How to make money from unit trust?
Author:
Max Chin
Due to poor law enforcement by regulator and unethical selling technique employed by some unit trust agent, some member of the public had in fact lost confidence to the industry itself. When an investor being approach by a unit trust agent or personal financial executive, the very first response the agent will get might be 'unit trust? i don\'t believe in it' sad to said this investor do not have the knowledge and understanding before making such a statement; but true enough some investor are being taken advantage of by some agent or personal financial executive that do not provide sufficient information to the investor to make a sound decision which lead to a remark like this; now i will explain how an investor like you and me can make money from unit trust in a smart way.
The first thing investor need to do is, ask yourself one simple question 'Am i really prepared to make mid-term and long term investment' while most investor do not understand that for most unit trust investment it has to be long term investment commitment and not a short term commitment as claimed by some agent who simply wanted to make some commission out of your pocket. Investor need to understand that for every transaction, there will be a 'service charge' that is chargeable by the financial institution or bank every time investor wish to make a 'top up' investment or on first investment, in Malaysia usually it will ranging from 0.25to 5.5depending on the type of unit trust you purchase and thus the moment investor buy in some margin already being taken by the financial institution or bank, plus an annual fund management fee that is chargeable every year these annual management fee ranging from 0.375to 1.80that will be deducted from the units that the investor hold during the tenure; in addition an annual trustee fee is also payable ranging from 0.035to 0.08depending on the type of funds investor invested in. With all this charges it is understood that for the fund to realize profit it have to be a long term investment for the fund to growth for some times then only investor can realize the profit from these investment.
Secondly, investor can also make money from the basic concept of 'buy low sell high' concept; during the economic crisis in the globe due to fall of US economy some investor that is smart enough realize that 'for some to fall there will be some who rise as well' and take the opportunity to invest. The same can be apply to unit trust as well, when economy fall most unit trust price starts to fall as well and thus investor who have some cash in hand might want to utilize this opportunity to buy some units at a much lower price compared to when the economy is doing good, it is because the interest rate for many country during turbulent time will be lowered and thus the lowered interest rate might not generate better return in the bank fixed deposit than in the unit trust. When the economy recovered back to its benchmark investor then can sell off the units to realize the profit of the price difference; but however the degree of the fall in price varies across all fund because each fund invest in different area and thus the degree of price fall will also varies.
It is also important to note that investor must look understand that some funds provide dividend for its investor, some will release dividend quarter, half yearly depending on the structure of the fund and thus it is important for investor to realize this and thus placing your long term investment in some of these funds to earn the dividend given and the difference between bid- offer; here bid refer to the price given when investor sell the units whereas offer refer to the price given when investor buy into units. If investor stay long enough and buy into the unit at the right time then the investor will be able to earn better return; here the 'right time' refer to buy when the price are lower or middle range and thus the return for investor will be much greater than those who buy at the peak price; investor must also check out the master prospectus or proposal for the fund u invested in to examine its past prices and to check on several factor such as where the fund invest in, unit price trend, investment objective which is vital for investor to make sound decision.
Some investor might ask since there are so many charges payable, can i still make money from unit trust? The above explanation did provide you some insights. But it is important to understood that buying unit trust from a reputable company does not provide a 'guarantee' chance that the fund will make money for you, as it is always stated clearly that 'past performance is not an indication for future performance' as a smart investor you need to know that some studies is inevitable if you want your money to work harder for you; there are several key factors that investor need to study on before making any investment decision on any fund, and what will that be? I will do the sharing in my coming article.
As a conclusion, investor can make money from unit trust by bid- offer price difference as well as dividend given by the fund manager; and if manage properly unit trust can be one of the good choice to diversified your long term investment.
Article Source: http://www.articlesbase.com/wealth-building-articles/how-to-make-money-from-unit-trust-3774441.html
About the Author
The author had past experience working in the financial industry and are constantly studying the industry for years being investor himself the author writes with good understanding of the industry as a whole. for more information please visit the author homepage at http://financialmarketguide.blogspot.com/
