What are unit trusts?

Unit trusts are a form of collective investment scheme, which pools money from many investors who share the same financial objectives. They are long-term investment vehicles, most suited to investors who want potential long-term capital growth and are able to tolerate volatile short-term fluctuations in prices.

Unit trusts are managed by professional Fund Managers in:

  • Securities of companies listed in Bursa Malaysia
  • Bonds and other fixed interest securities
  • Cash and money market instruments

A unit trust scheme is created out of a deed which constitutes a contractual agreement governing the tripartite relationship between the:

  • Manager - Often referred to as the management company, which is the promoter of the fund and responsible for the day-to-day operations and its overall investment performance.
  • Unit Holders - Investors of the funds. The ownership of a unit trust is expressed in the form of units. Depending on the amount invested, a proportionate share of the fund will be allocated to the investor. The returns, commonly known as income distribution, are distributed annually or biannually depending on the performance of the funds.
  • Trustee - Appointed to act as the custodian for all assets of the fund, and to ensure that the Manager adheres strictly to the provisions of the Deed.

Benefits

  • True diversification: In unit trusts, diversification helps in the 'spreading of risk' which essentially reduces volatility of returns. Our funds are an alternative investment option with lesser risks than investing directly in the stock market
  • Professional management: Funds are managed by full-time professional Fund Managers, equipped with ample resources and pertinent expertise
  • Liquidity: You may convert your investment into cash quickly or whenever the need arises
  • Affordability: Compared to a direct investment in securities, an initial investment in unit trusts can start from as little as RM500

Risk or Reward?

As a rule, unit trust funds work best as long-term investments. By understanding the nature of each fund and evaluating your own risk tolerance, you can select funds that provide either a regular income stream or capital growth, or a combination of the both.

Funds investing in stocks are relatively associated with a higher risk or volatility, with the anticipation of a higher growth potential. Fixed-income funds normally yield lower returns, due to the lower volatility and risk elements of the funds.

Valuation of Units

The valuation of units is based on the Net Asset Value (NAV) of the fund and is calculated at the close of each business day. When you invest in the fund you will be issued with units. These units represent your ownership of the fund. The number of units that you will receive is determined by the selling price of the units, which is the net asset value of the unit plus the service charge.

Customising your unit trust portfolio

By spreading your investment amongst different trust funds, you can create a unique unit trust portfolio that controls risks and generates potential returns. The first step towards this is to determine your financial goals. Here are some questions to get you started:

  • What is your investment horizon?
  • What is your level of risk temperament?
  • Given your level of risk tolerance, what sort of returns are you looking for?
  • Do you want your returns to be in the form of capital growth or income?

Also, should your needs change over time, you can adjust the portfolio simply by switching funds.