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Getting To Know Unit Trust Schemes

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Financial planning is a very important life skill that most of us had to learn on our own. At times, especially when we were young, we don’t realise how important it is to plan for our financial future until we hit a life-changing moment, such as marriage or having our first child, which require a lot of money.

As such, some of us will have to start making up for lost time, increasing the pressure to reach a certain financial goal. It may not be enough to just save money. We will need to invest too in search of better returns.

One option is to invest in Unit Trust Schemes, or Unit Trusts.

What Are Unit Trusts?

A Unit Trust is an investment scheme that pools money from many investors who have similar investment objectives, strategies and risk appetites. The pooled moneys are then invested into a diversified portfolio of investment assets, such as shares, bonds, and cash equivalents.

Unit Trusts are managed by professional fund/investment managers who have been licensed by the Securities Commission Malaysia. These professionals will be investing your money, using their expertise to help you reach your financial goals. With the professional fund managers making investments on your behalf, you are free from having to study the markets yourselves and making decisions on each individual investment.

Additionally, investing in Unit Trusts is an affordable option, especially for those who are just beginning their financial freedom journey. Only a small amount of capital is needed for you to start investing.

How Long Should I Invest In Unit Trust Schemes?

There are many reasons why investing in Unit Trusts makes good financial sense, particularly if you already have a goal in mind. You can choose to invest in a Unit Trust for varying lengths of time, from one to three years (usually defined as short-term), three to five years (medium-term) or more than five years (long-term).

Here are some examples of how these investment strategies would work with your particular goals:

Short-term: These are good for more immediate goals such as buying a car, looking to take a holiday, or wanting to start a family.

Medium-term: These are suitable if you are looking for slightly higher returns to be used towards the down payment for a house or seeking capital to start a new business in the near future.

Long-term: These are more suitable for big financial goals that you have lined up for the future, such as paying for your young child’s tertiary education or if you want a comfortable nest egg for retirement.

What Are The Risks Involved?

As with most forms of investments, there are risks involved in investing in Unit Trusts. But the beauty of investing in Unit Trusts is that you can choose an investment strategy that best fits your risk appetite.

In general, there are three types of investment strategies you can consider, based on your preferred level of risk:

Conservative: This is often the best strategy for older investors who have a large amount of capital and prefer stability over quick gains. Investments in this risk category tend to be in safe assets that are not easily susceptible to market shocks or swings, and very often, help to preserve the principal amount you invested.

Moderate: For investors who are willing to take some risks, this strategy is the perfect balance between wanting to preserve your principal investment, while still taking advantage of some assets that can offer potential growth.

Aggressive: For younger investors, a small amount of capital can go a long way, especially if you are willing to invest for the long term. While there might be a chance that you may lose some of the initial capital, the fact that you have time on your side means that you can take higher risks to maximise growth.

Let’s see how Unit Trusts measure up to other forms of investments and savings:

Unit Trusts offer a middle ground when it comes to investment options. Generally, it is safer than investing directly in the market and yet, it has the potential to offer better returns than standard savings accounts. For those looking to safeguard their financial future or grow their wealth, it is well worth considering investing your money into Unit Trusts.

Visit FIMM’s website for more information on Unit Trusts.

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