Should I take up a loan to invest in unit trust fund?
As an investor you must be aware of the risks in investing with borrowed money. The interest rate of your loan is fixed but the return from your unit trust investment is not. If the return is lower, you may end up paying more than the invested amount for interest and other charges. In addition, if the interest rates are floating rates, you must be prepared to service higher loan repayments if the rates increase.
In addition, the value of your unit will fluctuate depending on the market conditions. For example, the value of a RM10,000 loan invested in a unit trust fund may become RM9,000 if the unit price goes down from RM1 to RM0.90 per unit.
Your decision to invest in this manner must take into consideration all the associated risks. If you’re not ready to take it then don’t borrow to invest.
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