graph shows unit trust trend

When I was working in corporate companies, I was approached by a few Unit Trust consultants. I did invest in Unit Trust by using my EPF savings after being convinced of the potential returns. 


As I was not really understood how Unit Trust works, I gave 100% trust to the consultant to choose the funds for me. Unfortunately, not all their promises were well delivered.


As now I’m working as a consultant registered with Principal, my understanding about Unit Trust is much better. So, below I share;

Invest in Unit Trust Confidently , Tips and Best Practices

#1. What is unit trust

Unit trust is investment strategies that allow a pool of money from various investors to purchase a collection of stocks or bonds etc ie funds that buy wide range of investments. 


The fund’s investment is managed by professional fund managers and is regulated by the Securities Commission Malaysia.

#2. How unit trust works

Unit trust allows you to invest in many companies at once, from largest and most stable, to the new and fast-growing. Besides that, they have fund managers who choose companies for the fund to invest in.


In Malaysia, a person who does investment in Unit Trust, has options of the followings;

·       either to invest in Conventional or Syariah compliant funds

·       can do investment through EPF savings, cash and monthly savings

#3. How unit trust makes you money

A Unit Trust can be a good place to start if you want to save money for retirement or long-term goals. When you invest in a Unit Trust, the cash value can increase from two sources;


a.   Dividend payment


Dividend payment is a way for companies to share their profits with investors. Investors will receive dividends once or more in the course of one year, but take note that there are also funds that do not give out any at all.


b.   Capital gains

When an investor purchases shares in a fund at one price and sells them for another, they will make more money if the share value increases.


Capital growth is when the value of the shares in the portfolio fund increase due to investors selling the units at higher prices than their initial purchase cost.


# 4. Is it safe to invest in Unit trust?

In the nutshell, investing in Unit trust is safe. 

  • Although Unit trust as a product cannot guarantee specific returns, the risk is minimized in various ways. Firstly, professional teams of the Unit Trust manage the funds. Hence, the risk is reduced with the diversification of companies invested, instead of betting on a single stock.
  • Investor will see a better return on their investment if they are not worried about short-term fluctuations. Always invest in Unit Trust for long-term purposes.
  • The guidelines such as ‘The Capital Market and Service Act 2007’ and ‘Guideline on Unit Trust Funds’ provide regulatory and governance to protect the investors. Hence, investor’s money is safe from theft.

# 5. Unit trust pro & cons

  • Manage by Professional – Investors can save hours of time, energy from doing analysis or research on which quality stocks or companies to invest in. So that, investors can focus on their career or things that they enjoy.


  • Affordability – Most of the Unit Trust have minimum investment requirement. In other words, you can make an initial investment as low as RM 500. And subsequent investment at RM 100. 


  • Liquidity – It’s easy to buy and exit a Unit Trust investment. In Malaysia, after you sell your unit, money will be deposited to your bank or EPF account within 3 – 5 working days.


  • Diversification – Unit Trust is a basket of investment. Each fund does not only have one stock or portfolio. It is invested in hundreds of stocks, bonds, investment securities, and/or other assets.
  • Application fees – There are fees when you invested in the Unit Trust. Depending on which funds that you invest, the fees range as below;

      Money market                    :  0%

      Bond or sukuk                    :  1%

      Equity (EPF investment)      :  3.0%

      Equity cash                         :   4.5 – 6%


  • Open to risk, hence possible lose money. Unit Trust is also open to fluctuation returns depending on the market conditions. Hence, it’s crucial to understand the investment strategy, their markets, and the potential growth in the future.


In summary of Pro & Cons:

Investors who always want to minimize their risks and enjoy the potential of a high return should invest in Unit Trust. There is no guarantee for success because sometimes they might lose money, but if you take your time to understand what kind of investment strategy they have and are open about how well it will work with market conditions, then that risk can be minimized.

# 6. Can I invest in just a single fund?

Technically yes. However, the rule of thumb of investment is not to put all eggs in one basket. I would recommend diversifying your portfolio at least into 2 funds ie. Equity and Balance or Sukuk.

5 simple tips on what to check prior investing on the funds.

1. Objective should be long-term

Your investment objective has to be clear. You must understand the risk especially when you invest in equity funds. It has application fees and it is also subjects to market fluctuation. Invest in Unit Trust if you can hold at least 2-3 years. 

Should you want to save for short-term period, for instance, less than one year, I suggest putting it at Fixed Deposit (FD), Amanah Saham Bumiputra (ASB), or Tabung Haji.

2. Don’t chase long past performance

Performance and track record of the fund will give you an indication of the fund manager’s ability to manage risk through any market fluctuation. Don’t simply look based on the overall performance from the fund’s inception/launch. The fund’s performance might change from time to time. What was good the last 15 years, might not be great now. Just look at Blackberry.


I would recommend the investor to check at the annualized return of the fund for the past 5 years as below example. This will give an idea of how the fund performs recently.

3. Dividend yield.

A good fund will give dividends at a yield 5 -7% annually. Hence, although the price of the fund fluctuates in a certain year, the dividends received will increase the total unit accumulation. 

4. Work with the right consultant

If you is being approached by Unit Trust consultants, ask them to show their own investment. As currently, every consultant can access the company’s system via laptop, iPad & handphone, then there is no reason why your request cannot be fulfilled. 


If the consultant is able to do it, means that the consultant has 3 important traits;

a. he/she believes in the product

b. he/she practices what being said and not just selling

c. he/she has full visibility of the fund’s performance and understands what’s is expected from investor.


5. Monthly savings

Compound interest is awesome. If you invest $300 monthly and gain 10% interest per year, you’ll have $4000 by end of the year. And when you reach 20 years, you’ll have $200,000. 


Especially when you invest in Unit Trust, monthly savings is a simple and yet effective strategy that will help you grow your wealth. As the market is always up and down, dollar cost averaging helps to take the fear out of investing and you don’t need to time the market.


When market up, you will benefit from the capital gain of the fund’s price. And when it drops, you will be able to buy more units at lower prices for less cost.


Final Thought

Unit Trusts are a type of investment that can be used to fund your retirement or help you financially prepare for the future. This is an exciting opportunity, but it’s not always easy to get started on this journey.


That’s why we’ve provided some tips and tricks above in order to make investing easier and more successful for you! 


If you want a little more information about how unit trusts work before committing any funds, feel free to reach out through our contact page. We’re happy to answer any questions or concerns you may have so that you can start confidently investing in Unit Trusts today!


Investing involves substantial risk as well as reward; readers are encouraged to do their own research before arriving at any conclusions based solely on materials provided or republished here. Read full disclaimer. 

About the Author

Khairul, is a Certified Consultant registered with Principal, founder of Khairul Abu Bakar blogsite and the LinkedIn Spotlight 2019.

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  1. Dear Khairul…
    God bless you. Alhamdulillah. Thank you for the guidance. I was actually reading about your advices on mistakes to avoid for retirement. And whalla… l found this one.
    This section is also wonderful.
    Thank you so much for advising us, the public, on stuffs like this.
    I will surely find time to read all your blogs.
    A big THANK YOU!

    1. Thanks so much, RIZ for reading and your kind comments. It means a lot to me.
      To know that my writings do help the readers motivates me to write more quality posts. InsyaAllah.

      Thanks a million.

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