing my thought about unit trust investment for novice investors.

If you read my previous post on 7 Factors to consider before investing in a unit trust, you might roughly have an idea of whether a 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. Further reading is below.

11 Concerns novice unit trust investors should know
Final thoughts

11 Concerns novice unit trust investors should know

These are the 11 most important concerns on unit trust investment for novice investors:

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 reading materials and also from the Public Mutual website.

Learning the investment terms will enhance your investment knowledge and enable you to make wise investment decisions.

2. There are no guaranteed returns

The unit trust is unlike fixed deposit placement. For a fixed deposit, you will get a guaranteed return according to the term you have agreed to when you deposit your cash.

If you placed a principle of RM10,000 for a year at an interest rate of 3.5%, after maturity, you will have RM10,350 (RM10,000 + (3.0% x RM10,000)).

For the 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.

In the situation where there is a fee involved, do calculate and see if it is still worth it for you to perform the switching.

4. Cooling-off period

When I was investing in a unit trust for the first time, I was not aware that there is a cooling-off period for first-time investors.

If you are an individual 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.

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, 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 fund. And the factors are 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 are so many factors involved, so no one can time the market.

This is similar to other types of investment such as robo-advisor, cryptocurrency, gold and stocks.

Be alert to the current economic situation and invest wisely to get the most from unit trust investment.

7. Investment through EPF or KWSP

Other than investing through your hard-earned cash, EPF or KWSP allows its member to invest a certain amount from the account in selected funds.

You may check how much you can invest from the EPF website or through EPF i-Akaun.

8. Earnings from a unit trust fund

Unit trust brings profits in two ways. The first is from dividends or distribution. Depending on the funds, investors will receive a certain dividend per unit.

The second is from the increase in Net Asset Value (NAV). Different funds might have different priorities. 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.

The prospectus is like a contract between you and the fund you purchased.

10. Be patient

For those looking for quick money, a unit trust investment may not be the right investment plan for you. Because you need to allow a minimum of between 3 to 5 years before you can see the returns from unit trust investment.

With that said, a unit trust is more of a long-term investment strategy.

11. Do your own homework

Finally, don’t depend 100% on your unit trust consultant. Instead, improve your financial knowledge. Learn more on investment. Read the prospectus (Again?) before you make your investment decision.

No one knows you better than your own self. Therefore, 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, Public Dividend Select Fund (PDSF).

Final thoughts

Lastly, I hope my sharing on unit trust investment for the novice is beneficial to those planning to invest in the unit trust for the first time. With the above 11 concerns, at least you are aware of your rights as an investor.

Let’s make the most of our investment. I am still learning. Feel free to add more concerns to the list above.

Happy Investing!

photo credit: ccPixs.com Vintage Grow Your Money via photopin (license)

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