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?

Test Your Unit Trust Knowledge


Ian Tai
Ian Tai

Ian Tai is the founder of DividenVault.com, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks that pay ever-growing dividends year after year.

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

    • Gobinath Muthusamy

      Lau, hope you don’t continue to give half cooked informations. Please for God sake.
      FD gives around 3% returns and EPF gives around 6% returns so on that basis, UT funds will need to perform at average 9% or 12% to beat FD or EPF respectively. That is not how you do the comparison Lau. That’s a very typical comparison done by those lack of information or some with uncalled intention to mislead. If you are the first category, I hope you can take up some basic lesson first and only life can teach you a lesson if you are second category of person.

      In UT, there are 5 categories of funds and not all of them has 5.5% service chargers. Some has lower than 0 to 0.5% service chargers. Each categories has it’s objectives, characters, risk levels and risk management’s which can be applied by any person with basic guidance from FIMM licensed consultant.
      FD rates fluctuate according to OPR rate set by BNM according to economic conditions domestically and internationally. Typically, OPR rate increase when market goes on correction and OPR reduced when market goes on positive outlook. So, where the banks will invest to honour higher FD rates when market goes down? Collectively, with diversification and management by professionalmanagers, the money deposited by public will be invested into selectively potential stocks, Real Estates and investments.
      Collectively, Diversification, managed by professional managers and into stocks, REITS and investments are typical identity of UT as well.
      FD is best for short term investment, like wise UT has short term funds as well, like Money Market Funds, Fixed Securities, eCash Deposits, and bonds for longer period returns which has records 6% to 7% performance.
      KW5P on the other hand, is also has typical identity of Balanced funds or Mix Assets Funds. KW5P is well blended with money market funds, fixed securities, bonds, equities, Real Estates and other legitimate investment vehicles. 15years performance of KW5P has an average of 5.8% compounded returns, while the same period someone has performed at average 10% to 12% compounded returns after 5.5 service chargers. Guess who Lau? Anyway, anyone, withdrawing their 20 or 30 years KW5P before retirement age?
      Those 5 categories of UT funds can be further categories into 3 basic chartacters.
      Only distribution paying funds, only Capital Gain fund (typically the ETF type) and the last, the Distribution + Capital Gain type of funds.
      Every distributions, doesn’t only pay out of unit price but it also increase the number of units in a fund hold by investors. Thus, dollar cost averaging happens which will help to make profits in long run.
      By the way,
      Why don’t you say that even insurance companies are investing into UT and they only have 1 type of UT fund which Capital Gain only. All the insurance products come with Cost of Insurance (COI) which increase OVERTIME due to the aging of the insured. This additional cost will be deducted from UT funds by automatically selling the units to cover COI. The insurance products also has unit deductible riders which will increase as person insured aged and this cost also will be deducted from UT funds. The only place your savings can be zero is insurance. Why don’t you say that as well?
      Be transparent as financial coach Lau. Please..

    • Mani

      For the past 1 year, things have been bad for the UT industry. Tune to fellow into my investment strategy and retrieve some to go back into EPF.

    • AERUZZ ARONN

      Hi there,

      I had invested before in stock, and I lost a lot during the bad time for eg late 1990s. After that, I still try to invest in the stock but then I lost interest coz I am more toward capital gain person.

      Then my best friend introduced me to UT and honestly at first I was scared coz it involeved my epf money but now it was history.

      I had seen the market up and down, of course all people that included me, wanted to see the positive or up only. During the up time, of course the capital gain is there but during the down time is scary.

      As time goes by, I read and ask question, knowledge help keep me at ease. Actually I am more relaxed now than before. One of the information that we had read above, dont panic when the market went down coz that were the time the nav is low and we should be buying a lot and keep for the rainy days. Knowledge could keep u calm.

      I am still love of any kind of investment that are legally allowed by our gov. We must know, when we said investment there will be always a risk that we have to deal with..

      Tq.

    • CS

      How to calculate the FVF? I can’t seem to find them in a few of fund perspectus that I downloaded from FSM.

    • YUSUF BIN MOHD SALLEH

      When someone is picking on the other people, their objective is very clear. To put it down, so he/she can rise. Different people have a different need. That’s why there are many investment instruments in the market. Stock, mutual funds, gold, property etc. To criticise the other type of investment is like you spitting to their faces, so the flocks will join you.

      Any investment comes with risk, as the says goes No Risk, No Gain. It’s just how we navigate our investment is what matter.

    • Safwan

      nice and clear..thank you for your information..i as a unit trust consultant will do the best for my client..anyone who want to know about our product please let me share and guide.. 0122441109 safwan

    • Eddy

      Thank you Ian for your well written article. I thought I was wise when I invested RM68k eight years ago and RM200k four years ago thru two different unit trust consultants, from two of the biggest unit trust companies. Took out my EPF because I trusted the consultants as they are my relative and a good friend too.

      Ian, what you shared in your article was exactly what I went thru. Today, both investments are worth RM63k and RM175k respectively. It is a different picture should I let it grow in EPF. I am not sure of other people’s experience, but that’s my own. Thank you

      • Wong

        Basically, you are still making loss after eight years and 4 years respectively? Do you mind to share which unit trust you have invested?

      • Asriel

        Like what Ian has said, return from investing in unit trust does not have any guarantee. Unit trust companies invest capital collected from people like you and me and pour them into stock markets. When the market is bullish, you will earn profit. When the market goes down like now, your investment suffer losses. That’s very normal.

        That’s why we need to know what we are doing like what Ian has said. We cannot just blindly trust our good consultant friend or relative, because they are also innocents, they were just delivering what they have been trained to say or present. Even if you ask your relative consultant now why your capital incurred losses, he may not be able to answer you unless he get the answer first before you ask him.

        I believe we need to be proactive in handling our capital especially like sum a large sum of hard earned money like yours. When we invest, we need to cultivate. Like a farmer cultivates his crop for a better harvest. We cannot invest and forget all about it. For better discussion, please come into my unit trust web blog for unit trust investment strategy at https://wisefocusblog.com/2017/09/18/7-strategy-reasons-why-switching-is-mandatory-in-unit-trust-investment/

        You can also read many other articles about UT investment. If you see some enlightenment after reading, please feel free to subscribe. I am here to help UT investor to profit for free, as a free time hobby.

      • Neelaveni venugoal

        Hi im one of the utc. Investments in unit trust is for long term. You are accumulating more unit when the price is gone down. At the end we want more units to convert into cash, At least you need to keep more than10years,
        Please be patient is worth save in unit trust. The KPI is just leave it for more than 10 years

    • Grace tee

      Hi Ian,
      I think the unit trust consultant tht you met before is not professional. Some of the ethics consultant will let u understand all tht u mentioned above. They will base on clients financial background n analyze on their risk taking n come out a proposal. Btw, u hv th right to request on all th information tht u wnt to know from them. U hv th right to do so.

      Your article is good on some information but not all the contents is truth some of them is misleading the reader .e.g. ur calculation on the charge of the fund to determine the minimum return of the fund tht we shld need to gauge on is wrong. You hv misunderstanding on the 5% sales charge imposed on the fund, it is imposed per transaction basic is NOT annually impose. Annually charge is management free and trustee free which is 1.5 -1.7% and 0.06% , u cnt see the big impact on this bcs the fund return reflected in their report already taking this into account. For more convincing, u nid to using future value calculate and compare it with th FD then you. With the data, u jz can draw a conclusion on them.

      Unit trust (here talking abt equity, not the bond and money market) basically is same like investment. It gennerally being diversified in different country, industry or sector. But the beauty of it is it also diversify into the fix income or others security instrument. Unit trust fund normally hv their report shown on their asset allocation. U can easy retrieve it from website or from UTC. For equity fund unit trust it can up n dwn follow th market. Fund picking is important like a company stock picking when u open a CDS account invest for urself.
      If you know you cnt go with high risk investment, u cn seek for lower risk like bond and money market. Some bonds will gv the return better thn FD even deducted th sales charge which is 1%, while money market is 0% sales charge.

      My advise is dont to be too jeopardize to unit trust eventhoug i understanding ur bad experience with the unprofessional UTC. Every thing have their pros and cons, but makesure u really understand them indepth then just can compare apple to apple. Else, unit trust industry will not longer exist until now. Why it still got demand untill now bcs it still got it value.

      One need to understand their investment objective n workout with UTC. Chose a investment or saving plan tht most fit for u.We nid to be a wise consumer. Hv a yearly review if not satisfy u consult them to hlp u switching to potential fund.

      For those newbie to unit trust, cn refer to kclau previous post on unit trust which is more concise n not bias.

      Wish all cn achieve financal freedom n start early for retirement fund planning. Remember wat the Albert Einstein say the concept of the compiling interst!?

      • moot

        Apparently, you are trying to whitewash the outrages 5% fees and this is no better than “not professional consultant” that you claim.

        A 5% sales charges and + 1.65% fees mean that unit trust must earn 11% return just to be par with EPF 6% return. And in a bad year, the unit trust will dip and the 1.65% charges keep burning the investor capitals. If the subsequent year the unit trust cannot recover, the investor already burned capital will vaporise 1.65% and lost the equivalent EPF returns.

        • Thomas Chan

          I agree with both Grace Tee and Moot. Please do more research before making your claims. Ian. Don’t mislead the public! Please be more professional. Please allow me to give some new insights and truths!

          Is there anything wrong paying 5.5% to the professionals to do a portfolio investment? Would you be giving FREE consultation for the services you provide? How much are your clients paying you to manage their funds?

          How can you compare an investment scheme with a savings scheme? As unit trust is a long term investment vehicle, why show comparison for a year? Why not show a 10 year comparison? For this issue on investment, I would like you read The Intelligent Investor and books by Benjamin Graham.
          Ian, can you invest in a portfolio of PBB, MBB, Disney, P&G, BMW, Apple, Alphabet, Alibaba with just RM100? It is through unit trust that we are able to do that. Isn’t investing in all these companies value investing? Is this what you are promoting?

          About EPF members investment scheme, do you know that the scheme was launched in Nov. 1997? If EPF members are losing money and they complain would EPF allow the scheme to continue until now. I am proud to say that EPF has its members’ interest at their heart. That is why they keep raising the Basic Savings for account one? I had been in the investment scheme since day 1 and my EPF monies is now 3X of what I had invested. Not only that, I am enjoying FREE Life and PAPD insurances! Does EPF gives me this extra benefit? If I am not retired I would definitely continue to diversify my EPF monies into unit trust.

          • Ian Tai

            For the record, I do not manage funds for people and do not intent to do so in the future.
            I believe anyone who has the heart and desire to learn about investing can choose to learn and build their investment portfolio on their own.

            It is good to hear that your EPF did well. I’m happy for you.

            It is not a fair statement to say that one is a value investor because he invested in PBB, MBB, … etc. Who knows why and what price did he pay for these stocks.

            KCLau.com is a platform built to educate, share, inspire and grow. Here, I wrote this article with the intention to share firstly, how the rich invest differently and secondly, highlight to all investors (especially those who are considering unit trusts as their preferred vehicle) to ask questions about fees, PTR and FVF so that all of us have a chance to make informed decision.

            From your comments, I felt your ’emotions’. That’s okay. I’m also happy to have people like yourself to voice your opinions on the article. Why? Because it shows that people do care and are concerned about their financial health. But, may I ask: ‘Would it be better if your views / comments are meant to be constructive and educational rather than being offensive & argumentative?

            Here’s my feedback. If I write something which is a mistake, I am happy to be corrected as I am still in a learning process. But, if your intention is to lash out your displeasure by writing a ‘hate comment’, I find it a let down.

            May I invite all to have a bigger picture?

            It is to bring an awareness to people that as ‘consumers of investment products’, we can ask better questions before deciding on it. That’s why, once again, I wrote about FVF, PTR and fees of unit trust funds so that all are aware and may calculate their impact to their own investments.

            So, if you enjoy my write-ups, thanks and stay tune for more. Otherwise, please be more considerate when offering feedback. Thanks. Ian.

    • Francis

      Ian, are you selling stock broking software?

    • Elizabeth

      Hello there!

      May I just inquire.. I’m considering signing up for the PRS retirement scheme since there’s a benefit of RM 1000 from the government. What do you think of choosing AmBank as the PRS provider and electing the Conservative Fund Class D? I’m only 21 years old but my risk appetite is really low. Not looking for high returns but stable ones even if they’re low, as I’m looking at this long-term investing till retirement.

      Are growth funds really worth the risk?

      Also would the location e.g. Kuala Lumpur or Johor Bahru, affect my decision (perhaps more competent fund managers in the capital..?)

      Would appreciate a quick reply if possible as the deadline to apply is pretty soon.

      Thank you so much!

      • KCLau

        Most funds are well-diversified. Since it is long-term, it is best for you to go with growth fund.

      • Ian Tai

        Hi Eli,

        It depends on your intentions on investing. If you are attracted to the RM 1000 incentive offered by the gov, then, I suppose any qualified PRS funds should fulfil your objectives, even if the funds are categorised as low-risk.

        As written above, you should ask about the PTR and FVF of the fund. A high PTR and FVF fund may indicate that it is into stock trading as the fund tends to buy and sell stocks more often. Actually, in that sense, who knows what you are buying into. To me, it’s just like sending money to a fund manager, hopefully, he is a reliable one who can trade stocks for profits. There are no guarantees to whether you would win over the long-term. Definitely, the PRS fund, whichever you choose, would receive recurring income from managing your money, whether or not, you make any.

        If you happened to be one who don’t know what funds to invest, it means, you may not know what you are getting into. Then, an investment into PRS is risky, not because of the PRS fund, but, because you as the investor who are taking risk blindly. A lot of people invest in stuff that they do not know of, thus, lost a lot of money as a result of it. If so, please read on:

        You are 21, a relatively young age to start thinking about investing. Indeed, you are an inspiration to many, old and young, and I believe you would do well in life as you start early. It’s good to be conservative for I am one too. At your age, I think, it would be wiser to acquire knowledge, wisdom, insights … not investment products. Learn stuff that can traded for money. Attend seminars, read blogs, go for workshops, and upgrade your skills as an investor.

        Tip: Investing is not so much about buying a product. It’s about learning and self-discovery. Your returns on investment (ROI) is dependent on Your Knowledge and Wisdom acquired, so get them.

        Regards
        Ian

        • Elizabeth

          Hello Ian,

          Thank you for your tips and advice.

          I’ve decided not to rush into PRS since as you mentioned it might be risky to get into something I don’t know about. I’m sure similar incentives will be available via other platforms in the near future.

          In the meantime, could you recommend books that can aid in my financial literacy? I’m already an accounting and finance student pursuing ICAEW, but are there any other tips on materials on investing? There are so many in the book store, so kindly recommend some of your favourites that inspired you and helped you understand more!

          Many thanks,
          Liz

          • Ian

            Hi Eli,

            You’re welcome.

            ICAEW is a good start as you would eventually have an advantage over other investors – accounting skill. It depends how you use this skill as there are many ways to use and benefit from it, apart from getting a job. For instance, I’m a stock investor and rely a lot on my accounting skill that I picked up from ACCA to identify good stocks which are financially sound from bad ones which are not. Without accounting skill, I can’t tell a good stock from a bad one. A lot of people lost tons of money in stocks because they lack accounting skill. So, it’s a good skill set to acquire.

            Personally, I like ‘Rich Dad Poor Dad’ and all the ‘Rich Dad’s series’ as they emphasise on financial literacy and investing primarily for cash flows.

            If you are into stocks, I recommend ‘Buffettology’ and letters to shareholders by Warren Buffett, which can be easily downloaded for free from Berkshire Hathaway’s website.

            If you are into properties, it depends. If you choose to be an accountant, you may read ‘Who Says’ by Mark Chua and ‘WTF 23 Properties by 30’ by Faizul Ridzuan. They have pretty inspiring stories on how a person with a job can build up a portfolio of properties.

            Of course, you could be enterprising. Then, read books written by businessmen such as Richard Branson, Donald Trump, … countless of them.

            Of course, please do stay tune for more articles at KCLau.com.

      • Neelaveni venugoal

        Hi im one of the utc. Investments in unit trust is for long term. You are accumulating more unit when the price is gone down. At the end we want more units to convert into cash, At least you need to keep more than10years,
        Please be patient is worth save in unit trust. The KPI is just leave it for more than 10 years

    • 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.

      Regards
      Ian

    • 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

      Hi,

      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

        KFong,

        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.

        • Ivan

          I heard a lot ppl saying it is look for long term , but not short term .
          But who can guarantee we can earn a big one in long term.
          There is a chance of making loss even in long term right .

          Just discussing …
          Hehe

          • Asriel

            Ivan,

            I would definitely agree with you. “Long term” investment is not a magic spell for investment profit. For one, there isn’t a definite period of “long term”. You can read some of our readers responses said they have invested for four, nine or ten years and still see their investment at a shocking loss. I also had such an experience myself being an passive investor before I “converted” into an active investor now. I invested into a fund for 10 years and at one day I shockingly discovered that it did not grow at all. You can read my experience here at https://wisefocusblog.com/2018/01/15/the-peril-of-professional-advise/

            Profit or loss for your investment is the time when you take a look at your fund performance. If you look at it at good market (bullish) time, you will be cheered up by the profit figure shown there. But if it happened to be bad market (bearish) time, you will faint… like now a 16 % loss. It all because you did not know how and when to take your profit home when they were there showing you. And those profits were all evaporated with the market sinking down. That’s why it is important to learn how to invest even with unit trust. It is not much different than stock investment. The difference is only in the magnitude of profit and loss. We can ‘t afford to be passive and let the fund manager do their “professional” job.

      • Low

        Hi KFong,

        I’m an Unit Trust Consultant and I can tell you that unit trust investment is heavily based on the market performance. If you’re coming into the market by year 2018, then big chances that you’re losing money. Please enquire QFR Quarter 4 Year 2018 from your agent and ask him to explain to you. If your agent doesn’t answer you, you may actually required to switch to another servicing agent.

    • 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.

      • Low

        Unfortunately for you that you met an unprofessional Unit Trust Consultant. May I know your investment in under which bank now? I’m currently an UTC from Public Mutual who wish to take over your profile from the irresponsible agent and take good care of your investment.

        Please contact me via my contact number 016-5425421.

        Thank you.

    • 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

      #1
      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.

      #2
      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?

      #3
      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.

      #4
      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.

      #5
      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

      • Carol

        Totally agreed ! Very informative.

      • Cts

        This is a more justified reply. Frankly, I think the author’s comment is grossly bias. Unit trust is a long term investments instrument. It’s not fair to cainpare FD over 1 year.

      • Azi

        This is the best reply I have read here…..thus far

    • 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

      Hi,
      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

        • Asriel

          Definitely true! UT investors better wake up… do not let some fund houses use this free advertisement tactics to attract you into buying their funds.

    • 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

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