During the webinar I’ve conducted featuring Felix Yew from iFAST (FundSuperMart), he shared about the five practical strategies to invest in unit trust. Here is what he shared with us:
I have five strategies for you on how you should adapt yourself in investing in Unit Trust.
No.1 – Invest into the Right Market
Strategy number one: It is very important to invest in the Right Market. What does “Right Market” mean? Right Market means that you look at the Upside Potential of a market. How we do it is our research team would look at the P/E Ratio, and then we do a valuation of the expected P/E so we can see over the whole market. P/E means the Price over Earnings.
For Malaysia, we will look at the KLCI Index. Looking at the Upside Potential of the KLCI is one of the ways to look at the market. Of course, we do not just look at Malaysia, we also look at the market outlook of U.S., Europe, Russia, Brazil, and different countries and we do a valuation on the different countries of the market.
No.2 Apply Asset Allocation based on your Risk Profile, Time Horizon & Specific Goals
Strategy number two: What you need in a Unit Trust Investment is to apply Asset Allocation based on your Risk Profile. Not everyone is the very aggressive type. Maybe a lot of people would want a more steady return and a low risk investment.
We also have to look at the Time Horizon of your investment – some people would want to invest for three years. If you’re a young person, you might want to look at five years to ten years. Maybe your objective is to invest for your retirement. Different people have different goals. A lot of people and families may want to invest for their kids, for their education. You can also invest in Unit Trust.
No. 3: Go for a Fund with Consistent Performance Rather than a Famous Brand
Strategy number three: You need to go for funds with a Consistent Performance rather than a Famous Brand. Why do I say “rather than a famous brand?” Because it is important that you, as an individual, to do your own research rather than just follow people to whichever equity they are buying. It is important to educate yourself, to do a little bit of research, and to do a little bit of study on the market outlook.
No.4 – Invest at Consistent, Regular Periods to Benefit from Dollar Cost Averaging and Minimize Market Timing
Strategy number four: You should invest at a consistent and regular basis through Dollar Cost Averaging. What is “Dollar Cost Averaging?” Dollar Cost Averaging is a strategy where you invest proportionally at a fixed amount on regular periods.
For example, you’re an investor, you want to adopt Dollar Cost Averaging. You invest RM100 monthly whether the market is going up or going down – every single month you invest one RM100, RM100, RM100… When the market is going down as you invest, you will earn more units. As the market is going down, you earn lesser. Overall, at the end of the day, when you compare those who invest in one lump sum and those who adopt Dollar Cost Averaging, you would see the returns fo the latter is higher.
Dollar cost averaging requires a lot of discipline whereby you need to invest monthly. It is a very good way to take advantage or to gain a return from Unit Trust Investment. Of course, adopting Dollar Cost Averaging will also help you to avoid the market timing. Because as you do Dollar Cost Averaging, you don’t have to always wait until when the market go down or go up. As you continue to invest, in time, you will always see a return on your investment.
No. 5 – Choose a Right Channel
Strategy number five: It is always important to find the Right Channel. What do I mean by the “Right Channel?” It is how you get information on the Unit Trust, how you get information on the market outlook that is happening recently. So, it is important to keep yourself updated with the entire market outlook.
Now you’ve got some strategies to invest in unit trust. In fact, it is very easy to start – as low as RM100 per month, or RM500 one time investment. Do you already invest in unit trust? What funds did you buy and why?