As cliché as it sounds, a smart investor has a diversified portfolio of investment. One should never put all eggs in one basket. In this article, I am going to share with you about the benefits of investing in unit trusts or mutual funds as a vehicle to drive you faster towards your financial destination.
Professional Fund Management
When you start investing in unit trusts, you can be assured that you funds are managed by a myriad of approved professionals with extensive work experience in the finance and economics background. InMalaysia, the regulatory body for these professionals is the Federation of Investment Managers Malaysia. The fund managers’ exceptional expertise in buying securities of several companies, coupled with their monitoring, more often than not provides good returns for investors in the long run.
For novice investors, putting money in mutual funds offers more advantages than investing in the share market due to the diversification factor. Relatively, unit trusts carry lower risks and you can still have a good sleep at night. However, in the diversified family of unit trusts comprises a wide variety of equity stocks and bonds from different organizations, industries, and even countries. Each one of these has a varying degree of risks involved. The beauty of asset allocation in investing in unit trusts is that you can balance it all out according to how much risk you are willing to take.
Most people are comfortable in mutual funds because of the investment exposure. For instance, the fund manager of a particular equity fund purchases stocks from blue-chip companies of assorted sectors (such as communications, energy, and utilities) and also allocates some fund in money market instruments and fixed income securities. This provides as a great opportunity for an investor to expose his investment in wide-ranging asset classes under one fund with a minimal amount of money.
Only a small amount of capital is needed to start accumulating your wealth to financial freedom. In terms of cash, investors have two options: lump sum and regular savings (or direct debit instruction). Regular savings can go as low as RM100 per month. When it comes to retirement planning, investing in mutual funds is so affordable that you are able to invest without having to fork out cash when the government introduced the EPF Members Investment Scheme – where you are allowed to withdraw a certain amount from your Account 1 based on calculation that includes the balance and your age. This withdrawal is authorized every three months to make your money work harder for you in preparing for those golden retirement years.
The investor may redeem his investment should he feel satisfied with the returns and when the investment has achieved its financial goal. The ready-buyer is the unit trust management company that manages the funds itself, be it whole or partial of the units, on any business day. The regulatory body that regulates the unit trust management companies inMalaysia, the Securities Commission, is there to ensure that you get your money back within two weeks.
Adding unit trusts in your portfolio of investment is similar to adding more eggs in another different basket. You are reducing the risks of your overall investment, so that should one of your baskets fall down, you will not be losing all eggs (or as many as you cannot bear).
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