First of all, we as group have chosen Unit Trust as the best choice in conjunction to the topic of ideal type of security investments according to our understanding and beliefs. According to an article that we have researched, the Federation of Malaysian Unit Trust Managers (FMUTM) defines that unit trust is a form of collective investment which allows investors with similar investment objectives to pool their funds to be invested in a portfolio of securities of other assets.
A professional fund manager will then invest the pooled funds in a portfolio. It includes assets classes such as cash, bonds and deposits, shares, property, and commodities. The ownership of the funds is divided into units of entitlement; hence, unit holders do not purchase the securities in the portfolio directly. Consequently, when the funds of the mentioned asset classes’ increases or decreases, then the value of each issued unit increases or decreases accordingly.
Besides that, the return on investment (ROI) of unit holders is usually in the form of income distribution and capital appreciation which is derived from the pool of assets supporting the unit trust fund. Unit trust also allows investors to have easy access to a wide range of investments exposures which are not normally available to them. There are a number of other substantial benefits of investing in unit trust. Amongst them are that unit trust are very affordable. Investors are eligible to start with an investment amount as low as RM1000.
In addition, rather than concentrating an investment portfolio of one or two investments or share, a portfolio of market securities can be held. Meaning, there is a wider spread of the investments which is also know diversification; hence the investment returns will be less volatile. Through unit trust investment, individual investors have better chances to spread their money to wider asset classes in the same time gaining their particular investment exposure requirements. On top of that, unit trusts have good liquidity which further enhances chances of profits of an investor.
Other than that, as mentioned a little earlier on, the people managing unit trusts are approved professionals whom are trained to ensure that decision-making is structured and according to sound investment principles. In the long term, the expertise of a knowledgeable and experienced fund manager usually generates above average investment returns for unit trust investors. Subsequently, with unit trust, the economics of the transaction are more favorable because fund managers invest in larger amounts.
Hence, it means that fund managers are able to get access to wholesale fees and products which are impossible for the individual investors to obtain; in return, this action reduces the cost and charges and further enhances the profit for the investment of the investors. Moving on, with the introduction of unit trusts in Malaysia came also the regulations from various regulators, especially the Securities Commission. The entire range of variables relating to the unit trust industry is governed by various legislations in order to protect the interest of the public investors and also a safe investment mechanism to prevent any frauds.