A unit trust is a type of investment where money is pooled and managed collectively by a fund manager. When you purchase units in a trust, your money is therefore pooled with other investors so it can be invested in accordance with the goals of the fund. For instance, if you invest in a fund in Malaysia, the fund manager will invest your contributions in investment opportunities in Malaysia.
A Lump-Sum Investment
This type of investment offers some key advantages, advantages such as diversification, the ability to tap into inaccessible markets, economies of scale, and professional management. You can choose from one of several ways to invest in a unit trust. One way is to make a lump sum investment. This one-time contribution enables you to derive immediate advantages from the underlying market.
A Systematic Investment Programme
You can also choose to place your investment in a systematic investment programme. This type of investment enables you to spread your one-time unit trust investment in Malaysia over a six-month of 12-month duration. This particular programme offers a guaranteed 4% cash bonus at the conclusion of the investment term.
You also get to choose the fund of your choice. Since this type of programme offers consistent investing, you can invest routinely, regardless of market fluctuations, and take advantage of a system known as dollar cost averaging.
What Is Dollar Cost Averaging?
Dollar cost averaging (DCA) is an investment method that allows an investor to purchase a fixed amount of a specific investment on a consistent and regular schedule. It does not matter the current share price as more shares are purchased when market prices are lower and fewer shares are bought when prices escalate. The idea behind DCA is to reduce the average share cost over a period of time, thereby enhancing the chance for a profit.
Therefore, the fundamental premise of DCA is to commit to investing a fixed amount each month. Depending on the investment goals and an investor’s risk profile, the contributions may be contributed to a mixed folio or to individual securities. Systematic programme of investing again makes it possible for investors to reduce risk and realise the possibility of a higher return.
Regular Monthly Investments
Regular investments can be made each month through a monthly investment programme as well. Participants can contribute as low as RM100 per month in Malaysia, thereby balancing out any market risks over time.
Monthly investments appeal to conservative investors in Malaysia as they are affordable, flexible, disciplined, and convenient. Participants in this type of plan can contribute a low beginning investment of RM2,000. They can also stop the investment plan at their discretion without the worry of penalties. Since this type of programme offers a disciplined approached, money is regularly set aside for growth. Each monthly investment sum is deducted automatically from the investor’s account.
As you can see, you have several options from which you can choose when investing in a unit trust. Whether you are a more aggressive investor or someone who is financially conservative, you will find that this investment vehicle can help you build and retain wealth.