Basic guide to selecting the right unit trust fund
“Which fund should I choose?” is a very common question among unit trust investors. Choosing the right funds has never been easy. But the following basic guide could help determine the most appropriate funds for you.
 |
Know why you are investing? |
| |
Different investors have different investment needs or objectives. Some do it as part of retirement planning, while others for their children’s education funds. As an investor, you must be clear of your investment objectives. This will help you determine the right fund for you. For example, if you are looking for a source of steady income, you may NOT want to invest in a unit trust that was set up to achieve capital gains. |
| |
|
 |
Know your risk profile |
| |
Once you have set your objectives, assess your risk profile. In investment, risk means the possibility of experiencing investment losses. Every investor has a different risk profile. Some are willing to take higher risks and some are not. As an investor, you must always assess your risk profile and really understand how much risk you can take i.e. how much money you are prepared to lose. Different funds have a different degree of risks and always remember – higher returns means higher risk. The ability to really know and understand your risk profile is crucial. It will keep you focused and can prevent you from being distracted by your agent’s numerous colourful brochures and promises which could mislead you into choosing the wrong fund. |
| |
|
 |
Do your homework |
| |
Once you are certain of your investment objectives and risk profile, it is time to get all the relevant information. Your source of information could be from the following:
- Prospectus
This is the most important document for unit trust investors. Sadly, most investors do not bother to read the contents of a prospectus, preferring to rely on the agent to tell them about the fund. But if you want to be a serious investor, it is advisable for you to read them because most of the basic information, such as the fund’s objectives, manager’s qualifications and experience, fees and charges, and other relevant information are in the prospectus. You can get the prospectus from the unit trust management company. Alternatively, the SIDC Library has a complete set of unit trust fund prospectuses which is accessible to the public. Do pay them a visit.
- Newspaper
Newspapers are the most accessible source of information for unit trust investors. Usually, newspapers will carry news and data on unit trust funds.
- Financial planner
This concept is still new in Malaysia. Financial planners should be able to help you determine the most suitable fund to invest in. But if you decide to use their services, ask whether they are independent financial planners or otherwise. A non-independent financial planner may receive commissions for a product they are recommending. As a client, you should be made aware of this fact and you should not be compelled to invest in these products.
|
|
