Top 5 Important Facts about Unit Trust that Agents will not tell you By KK Lee http: //www. myunittrust. info
Profile • As unit trust consultant since year 2007 • Founder of myunittrust. info • Active forumer in local chinese forum
Myunittrust. info • A Malaysian unit trust fund information sharing portal • Info sharing is not limited to single fund house, but all unit trust funds • Objective: – To provide information of all unit trust funds in Malaysia as well as industry news update. – To educate investors about unit trust investment
Top 5 Important Facts about Unit Trust that Agents will not tell you 1. Distribution does not add value to your investment
What normally agents tell you about distribution? • This fund gives distribution every year, you should invest in this to generate more passive income… • This fund will have distribution next month, you should invest into it now… • This fund distribution is average 6%, higher than FD interest rate…
In fact… (1) • Distribution does not add value into your investment • After distribution, the fund NAV will be adjusted accordingly • The total net worth of your fund NAV will be same before and after the distribution • Even though normally funds only give distribution when have profit, fund manager can give distribution when fund is lossing
Top 5 Important Facts about Unit Trust that Agents will not tell you 1. Distribution does not add value to your investment 2. Unit Trust is long term investment
What normally agents tell you about unit trust investment? • Unit trust can give return 8 -12% a year, much higher than FD interest… • You put in FD, 1 year only earn 3. 5%. If you put in unit trust, 1 year can earn 812%. . .
In fact… (2) • Malaysian equity fund service charge is up to 6. 5% • Normally, unit trust funds will take 3 -5 years to generate more return as the service charge is already 6. 5% in the first year • Reasonable expected return: – Equity fund: average 8 -9% per annum over long term – Balanced fund: average 6% per annum over long term – Bond fund: average 4 -5% per annum over long term
Top 5 Important Facts about Unit Trust that Agents will not tell you 1. Distribution does not add value to your investment 2. Unit Trust is long term investment 3. Bond Funds
What normally agents tell you about bond funds? • Bond funds return is low, almost same as FD interest. If you want to earn money, better invest in equity funds… • If you don’t want to invest in high risk funds, you can invest in balanced funds…
In fact… (3) • Bond funds service charge is lower compared to equity funds • Can be used to lower the overall risk level of unit trust fund portfolio • Save service charge compared to investing in balanced fund
Top 5 Important Facts about Unit Trust that Agents will not tell you 1. Distribution does not add value to your investment 2. Unit Trust is long term investment 3. Bond Funds 4. Low fund price does not mean it’s cheap
What normally agents tell you about fund price? • This new fund price is only RM 0. 25, very low, so high potential to increase… • This fund price drops to RM 0. 15, very worth to buy now, can get a lot of units…
In fact… (4) • Fund price is not an indicator when comparing funds • A RM 0. 25 fund is not necessary more worth to invest than a RM 0. 50 fund
Top 5 Important Facts about Unit Trust that Agents will not tell you 1. Distribution does not add value to your investment 2. Unit Trust is long term investment 3. Bond Funds 4. Low fund price does not mean it’s cheap 5. Past performance does not guarantee future performance
What normally agents tell you about fund performance? • The one year return for this fund is 30% now, you should invest in this… • This fund performance is in top 3 this year for the 1 year period, you should invest in this fund…
In fact… (5) • Although most of the brochures or agents tell you that past performance does not guarantee the future performance, agents still recommend based on past performance • Top performing fund in the past 1 -3 years, maybe the worst performance fund in the following year
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