The usual interaction between a unit trust agent and an investor is the agent talking a lot and the investor listening. Not many pertinent questions are asked by the investor except for the usual – “how much dividend the unit trust will give out?” or “what is the minimum amount to start investing?”. But to fully benefit from your unit trust investments, you must be prepared to ask many questions. The answers you get from these agents can help you determine whether investing in a unit trust they are offering is suitable for your investment goals and objectives. It will also prevent you from investing in unit trust products that are not suitable but which an agent is pushing because he gets high commissions from its sales.

Here is a list of suggested questions (not exhaustive, of course) that you should ask your agents.

1. Is this unit trust fund registered with the Securities Commission?

Hint: All unit trust products must be registered with the SC. To ensure that an investment product is registered with the Securities Commission, call 03-6204 8000 and ask for the Trust and Investment Management Department.

2. How long has the unit trust company been in business? What is its track record or performance in giving the promised returns?

Hint: It is important for an investor to check out the background of a unit trust company, including the company that will be managing the funds (if the fund is being managed by external fund managers). Find out their track record and experience. You must take the effort to get to know the people to whom you are entrusting your hard earned money.

3. Does this fund suit my investment goals and risk profiles?

Hint: Before you ask this question, you must know and be sure what your investment goals or objectives are (there are Malaysian Investor's articles on investment goals and objectives, please read them) and how much investment risks you can tolerate (investment risks are essentially situations that may arise which can cause you to suffer losses). Nowadays, there are many types of funds in the market, each with its own benefits and risks (the higher the return promised, the higher the risks you have to take). Hence it is important for you to understand the funds being offered and for you to choose a fund or funds that really suit your investment goals and risk tolerance. For instance, if you want a consistent income, you must invest in funds that provide steady consistent returns. You should not be pressured by any agent to invest in a fund that is not suitable for you.

4. What will happen to the money that I put in a fund? Where will it be invested?

Hint: Each unit trust fund has its own investment strategy. For example, for an equity fund, generally most of the fund's assets will be invested in the stock market. On the other hand, a bond fund will invest most of its funds in bond products. It is crucial for an investor to know which investment products the fund will be investing in, as this will have direct implication on risk tolerance of the investors. If the fund is investing in high-risk investment products, the unit trust fund itself becomes a high-risk investment. (Check the hint in Question 3 too!).

5. How do I know that my fund is doing well? How can I compare it with other funds?

Hint: Each fund has its own benchmark (something you can compare its performance with), which is stated in the prospectus . You can compare the rate of return of your fund with these benchmarks. T he common benchmark for funds is the Kuala Lumpur Composite Index (KLCI) while for bond funds, it is normally the average 12-month fixed deposit rate of banks.

Alternatively, you can compare your fund with other funds of similar characteristics. For example, if you have invested in a bond fund, compare its performance with other bond funds.

6. How will I make money from this fund? (Capital gains? dividends?).

Hint: If you invest in unit trusts, your return could be in the form of capital gains (if the market moves favourably) or dividends (if the management company announced any). Get your agent to explain this.

7. Do I have to pay any fees or charges?

Hint: Every investment has a cost to it and investing in unit trust funds is no exception. Unit trust management company may impose fees, such as sales charge, management fees, trustees' fees and other relevant charges. Your agent must explain this clearly to you.

8. If I change my mind after I have invested in a fund, can I sell it back to the company and get a full refund ?

Hint: Investors are given a “c ooling-off period” which is time given to investors to reconsider if they want to continue investing in the unit trust fund or otherwise. Subject to conditions, a unit trust investor is entitled to a full refund if he decides not to continue investing in the fund within the “cooling of period”. “Cooling off” is your right!

Useful link : Cooling-off period .

9. How easy can I sell the fund if I need my money right away? How long do I have to wait before I can get my money back?

Hint : It's important that you know when you will be getting your money back so that you are more prepared in case you need the money urgently. Ask the agent.

10. Will I be getting any statement regarding my investment status from the management company?

Hint: Your monitoring process will be easier if you receive a statement from the management company regarding your investment status. Find out how frequently you will be getting such a statement. You must monitor your investments.

11. Where can I get more information about the fund?

Hint: Most of the information about a unit trust fund is in its prospectus and annual report. Ask your agent for a copy of the prospectus and read it before investing.