Financial literacy is on the rise, and it’s no surprise to see Malaysian students start exploring investing – even from as young as their teens.

With so many investment options around from ETFs to unit trusts to robo-advisors, there’s a lot of research to be done, though few resources are targeted with students in mind.

If you’re a student keen to learn more about unit trusts, start here!

Introduction to unit trusts in Malaysia

The term risk appetite is often used interchangeably with risk tolerance, but it’s important to note that these are different.

A unit trust is a collective investment where funds from multiple investors just like you are pooled into a huge fund, hence why unit trusts are also referred to as mutual funds.

Fund managers then hold the tough responsibility to invest the funds appropriately in line with the fund’s objectives and garner positive returns for all investors.

From a young student’s perspective, unit trusts can be particularly suitable to get you head started on your investment journey.

What makes unit trusts suitable for students?

• The professionals manage the fund for you

As a student, you may lack the necessary financial and investment expertise to help you ensure your investment is profitable. While hands-on experience and the occasional failure is necessary to learn and grow, you might not want to take that risk if you’re relying on your savings. Unit trusts are a great, passive investment tool you can trust the pros to take care of.

• The risk is spread across a diverse portfolio

Diversification is important to minimise risk by spreading the investment across a variety of different assets. 

• You can start investing with just RM100

Sure, there are tons of investment options out there with low cost of entry too, though not many offer the diversity that unit trusts provide. Most unit trusts only require a minimum investment of RM1,000, though some go as low as RM100.

• Your cash isn’t locked up

With lectures, tutorials and assignments galore – it’s safe to say you probably don’t have a lot of time to work a full-time job and bring in a full-time income. With less income, means less money you can afford to invest, so it’s important that your funds can be liquidated when you need it.

At RCA Wealth, you can withdraw funds from your unit trust and have it reflected in your bank account on the next business day itself.

What you need to know before starting your investment journey as a student

Deciding where to put your money is a decision that requires careful consideration, but before getting there, you’ve got even bigger questions to address first.

• What’s your financial situation like?

As a student, your income may not be as stable as you would like it to be, and that’s fine! You do, however, need to ensure you’re making enough income for your living expenses. With that settled, you’ll also want to set aside a sizable sum of emergency savings first (most experts recommend 6 months’ worth).

• How will you manage your debt?

Whether or not you should pay off your debts before investing is a controversial topic with differing opinions. One opinion that’s generally agreed upon is credit-card debt, which you should endeavour to pay off ASAP.

You’ll probably also have PTPTN repayments, where interest will kick in 12 months after graduating. PTPTN however, charges a flat rate interest of only 1%, so it’s important to strike a balance between paying off your student loans and putting some of your money towards investing.

• What are you investing for?

Pinpointing your investment goal will therefore determine your investment timeframe and risk appetite. Your investment goals could look like:

• Investing for a car
• Investing for a business venture
• Investing for your first home
• Investing for further education
• Investing for retirement (no shame in starting early!)

• How much can you afford to lose?

Your tolerance for risk depends on a variety of factors. Namely, your investment goal, time horizon and financial stability. This is one area where it definitely helps to have a unit trust advisor who can guide you.

How much do you need to start investing in unit trusts?

As mentioned above, the minimum cost of entry for most unit trusts starts at RM1,000, with many unit trusts now offering minimum entry figures as low as RM100.

But don’t forget about the additional costs too! We explore the fees associated with unit trusts more in-depth here, or you can view this handy table for a better idea.

Most unit trusts will also charge a fee to withdraw funds. Always do your due diligence and review each fund in detail or talk to a trusted Unit Trust Consultant (UTC) to understand their respective fees.

Read our Detailed Guide to Investing in Unit Trusts in Malaysia for the three ways you can start investing in unit trusts.

Investment tips for students

• Don’t succumb to pressure
• Put your financial education first
• Always do your due diligence
• Get the right guidance

Don’t let the pressure of investing early influence you into making hasty decisions, especially if you don’t have the income to support that. Regardless of what your peers are doing, it’s important to put your financial education first.

There are countless investment resources out there, be it books, podcasts, articles or even seasoned investors within your family or extended circle. Armed with the basics, you’ll be better positioned to avoid scams and make investment decisions which are most suitable to your personal needs.

Most importantly, always do your due diligence and read the respective prospectus page-to-page before putting your hard-earned money into any fund. It helps to get the right guidance in your unit trust journey – get in touch with our UTCs here! We’re always happy to help.