Want to calculate the savings if you reduce one cup of coffee a week?

The Benefit of Investing in Unit Trust

unit trust
ASNB
ASNB Academy

8 min read

Investing can be complicated and overwhelming, especially for those unfamiliar with the terms and jargon associated with it. There are many options to choose from, including stocks, unit trusts, gold, bonds, forex, and real estate.

Which one suits you, how do you choose, can you make a profit, what if you lose? All these burning questions keep lingering as you try to select the best investment options.

If you are willing to take some risk but have yet to be ready to invest in a high-risk asset class, a unit trust investment might be your best option.  

Among the Unit Trust Management Company (UTMC) in Malaysia are Amanah Saham Nasional Berhad (ASNB), Maybank Asset Management Sdn Berhad, Amfunds Management Berhad and Kenanga Investors Berhad.

What is a Unit Trust?

A unit trust is an investment vehicle that pools money from multiple investors to invest in a diversified portfolio of assets, including stocks, bonds, money market instruments, and other securities.

Managed by professional fund managers, unit trusts offer individual investors an opportunity to gain exposure to a wide array of securities with relatively low investment minimums.

Benefits of Investing in Unit Trust

1. Diversification

  • Spread Risk: Unit trust invest in various securities, reducing the risk associated with the performance of any single asset.
  • Asset Allocation: They often include different types of assets (stocks, bonds, etc.), which helps spread risk across various sectors and asset classes.

2. Professional Management

  • Expertise: Managed by experienced professionals with the knowledge and resources to make informed investment decisions.
  • Continuous Monitoring: Fund managers monitor market conditions and adjust the portfolio to meet the fund's objectives.

3. Liquidity

  • Ease of Access: Unit trust can be easily bought or sold at the fund's current net asset value (NAV) at the end of each trading day.
  • Quick Redemption: Investors can redeem their investments and receive the proceeds within a few business days.

4. Affordability

  • Low Minimum Investment: Many unit trusts have low initial investment requirements, making them accessible to a wide range of investors.
  • Economies of Scale: Investors benefit from the lower costs associated with the fund's more extensive pool of capital.

5. Convenience

  • Automatic Investments: Many unit trusts offer systematic investment plans (SIPs), which allow for automatic, regular contributions. You can invest automatically in an ASNB unit trust via AutoLabur @myASNB.
  • Record Keeping: Unit trusts provide detailed statements and tax documents, simplifying investment tracking and tax reporting.

6. Variety and Flexibility

  • Different Types: Various types of unit trusts are available, including equity funds, bond funds, index funds, sector funds, and balanced funds. Investors can choose according to their risk tolerance and investment goals.
  • Customizable Portfolio: Investors can select from a wide range of funds to build a portfolio that meets their specific financial objectives.

7. Cost Efficiency

  • Lower Transaction Costs: Due to the large volume of trades, unit trusts often have lower transaction costs than individual investors would incur.
  • No-Load Funds: Some unit trusts are no-load, meaning they do not charge a commission or sales fee.

8. Dividend Reinvestment

  • Reinvest Earnings: Unit trusts often offer the option to reinvest dividends and capital gains, compounding growth over time.
  • Automatic Growth: Reinvestment allows for the automatic purchase of additional fund shares, enhancing the growth potential.

9. Regulation and Transparency

  • Strict Regulation: Unit trusts are regulated by government agencies, such as the Securities Commission, which ensures a level of oversight and investor protection.
  • Transparency: Funds must disclose holdings, performance, fees, and other information via Prospectus regularly to allow investors to make informed decisions.

10. Tax Benefits

  • Tax Efficiency: Some mutual funds are designed to be tax-efficient, minimizing the tax impact on investors. For example, if you invest in ASB, your dividend is exempted from tax.

Conclusion

Unit trusts offer a range of benefits, including diversification, professional management, liquidity, and affordability, making them attractive options for both beginner and experienced investors.

By investing in mutual funds, individuals can achieve their financial goals while mitigating risk and enjoying these investment vehicles' convenience and flexibility.

Moreover, in Malaysia, we have unique unit trusts, which are fixed-price trust units managed by ASNB. These unit trusts have unique characteristics, such as low risk, as they are traded at a fixed price of RM1 per unit, high liquidity, in which investors can redeem their investment on the spot, and ease of investment, as ASNB has more than 2,000 agents nationwide. Among the products offered are ASB, ASB3 Didik, and ASM.

As such, why are you still not investing? Start investing as soon as possible to beat inflation, build an emergency fund, or, better still, achieve financial freedom.   

A list of UTMC and the funds offered can be found on the FIMM website.