Hi, I’m Ian.

Lately, I’ve met up with a unit trust consultant.


‘Seriously? But Ian, I thought you are an avid stock investor. Why do you need a fund manager when you can build and manage your own stock portfolio by yourself from scratch?’


Good question. Yes, I’ve built a profitable stock portfolio from scratch. I believe all of us can do it too without a fund manager. We can be our very own fund manager. As such, normally, I don’t really meet up with a unit trust consultant as I don’t have any intention to invest in a unit trust fund.

However, as I write, I’m still a young chap. I’m qualified to enjoy the PRS Youth Incentive where I’m able to receive an additional RM 1,000 in my PRS fund from the government if I invest at least RM 1,000 in a PRS fund. Also, I would be able to enjoy some savings from tax payments if I invest in a PRS fund. The total returns seem attractive even before mentioning the performances of a PRS fund. That’s why I agreed to meet up with a unit trust consultant.

The meeting was casual. We had coffee. After some pleasantries, the unit trust consultant (let’s call him Tan) began his presentation which was well rehearsed. In addition to PRS funds, Tan has also introduced a handful of unit trust funds which are not under the PRS scheme. After the meeting, I began to collect my thoughts on his sharing and do further studies on unit trust funds, both PRS and non-PRS funds.

In this article, I’ll share 5 things that you may need to know about unit trusts first before you invest in them. Probably, these are stuffs that unit trusts may not tell you beforehand when you are considering to invest in them.

#1: Beating FDs & the EPF

Tan: ‘Ian, it’s not enough to rely on FDs and the EPF to finance our retirement.’

Ian: ‘What do you suggest?’

Tan: ‘How about our equity fund’

Ian: ‘What’s the sales charge?’

Tan: ‘5% of your capital’


As I write, most FDs are paying out 3% interest a year and the EPF has paid out 5.70% in dividends in 2016 after strings of above 6% of dividends since 2012. How much returns should I expect from the equity fund to beat FDs and the EPF? Here’s some mental maths:

If I placed RM 1,000 in a fixed deposit account, I would receive RM 1,030 upon its maturity. Instead, if I choose to buy units of an equity fund, I would incur RM 50 in sales charges (5% of my capital) and thus, leaving my initial capital to be RM 950. To match my returns with fixed deposit, I would need to earn RM 80 in my first year from the equity fund. This equates to a return of 8.42% from RM 950 of initial capital.  

What about the EPF? If the EPF pays out 5.7% in dividends for 2017, then, my EPF should increase to RM 1,057 from every RM 1,000 I have in my EPF account. This means, I would need to earn RM 107 in my first year from the equity fund to match my returns from the EPF. This equates to a return of 11.26% from RM 950 of initial capital.

This means, the equity fund needs to generate more than 8.42% and 11.26% in returns to beat returns from FDs and the EPF respectively. We haven’t even factored in the annual management & trustee fees applicable to these funds. 

#2: On Fund’s Performance

Tan: ‘The performance of this fund is good. It has made, on average, 8% a year in returns since its inception in 2013.’

How are returns from unit trust measured? It is based on the net asset value (NAV) appreciation of a unit trust fund over a specific period of time. It is a measure of capital growth over cash returns. As such, returns are dependent on the NAV fluctuation of a unit trust fund and thus, are not guaranteed.

What is less mentioned is the term, ‘Fund Volatility Factor (FVF)’. It is often measured based on returns over the last 3 years. For instance, if you opened a fixed deposit account and received annual interests of 3%, 3%, and 3% over the last 3 years, then, the FVF is 0%. This means, the returns are not volatile.

If you find a fund where the FVF is 10%, this means, the returns may deviate by +/- 10%. If the fund’s average returns is 8%, future returns could fluctuate between -2% to 18%. Thus, high FVF funds have greater uncertainties of future returns than low FVF funds as they are more volatile. This explains, perhaps, why you may experience inconsistent returns from your investment in a unit trust fund.

#3: Am I buying a Trading Fund?

Tan: ‘The objective of investing in an equity fund is to achieve mid-to-long term capital appreciation. Unit trust is a long-term investment and not for short-term gains.’


I believe, there are many sincere people who buy units of unit trust funds as they believe that they are investing. In my opinion, some were being grossly misled.

Here’s another term that is less mentioned. It’s called, ‘Portfolio Turnover Ratio (PTR)’. PTR is a simple way to tell us whether a fund is an investment fund or a trading fund.

For instance, let’s use a IGB Reit as an example. It is a Reit that derives rental income from Midvalley Megamall and the Gardens Mall. Since its inception, it never bought or sold any investment properties. As such, IGB Reit’s PTR is zero as there is no change in the composition of its investment portfolio.

If you find a fund where the PTR is high, this means, the fund manager has been active in buying and selling investment securities. If a fund’s PTR is consistently high, this means, it is a fund that is active in trading and have lesser tendency of holding onto an investment. In most cases, you may find high PTR funds in most equity or aggressive funds.

#4: Guaranteed Returns

Tan: ‘Of course, I must tell you beforehand that returns are not guaranteed.’

Pardon me for writing this. While there are many consultants who possess great customers’ services, ultimately, I believe the priority of all consultants is to make their respective principals rich first over sincere investors like you and me. Let me elaborate.

For a start, the rich invests differently from others. Their focus is on cash flow which are recurring and predictable. Meanwhile, many others choose to focus on capital gains which are non-recurring and unpredictable. Let us assess unit trust investment from the viewpoints of both buyers and sellers.

For sellers, they derive consistent multiple streams of income from your investments in unit trust. They include sales charges, management fees, trustee fees, switching fees and other fees applicable. They make money in both good and bad times as they continue to derive income from investors regardless of the performance of their funds.

For buyers, you incur multiple streams of fees for investing in unit trust in exchange of an opportunity to realise a gain from selling off units at a price higher than your purchase cost. In good times, you may stand to gain if the fund’s NAV goes up. In bad times, you may lose if the fund’s NAV drops. In this case, who’s got the upper hand? I’ll rest my case.

#5: I’m a Risky Investor?

Ian: ‘Well Tan, I invested in stocks.’

Tan: ‘So, you are an aggressive investor. I think, you can take high risks. After all, stock investors are high risk takers.’

Ian: ‘Ehm… Not exactly, bro. I’m actually quite conservative.’


I suppose, there is a misconception of who stock investors are, their nature and what they actually do. I believe, stock investors are branded as high risk takers as many do not know the difference between speculators, traders and investors. Here’s the key difference.

In most cases, stock investors are conservative by nature. Before investing, they want to know what they are investing into, how their money is being used, what their returns are, how potential risks are mitigated, and more importantly, can the price of the investment be reduced further. This is why stock investors need official documents such as annual reports, quarterly reports, press releases, and investors’ presentations to assess a stock deal.

It is not the same as unit trust where most people buy units, not knowing how their money is being managed, and hope that the units somehow will appreciate in prices. Knowing adds certainty. To stock investors, investing without knowledge is very risky. Thus, if a unit trust consultant fails to explain how my money is going to be invested, then, I reckon that the investment is very risky.

So, You want to Buy Units in a Unit Trust Fund …


Here are some guidelines:


– Find funds that have lower sales charges.

– Ask for the funds’ FVF & PTR.

– Ask for the funds’ distribution policy.

– Benchmark performance against FDs and the EPF

– Don’t be lured or oversold by ‘Best-Performing Funds’.

– Check out Conservative Funds. Don’t dismiss them.

– Ask how your money would be invested. Where does it go?


Ian Tai
Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia.

    32 replies to "5 Things Unit Trust Consultants will not tell you …"

    • Ian Tai

      Hi Mr. M, thanks for your question. It depends how you look at it. In a glance, it seems worth it as the RM 1,000 you invested would be matched with RM 1,000 by the government. It gives you 100% returns with the catch is that you can’t touch the money as it is under PRS. On top of that, you are entitled with some tax relief from it. You’ll be penalised if you make an early withdrawal on the money.

      By looking in-depth at it, it depends on the PRS Fund. It depends on your preference. Usually, people who invest in unit trust are ‘hooked’ in because of promises to achieve capital gains. Very little or no talk about cash flows from them. Most instances, unit trust companies earn stable and regular cash flow from sales charges, management fees and trustee fees from their investment funds.

      Let us say, you put in RM 2,000 into PRS. When would you see your money again? But, I’m sure that the PRS operator would earn stable cash flows from all the fees as mentioned above year after year until you see your money again, regardless whether you eventually make capital gain or loss from your PRS fund.


    • Mr M

      Hi , can I ask your advice , I’m qualified to enjoy the PRS Youth Incentive where I’m able to receive an additional RM 1,000 in my PRS fund from the government if I invest at least RM 1,000 in a PRS before end of December this year and yes I’m 29yrs old, my uncle ask me to this well still deciding , sorry I’m noob for this investment word just a small fish , I want to ask after I put 1000 +gov = 2k and I just leave it there to grow up till my retirement day , is that ok and should I go with this PRS ? If any dark side about prs that I don’t know can you tell me, I don’t want to hear only sweet talk but real deal like risk, things like that .

    • yazli


      I have invested since 2012 totalling close to RM50k but the current market value yields are mere RM4k over there 5 years. Can i conclude that this fund is bad?

      Also, my total investment vs return is only a mere 1% gain. Really bad, and unfortunately i did not have time nor a good UTC to advise me since the beginner..I think they are just into capitalizing the charges we have to incur doing UT.

    • KFong

      I’ve just read your article after I lost 16% in unit trust. Only I’ve read it earlier I would have decided differently. I bought into a fund supposedly has low risk and has the flexibility to change to different markets or to keep the money in cash or bond. And I asked for 8% return only. But the fund decided to invest in derivative and lost so much in the process. It makes no sense to lose 16% in exchange for possible 8% reward. Also my agent wasn’t monitoring for me. Given the flexibility of the fund I just can’t believe what they just did.

      I will never again in my life invest in Mutual Fund. There’s no transparency and the fund managers are probably more invested in their own interests. When we are investing on our own, we can control our risk, choose our pick and cut loss when we don’t feel comfortable, Mutual fund charts are hard to read cos it’s a basket of different things that we don’t know what it is.

      • elisa

        i totally agree with you…

      • Andy


        May I know how long you already invest in mutual funds? 16% lost within one year? Fyi, invest in mutual funds always look at long term. If just 1-3 years, very difficult to see result.

    • Devendran

      Very simple but articulate reading, thanks

    • Andrew

      Hi Ian,

      I need your guidance here as i dont know what should i do now whether to withdraw or continue.

      In Nov 2017, i have invested over 50% of my EPF account 1 into Manulife Unit Trust. As of now it has unrealised loss up to -14%. Should i withdraw now and fire this unit trust? or i should continue to let it sit hoping it will recover one day.

      • Karmaliah

        Hi andrew…

        I would like to consult you personally..you may call me 013 8019615.tq.

      • KFong

        Hi Andrew,

        I feel your pain. I also lost 16% recently. It was supposed to be 14% loss but the company delayed my sales for 2 days and it became 16% loss. It’s a very hard decision to make but I decided to cut loss. I don’t think I want to let my money keep sitting there when I don’t trust their company to manage my funds anymore and I can’t sleep at night. They can be reckless for all we know and there’s no transparency. I don’t know why I only see it in hindsight when everything suddenly becomes clear to me. I can’t advise you about your withdrawing decision but moving forward we’re better off knowing what we invest in and to understand the fundamentals of a company. The past week has been hard for me. The decision making depleted all my energy and I could hardly sleep. For myself now mutual fund is a big no no. I don’t care what agents say about “oh you sure can recover and make back all that you lost”. Like yeah right, in 10 years maybe.

    • Ian Tai

      Dear Reader,

      I’m Ian, a team member of KCLau.com. I received your comment on my article posted on KCLau.com. Thanks for reading my article.

      First, I think it is best to know your own unique purposes for investing. Is it for passive income, capital preservation or capital appreciation in the future? While one can invest for all three, but, at the end, it is the priority of the three that defines why we invest and what we would be investing into. Without knowledge of this, it is hard to ascertain what to do next with your investment.

      Second, I believe you are adopting a different mindset as compared to the unit trust consultants. That is okay. I believe, if you read my article, perhaps, you would find me very different from a lot of unit trust consultants in the market. The key difference is that – I’m one who invest for cash flow. It does not matter what I invest into, be it stocks or properties. My intention is to derive stable income from them regularly via dividends and rental income. From the perspective of most unit trust consultants, they reckon capital gains. So, clearly, as a cash flow person, I may not speak the same lingo as an unit trust consultant. Therefore, it goes back to the first question: ‘What are you investing for?’ and the answer to it would make it easier for you to decide what you should do with your unit trust investments.

      The analogy is this. Why do you raise a cow? Butcher it for its meat? or to Milk it? A butcher is likened to one who invest for capital gain. A dairy farmer is one who invest for regular cash flow. Which of the two are you? A Cattle Rancher or a Dairy Farmer?

      I understand, it may not be a conventional ‘What to do’ kind of answer that you may desire. Here, I hope that you are inspired to think ‘Why do you what you intend to do’ before embarking on your next investment decision. Of course, if you have more comments / questions, please feel free to reply this email.

      All the best.

    • Newbie

      Hi KC
      My unit trusts are doing badly especially since 2016. I took over my late husband’s account in 2013. I don’t reinvest because i was hoping to enjoy the payouts but the amts have been pittance compared to FD and EPF. I was thinking of selling some but my utc was so pissed off n belittled my opinion….saying that i cannot compare like that and even said i had to change my mentality! He said because my husband reinvested so the capital grew faster but i said that he had already stopped that to take payouts instead and i remember the capital was already a tidy sum plus payouts were equally good. My capital has dipped n payouts are so miserable….i don’t know how long i can sustain. Please advise.

    • Nur Adeline Baharin

      Hi KC Lau,
      Just need your opinion, if my UT investment in 5 different fund for the past 5 yrs period generate lower return vs EPF return can i conclude that my investment is a wrong investment? If my total return generate approximately 12.8% over 5 yrs period. where as EPF generate constantly above 5.7% . Please advice.

      • KCLau

        Sounds like it …
        The usual strategy to invest in UT is applicable to EPF withdrawal for UT too, such as:
        1. Dollar cost averaging: withdraw every quarter when your EPF account is eligible.
        2. Portfolio rebalancing by doing switching.

        Sometimes, it is due to timing issue, which is hard to predict. But people is optimistic when market is good. However, you should be doing the opposite, when market is down and everyone is panic, it is the best time to withdraw EPF for equity funds.

    • Andrea Yap

      Hi KCLau,

      What do you think about Malaysia government fund of ASNB? Do you think it is better compare to the other UT? It seems like a low risk fund and personally i think that it is about the same as FD. What do you think about it?

    • Melissa

      Fd tenure is fixed for 1 year. Early withdrawal will incur penalty. On top of that, gains from fd will be taxed at 24%. The alternative to fd is UT money market. Distribution is on monthly basis(investor can opt to reinvest or withdraw the monthly gains). This means it is highly liquid. Anytime can withdraw without being incurred penalty charges, unlike fd. UT money market 1 year interest earned is about 3-3.5% and the gains are not taxable to the investor. The gains are all his.

      • Xiang Jiek Cheng

        FD tenure can is as short as one month. FD interest is tax free for individuals, it is only taxable for companies and organisations.

        It is true that Money Market fund outperforms FD, but Unit Trust agents rarely promote it as they won’t earn any initial commission from it.

    • Ying

      As we all know, unit trust is mid to long term investment. And therefore it is not appropriate to compare it with one year FD or EPF rate. Try comparing it for longer term like 5 or more than 10 years then it makes sense.

      Mentioning about FVF, if it’s 0 that means the return is fixed, and it means no risk at all. However, the beauty of investment is that it comes with risk, and that’s when you can get a higher return. Try to read the past performance of UT as reference, by totalling up the gain and loss from previous years can give you an idea on the average return. Again, investing long term is the key and inconsistent return won’t affect much in this case. If annualised return can be 8% for UT, it includes the downside already doesn’t it?

      As for PTR, high or low ratio doesn’t define the fund’s performance as the ratio indicates how active the fund manager is trading the fund’s stock. If the market is not doing well on certain sectors, the fund manager has the responsibility to change their allocation in order to preserve the capital. And this is also why management fees incurred. As an unit trust investor, we are INVESTING by holding it long term for the fund managers to do their work.

      Seller: Only certain percentage of the sales charge will be paid to unit trust consultant as commission. Trustee fee is for the trustee company and management fee is for fund managers. And these charges are not directly charged from investor but from the fund’s NAV.

      Buyer: You don’t gain profit only when the unit price is higher than your purchase cost. During distribution time, you will get to reinvest and accumulate more units in your fund. Even when you lose money during bad times, fund manager still have a chance to declare distribution. Compounding interest then comes into the picture and do the magic for long term investor.

      Risk tolerance varies from individuals. Some suggestion:
      If you have great investment knowledge and willing to spend your time to do research and monitor your investment, trading in stock market will be a good idea as the investment is under your control.

      If you do not possess good investment knowledge or no time to manage your investment, invest in unit trust can be a good start as all you need to do is let the fund manager do the work.

      I’m still new in investment field. I invest in both stock market and unit trust as I believe I can gain from both sides in terms of knowledge and exposure. The above is just my opinion and sharing.

      • Mohd Rahmat

        In my humble opinion, most of UT in M’sia is mediocre and not worth to put any money. It is better to invest directly in dividend paying company in the stock market. The worse about UT is their sales charge, it is not nominal like brokerage fees. It is better stay away from UT.

      • Jenn

        Thanks for your sharing ?

      • Newbie

        V informative….tnks

    • Anna

      Hi KCLau, I live in Jamaica small island. But I don’t have much knowledge of the stock market, however I’ve invested in a portfolio unit trust account. What I wanted to know is if I make monthly deposit in these accounts, in what way would they be affected? I really need your reply. As I’m new to this whole unit trust.

      • KCLau

        Hi Anna, that is like dollar cost averaging when you do fixed regular investment in unit trust.
        Search the term “dollar cost averaging” to learn more.

    • Muheeth

      Hi Mr Lau,
      It appears most UT funds touts high Annual Performance percentage in a year, but their actual dividend distribution (which is the ROI) in a year is a much lower percentage. This provides incorrect perception, as investors are attracted to good performing UT funds, but later they may realise the UT’s actual dividend distribution is much lower. What is you view on this?

      Also, may I know where actually we can find the historical dividend distribution of a particular UT fund since its inception?

      • KCLau

        UT do distribution mainly to reduce the unit price to appear affordable, not like stocks that actually pay dividends.
        Major sites like MorningStars do provide past performance of unit trust. Or you can always download the latest report from the fund houses.

    • Winston

      I have a question on switching Unit Trust(UT). If the UT financial years ends at April every year and i want to do switching portion of the UT to other UT within the same fund manager, i will not get the dividend from the previous UT?I want to diversified my UT to same fund manager but different UT.

      • KCLau

        The dividend is not not extra income. Technical term is “distribution”. It is just slicing the unit smaller. So there is no financial effect whether you get the distribution or not.

        • alif safuan bin abdul zalif

          How to contact u, can u leave phone number

    • Helmy

      Great insight from you bro. I’m still green in the unit trust and opt for PRS before my 31st birthday this year. Well at least i need to start from somewhere for my retirement purpose. Thanks for sharing with us, the greener ones..

    • Ian

      Hi Adibah, thanks for the question. EPF pays out above 6% in dividend yields. FD pays 3% in interest rates. As to unit trust funds, I don’t know. It depends on which fund or funds do you choose. But, one thing is for guarantee which is: You’ll incur fees (sales charges, trustee & management fees) for investing in any unit trust funds and there is no guarantee of profits for these funds. So, you may need to learn how to pick one where it has potential to generate good returns to pay off these fees. The article above gives you a good guidance on what you need to be aware of when choosing a unit trust fund as, in most cases, mutual fund sales rep won’t tell you about them. For me, personally, I find dividend stocks to be a much viable alternative as it is a lot cheaper in terms of fees & less complicated as an investment than most unit trust funds. Ian.

    • Adibah

      Hi, between Unit Trust n Fixed Deposits, which is a better investment for someone looking to park his EPG savings?

      • Siti Fatimah

        Hi Adibah, I am a unit trust consultant, I am more than happy to assist you in explaining our product. If you would like to know more, feel free to contact me via sitifatimahmn@gmail.com

Leave a Reply

Your email address will not be published.