Unit trusts are one of the most popular investment options in Malaysia and for good reason. Regardless of whether you’re a seasoned investor or dabbling newbie, unit trusts can be a safe and rewarding way to put your money to work.

This beginner’s guide will walk you through the what, why, and how of investing in unit trusts in Malaysia.

What are unit trusts, and how do they work?

A unit trust is a collective investment scheme where funds are pooled from many investors into one large fund – also aptly known as a mutual fund. This fund is managed by professional fund managers and used to invest in a variety of assets.

When you invest in a unit trust, you’re not actually buying these assets. The entire fund as a whole is divided up into shares and everyone gets a piece of the pie.

Why invest in unit trusts?

Typically, individual investors are limited by minimum buy-in amounts. But with everyone collectively pooling their money together, this barrier can be overcome. It’s no wonder then why unit trusts are so much more appealing for Malaysians – even the smallest investors can invest in highly-diversified portfolios.

With so many investment solutions, what makes unit trusts stand out from the rest?

• Ability to invest in a highly-diversified portfolio

Diversification is the golden rule of any investment you make, and there are few investment solutions which enable you to invest in as wide a variety of assets given the low capital.

• Leave it in the hands of the professionals

Many Malaysians lack the in-depth financial knowledge necessary to profit from their own investments, and that’s completely fine! Professional unit trust managers bring the necessary expertise to help you manage your investments so you can rest easy.

• Secure and highly regulated

Thanks to clearly-defined regulations by Securities Commission (SC), unit trusts are subject to stringent guidelines.

• Low cost of entry

Unit trusts offer a reasonably low minimum investment averaging at RM1,000, with some going as low as RM100.

• Liquidity when you need it

With unit trusts, your money isn’t locked away and can easily be liquidated within a short period of time.

Types of unit trusts in Malaysia

What fees do unit trusts charge?

Unit trusts can sometimes get a bad rep for the copious fees that come alongside them. That said, remember that these funds are professionally managed. Convenience aside, you’re also paying for the expertise.

While the rates will differ from bank to bank, the three main fees charged by unit trusts in Malaysia are as below. Note that you’re still advised to do your due diligence and review each fund’s prospectus to better understand their respective fees.

Choosing the right unit trust for you

• How risk-hungry are you?

Any move you make in your investment journey will require you to figure out two things – what do you plan to achieve through this investment, and how much risk are you willing to take? Your investment goals and risk appetite will ultimately determine the portfolio that suits you best.

For instance, aggressive growth equity funds might emphasize fast-growing stocks, making them high-risk but high-return in the long run.

• Evaluating the fund’s performance

You don’t have to be a finance guru by any means, but you do have to know your fund well. Where is your money going, how has the fund performed thus far, and what’s the investment process like? All funds should have their prospectus easily available online for your perusal, so do the homework!

• Get familiar with the fees

It’s not unheard of for certain unit trusts to impose multiple fees that may be more than the expected usual. When it comes to the fees, be extra diligent in identifying all the charges that come alongside your investment.

How do I start investing in unit trusts?

With your due diligence done, the next best thing to do would be to dip your feet in! As the adage goes – the best time to plant a tree was 20 years ago, the second best time is now. Typically, you have three options on how you can invest in unit trusts here in Malaysia.

• Lump-sum investment

If you have the financial means to do so, depositing your available funds all at once into your unit trust of choice may help you reap good situational returns (provided you have the risk tolerance for it).

• Dollar-cost averaging (DCA) or Ringgit-cost averaging (RCA)

This option allows you to deposit a fixed amount of funds at set intervals. This is often seen as a good strategy if you’d rather err on the safer side of the equation.

• EPF i-Invest

Yes, EPF has historically boasted good returns. But did you know you can potentially enjoy even higher returns by placing some of your EPF funds in approved unit trusts? The i-Invest feature allows you to diversify your EPF savings and enjoy benefits such as reduced fees and charges. View the eligibility criteria and list of available funds here.

Your wealth: Grow, grow, growing

Knowing is only half the journey, but it forms the basis of making an informed investment that will last you for life. What matters most to us at RCA Wealth is helping Malaysians make informed investment decisions that will pay off in the long run.

Get in touch with us today to reach your financial destination with the right guidance!