Benefits Investing in Unit Trust

Professional Investment Management
A unit trust combines the capital of many investors to employ experienced management in purchasing securities of many companies. The management of a unit trust provides diversification of investments and supervision which few investors could individually afford. Investment management is a full time job requiring specialised knowledge and training. It involves the study of a variety of factors.
Some of the factors which have to be examined are,
Comparisons of all industries in the economy
Relative studies of companies within a promising industry
Personal contact with management of promising corporations
Evaluating the effect of international events, both monetary and political
Determining the results of government policies on each industry
Professional management is also interested in studying less obvious factors such as wage rates, which might affect the economy or the profitability of certain companies or corporations. It requires careful study of individual companies within the industry to determine which of the many companies offer the best prospects for the investors. It requires comparing this company with the best companies in other promising industries. Since all this factors are constantly changing, re-evaluation and study have to be continuous.

Diversification
Diversification means spreading one's investments among many securities. It is an important method of reducing risk. It decreases the danger of damaging losses, which can occur through having all of one's eggs in one basket.
Diversification is difficult and expensive for a small investor because the cost of purchasing numbers of shares in many companies at the same time is disproportionately high.
Unit trusts with their resources are able to make widely diversified investments available to even the smallest investor. Diversification involves the ownership of many different securities. All the securities owned by an individual investor or unit trust fund are referred to as an investment portfolio.

Liquidity
An investor can sell his units, wholly or partially, at the following trading day's unit buying price. Units have a high liquidity, that is, they can be readily converted into cash.
It has to be remembered, however, that unit trust’s units will be redeemed at the prevailing buying price on the following day after receipt of the repurchase form. The unit price may be higher or lower than the price at which the investor started the plan. Unit trusts should be regarded as a long term, rather than short term investment.

Advantages of Compounding
Many unit trust funds provide facilities for investors to reinvest their distributions. For those who opted for distribution reinvestment, the fund will automatically credit the distributions into the account, rather than sending distribution warrants.
This process of reinvesting the income from the original investment and also of reinvesting the return on the total accumulating investments is called compounding.
As an illustration, if at 25, you invested RM100 at the beginning of every month at an interest growth of 10% per annum until age 65, your investment would have grown to RM638,000 ! The key element to compounding is time. The longer the period of time, the greater the growth.

Regularity of Investing
Many people do not have substantial sums of cash available to invest, but they can develop an investment account, investing smaller sums regularly in a unit trust.
Most unit trust funds have plans available to make it possible for smaller investors to invest relatively small amounts monthly. It is easy and inexpensive for an individual to acquire units through deposits of RM100 or more a month in a unit trust fund.

Fund Administration - The Convenient Factor
Few people have the experience, time or facility to properly set up an investment programme, much less to supervise it constantly. Unit trust managers have emerged as professional organisation devoted to solving the investment problems of people from all walks of life.
Unit trusts relieve their investors of the need to handle their own securities transactions. Investors in unit trust funds are not obliged to concern themselves with matters such as,
Obtaining quotations on securities being bought and sold
Delivery and payment for the securities involved in each transaction
Safekeeping of cash and securities
Accounting and bookkeeping procedures, etc
Investors of unit trust funds will receive semi annual and annual reports which describe
a. The portfolio of the funds
b. Investment changes made in the period
c. Distributions paid, if any
d. Fund manager's opinion on the economic and market outlook

To invest in Public Mutual unit trust fund, pls contact me, Fauzi (Public Mutual Agency Supervisor) at 012-7116707

What Is Unit Trust

A unit trust is a financial vehicle through which individuals may invest their money. The idea behind unit trust is better investment through collective investing. That is to say pooling the investments of many investors, individuals and institutions.
Investing in a unit trust offers investors numerous advantages, including :
a. Professional management at a low cost
b. Safety through the spreading of risk (diversification)
c. Liquidity
d. Ease of transaction
e. Capital appreciation/income stream
The operation of a unit trust may be best explained by outlining its similarities with the operation of a bank, with which most individuals are familiar.
Many individuals deposit money in the banks, for which they receive interest. These individuals expect complete liquidity where they must be able to withdraw their deposits in cash at any time. The banks employ professional managers to look after the deposits. The deposits are invested. These managers lend the deposits to other individuals requiring funds and a host of other profit generating facilities of the banks.
Similarly, unit trust holders wish to put their money to generate higher returns. The goal of all investments is to make money more productive, either through producing income or growth. Unit trust holders have liquidity because their units can be readily converted into cash at any time. By investing in unit trusts, it allows them to engage professional fund managers at a low cost to the individual investors. These managers diversifies the investible funds in many different securities and other approved channels to spread the risk.
The unit trust is constituted through a document known as a deed which brings together and binds the various parties to the deed :
· The trustee, who holds the assets of the trusts on behalf of the unitholders.
· The manager, who is the promoter of the scheme and provides investment and administrative expertise and markets units to the public
· The unitholders who provide the funds for investment and expect to receive the benefits derived from the investment. The effect of dividing the beneficiaries' interest in the trust into units is that their interest is quantified into discrete portions.
Particular advantages of unit trusts over the pooled investments include :
· The provision of an independent trustee to hold the trust's assets on behalf of unitholders and to watch over their interests on an on-going basis.
· The deed and prospectus are scrutinised by government authorities, prior to an offer of units being made to the general public. The managers and trustee are themselves approved by the regulators.
· A buy back provision or covenant in each deed which requires the manager to redeem an investor's units within specified time limits at a price determined in accordance with the deed.
Provisions in the deed under which the manager and trustee are in a fiduciary position in relation to the trust (i.e. they can only profit in ways laid down under the deed). The investor can determine in advance what costs and charges they will be required to pay to join and stay in the trust.

To invest, call me, Fauzi at 012-7116707. Public Mutual Agency Supervisor