5 Good Reasons Why Millennials Should Invest in Unit Trusts

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5 Good Reasons Why Millennials Should Invest in Unit Trusts

Image source: Nattanan23 / Pixabay

If you are one of the 32 million citizens of Malaysia, you would’ve probably known by now that a General Election is on the horizon. With voting day set for May 9, it seems that every single inch of the news columns is dedicated towards this event, thus making it something impossible to ignore.

However, did you know there is another event happening in the country that could potentially help to secure your future too?

And this future relates to your financial independence: we’re talking about the Malaysian Unit Trust Week 2018 (MSAM 2018). Happening at Stadium Batu Pahat, Johor from April 19 to 25, it aims to enhance public knowledge on investment and financial planning.

The week-long programme is an annual event which has been organised by the Permodalan Nasional Berhad (PNB) since 2000 and has so far attracted over 3.6 million visitors.

“Unlike the previous years, this year’s exhibition will incorporate various digital elements, such as the use of MSAM 2018 mobile event application (mobile app) corresponding to this year’s theme ‘Digitalising Customer Experience’,” PNB Group Chairman, Tan Sri Abdul Wahid Omar told reporters recently.

PNB is hoping to attract around 150,000 visitors to the event and is even offering prizes such as a terrace house, a Hyundai Ioniq Kappa 1.6 HEV Plus, and a Toyota Vios 1.5 GX (AT).

In case you haven’t delved into the world of unit trust and was wondering about the benefits, we’ve got you covered.

Here, we list down the 5 good reasons why millennials should invest in unit trusts:

1. You don’t need to be an expert

Unlike some other types of investments, you don’t need to be an expert or possess years of financial knowledge to reap profits. Unit trusts are collective investment schemes which pool investment money from multiple people.

These collective investment portfolios are then managed by experienced and skilled fund managers. By having experts do the hard work, unit trusts are an ideal solution for novices and busy people.

There is no need to worry about the best times to buy or sell your investments. The risks are kept to a minimum thus you can start building your wealth straight away!

Related: ASB Investment FAQ: How to Buy Units, How Lucrative Are They?

2. You don’t need a big income

Most unit trust providers give you the option to either invest in lump sums or smaller, regular amounts each month through a debit order. The latter option makes it possible for those on a limited income to slowly accumulate large amounts of investments.

Furthermore, by pooling your money together with other people, you can now afford to buy assets that are ordinarily only available to wealthy investors. The cost of some shares is far too expensive for regular individuals so the collective nature of unit trusts provides a solution towards this problem.

Related: 5 Intelligent Reasons Why Millennials Should Invest in PRS

3. Invest in a diverse portfolio

Image source: Dawnfu / Pixabay

The fund managers who take care of your unit trust funds usually diversify the investment towards a variety of assets. This normally includes stocks or equity funds, bond funds, corporate bonds, money market funds, REIT funds, property funds and many more.

By spreading the money across a diverse portfolio, your overall investment risks are reduced. If one investment doesn’t work out, you won’t lose your entire savings. However, this also translates to the opposite scenario.

If one investment does incredibly well, your entire holding won’t rise in value to that extent. But this brings us back to our earlier point – unit trusts are meant for novices and busy people. Once you have the experience and expertise, you can try your hands at riskier (and possibly more lucrative) investments.

Related: 9 Essential Questions About Fixed Deposits That Everyone Needs to Ask Before Investing

4. Safe and secure investment

Although a fund manager makes decisions on your behalf, he or she can’t access your cash. The interests of you, the unitholder, are protected by the appointment of an independent trustee to hold the fund’s assets on behalf of the unitholders.

The laws (and the guidelines by the Securities Commission Malaysia) surrounding unit trusts make it hard for others to steal your money and this helps reduce the investment risks for investors.

Related: 6 Common Biases That Hurt Your Investment Decisions and How to Overcome Them

5. Ease of liquidity

Unlike some other investments that lock your money away for fixed periods, unit trusts have a higher level of liquidity. You can readily convert your units into cash at the following day’s unit buying price.

Furthermore, you do not have to pay penalties when you choose to do this. This is especially an advantage in cases of emergencies or when you need your money on short notice.

Compare this, if you will, to some other investments (like fixed deposits) that tie up your money for years. They will require you to pay a big amount of money if you opt to access your investment any sooner.

Related: 7 Intelligent Tips to Help You Save for Your Retirement

Some other tips novices mulling investing in unit trusts must make a note of:

Image source: snowing / Freepik

So, we’ve now established that investing in unit trusts is one of the ways to secure the future and your financial freedom. Here are some tips for novices to keep in mind:

  • Develop financial goals/plans and stick to them – Lay out your risk profile, investment time horizon, and investment objectives.
  • Do your homework – There are different types of unit trust funds on the market, and you need to understand each of them, including the risks and rewards involved. Find one that best matches your financial goals.   
  • Choose the right fund manager – Make sure he or she has the right skills, expertise, and resources.
  • Read between the lines – Read the fund fact sheets/prospectus carefully and comprehend it.
  • Be aware of the fees and charges involved – Find out the fees and charges that you have to make for every transaction (e.g. buying, selling, switching funds).
  • Check your investment’s performance – Read the annual reports and financial statements.

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Disclaimer: The views expressed in this blog are those of the author. BBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Read all investment-related documents carefully in full and consult your financial advisor before investing.

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