Benefits of Unit Trust Investment

There are 8 benefits to invest into unit trust.

1. Affordability

In Malaysia, everyone who has reached age 18 can invest into unit trust for their own name as first holder. As unit trusts are a collective investment scheme, the investors can start with an investment amount as low as RM1,000, even some company can accept the low initial amount of RM500 for a new account. Investors can start their investment through Cash Scheme or KWSP Scheme.

2. Diversification

The funds in a unit trust are invested in a wide range of assets, this reduces the overall risk of the portfolio. This means that the poor performance of any one asset in the fund is not likely to have a major adverse impact on the portfolio as a whole. Never put all eggs into a same basket.

3. Professional Fund Management

Unit trusts fund managers are approved professionals in a highly regulated industry. Their license, background and expertise ensure that decision making is structured and according to sound investment principles. In the process, unit trust funds enjoy the depth of knowledge and experience that fund manager can bring. In the long term, it is this expertise that should generate above average investment returns for unit trust investors.

4. Investment Exposure

For an individual investor, it may be difficult to have exposure to particular asset classes. For example, if an investor with RM50,000 wants to be invested into property, global equity and bond market, it would be impossible to simultaneously hold a direct investment portfolio in all of these markets. However, with unit trust investments, it is possible to spread the RM50,000 around to all of these asset classes concurrently so that the investor can gain the investment exposure he seeks.

5. Reduced Costs & Access to Asset Classes

If one investor were to buy a large number of direct investments, the amount they would be able to invest in each holding is likely to be small. Dealing costs are normally based on the number and size of each transaction, therefore the overall dealing costs would take a large chunk out of the capital (affecting future profits). Pooling money with that of other investors gives the advantage of buying in bulk, making dealing costs an insignificant part of the investment. In addition, since the fund managers invest in larger amounts, they are able to get access to wholesale yields and products, which are impossible for the individual investor to obtain. 

6. Regulated Industry

With the introduction of unit trusts in Malaysia came regulation from various regulators, especially the Securities Commission. The entire range of variables relating to the unit trust industry is governed by various legislations. The sole purpose of such regulations is to protect the interest of the investing public. Regulations provide investors with a level of comfort that they are investing in a safe investment mechanism.

7. Investment Opportunities

By pooling their funds with that of other investors in a unit trust fund, investors will get exposure to a broad range of investment vehicles. With one low minimum purchase, investors can own a diversified portfolio of securities, which allows easy access to investments that may need a high initial investment if accessed directly.

8. Convenience and Liquidity

Unit trusts are easy to buy and sell. Debit / redemption / repurchase orders can be increased or decreased without penalty. Investors may redeem their investment amount as and when they require their monies at the established redemption price. Securities in the unit trust will be sold and cash will be distributed to the client’s nominated account. It is also easy for investors to switch between funds as and when their personal circumstances change. Many unit trust companies (UTMC) are providing online service to their investors to perform this process as well.