Unit Trust for Beginner

unit trust, mutual fund, amanah saham, whatever the term is, it's refer to the same thing. in UK, it's unit trust; in US, it's mutual fund; in Malaysia, it's amanah saham and unit trust is widely used in this country as well.

the unit trust concept is like this, it is a kind of investment by means of pooling funds from many individual and corporate, to be invested into various investment opportunities, in other words, in the different companies. unit trusts raise the money by selling shares of the fund to the public, much like any other company can sell stock in itself to the public.

there's might be confusion between unit trust and share market investment. here i highlight the different and similarities between those two.

Investment Portfolio
1. unit trust invests in various companies.
2. share invests in one exclusive company.

Investment Risk
1. unit trust risks are medium and diversified. example, if company A goes bankrupt, the other companies can back up the NAV price.
2. share market risks are very high and exclusive. if something happen to the company (rugi, tutup, bankrupt) you'll dragged into the same dilemma.

Investment Style
1. unit trust is for long-term investment since the NAV is stable upon time (depend on what type of fund you're invested in).
2. share market gives high return in relatively short period of time.

Investment Strategy
1. unit trust investor has to know the type of fund and the fund's portfolio prior to investing. he can invest at anytime.
2. share market investor needs sufficient information, experience and know the right time to invest.

Investment Trend
1. unit trust's price fluctuation is not slightly significant. e.g. if the price decrease dramatically, it won't raise as dramatic as it went down. remember, the trend is slow but stable.
2. share's price is very significant in price fluctuating. it may has a stable price for months but in a day, it can goes up to 150% or goes down to 70%.

for a layman like us, investing in unit trust is a smart way to doubles or triples our money provided we have enough infos about investing in unit trust especially in choosing the right unit trust management company. we have lots of unit trust companies in Malaysia and there goes the choice to make the right decision so that our monies will be save and actively compounded.

Start Saving

sometimes, we failed to define the word SAVE. in sport, the word save means to prevent the opposition from scoring. in finance, it's not so much different with the sport term for save.

in finance management, we have opposition. the opposition is our spending habit. fail to handle it will make it win and our saving will be not so much, or even likely to be not at all. here's some tips to control the habit than winning meanwhile decrease our monthly saving.

1. spend for yourself.
ah ah ah... don't get excited. spending for yourself is not spending on new clothes, new handphone, eateries, etc. it's paying yourself. save your money first! allocate a certain percentage of your monthly earning and let it be in your saving. whether you like it to sleep in your saving account or invest in unit trust.

2. necessities not accessories.
know your priority. spend on your clothes rather than your extravagance dress or shoes.

3. reserve for emergency
again, malang tidak berbau. it shouldn't be very much, maybe a hundred buck is good enough.

4. set your style
sometimes we can go into a deep debt or with zero saving just to get ourselves up-to-date. why should we jeopardize our own money for the changing lifestyle? next year, the style changes, and we should change to be in line with it. overcome the world's style. pick up your new, evergreen style.

5. remember the tomorrow
where does the malay proverb 'kerana guruh di langit, air di tempayan dicurahkan' came from if it's not from us? don't be too sure that your increasing salaries, your bonuses, etc. might cover your tomorrow if you don't have any saving plan today.

6. start now!
don't wait until the next salary to start saving. procrastination is the worst enemy in planning. start, even if it's only 2% of it.

with a proper plan, you shouldn't have to cut your eateries. believe me.

Money Makes Money?

the idea of let money makes money starts to penetrate into our society. our people starts to get use to a term called investment. in all definition of the word INVESTMENT, i like this term 'the use of money through various vehicles, or an individual's time and effort, to make more income or increase capital, or both'. look at the underlined words.

investment needs vehicles. to invest, you have to know investment vehicle that can bring you to your destination. prior to it, you have to know your destination. what is you target? why do you invest?

in physical life, if you wanna travel, first you have to know your destination, isn't it? then, why do you need to arrive at the destination. let say you wanna travel from KB to KL. you have many choices of transports. you may drive your car, ride your motorcycle, or bus, or plane, or even lorry, if you want. that's why you have to know your motive of traveling. if you wanna have a nice sightseeing, you may use car. if you wanna rest, you may choose bus. if you're in rush, plane is the best choice for you.

so goes with investment. you have to set your target before investing. for retirement? or for children's education? or to buy a car by next year? those target have to go through different investment vehicles.

the next point is your time and effort. of course you don't have to knock everydoor to collect your earnings but the effort here includes your studies, your knowledge, and what you do to provide you with knowledge to invest.

knowledge=simple. where does the money come from? what is the concept? and the most important is the CONCEPT OF INVESTMENT ITSELF!

if someone comes and offers you an 'investment' scheme that will guarantee return of 300% in a year, what would you do? and he shows the evident that many people became rich via the scheme. would you? i believe that 45% will say yes. this is totally ridiculous.

even if the evident is there but please.. please.. please.. if you don't know where the money comes, find another thing lah. it's like you wanna go to KL from KB by bas ulat.

Where Are We at the Age of 64?

today's NST reported that according to S. Thechinamoorthy, a financial planner from monetmatters corp sdn bhd, in 2026, the rm1.4M is equal to rm639K today. a 35-year-old should have a sum of 1.5M at his 55 to ensure he can continue living comfortably. while according to u chen hock of hsbc, a 35-year-olgd today with rm4K earning per month will have rm500K in his EPF upon retirement, which he need a million more to support his life later!

like it or not, we still have another 2oyears plus to live after retirement (according to latest statistic). thus, we have to consider not only the day to day activities after retirement, but also the vital thing is health issues. as we grow old, our bodies become more porous and more absorbent to disease. as this happen that time, treatment at hospital can be very expensive. furthermore, that time we are not going to have a 'one month high fever then recover' but our disease might be continuous and need as frequent as monthly basis of medication.

according to financial planners, to face this, we have to save as early as today. we might start at a small amount but after 25 years, the accumulation would make us surprise. however, in this world with increasing inflation rate, we should be wise to park our money so that it would grow according to inflation.

the suggested way is to save in equity fund, fund that invested into equity market. and if we are smart enough, real property is a good investment for the old days. however, nothing is easy to have easier life. everything must be followed by discipline and target of how we are gonna live after retirement.

nowadays life is no more enjoyable unless if your salary is rm100K per month. according to the oldschool parents, they would put their hope on their kids to take care of them later. but now this is no more reliable since those kids also have to run in their rat race. now we have to live frugally with enough saving to protect us later.

Choosing the Best Unit Trust - 2

unit trust performance doesn't like share market even if they're correlates. when considering share market, ones has to look art the history, performance, record, etc. of the particular company. when considering unit trust, it is important to get to know the unit trust company and the funds' performance instead of considering the companies they invested in.

unit trust's performance is slightly different than stock market. stock market graph is very obvious ups-and-downs because the objective is to get income in short term (unless the company is very2 stable so you can hold it longer). for unit trust, the graph's trend of ups-and-down is not obvious, but for long term it should go up and up. see the graph below:
the upper graph is stock market's trend (in general) where the below one is unit trust trend (in general). see the trend? for a short-term investment, buying at a really low price and sell at a really high price will be significantly relevant in a very short time. for a long-term, buying at lower price it relevant as well but ones has to consider the company's ability to retain the higher price in short time. remember unit trust is slightly different than stock market. it's not as aggressive as stock market as it is a diversified investment policy.

another thing to keep in mind is that, unit trust is not totally depend on where does it invests in but who manage the investment. even if you invest in a very good company but if you're not a good investor, you'll end up in deep debt. except you're lucky. so goes with an investor who invests in a-not-so-good company, if he is good and smart enough, he would be able to gain big money.

this starting new year a good time to look for the best unit trust company. the edge-lipper and standard's & poor rating is in the store to be checked.

happy investing!

Choosing the Best Unit Trust

simple rule : go for the company, then look for the product.

easy, when you want to buy a simple thing like shampoo, which much attract you, buying from a shopping mall or a small kedai runcit, for the same brand of shampoo? i bet you'll go to supermarket or even watson for a tube of toothpaste.

why you would go to those places rather than kedai runcit? attraction. in financial, you might not see the physical attraction as what exhibits by a supermarket. the attraction shown by the company performance and the fund managers. how to see all this?

check for the tips in the next entries.

Budgeting

do you ever count with your current income, your current salary, your current saving, your current property, how long it takes for you to be a millionaire? or at least you'll retire without jeopardizing your current lifestyle?

we might have EPF for retirement. in 2006, EPF declares 5.15% dividend rate distribution. minus 4% inflation rate, the nett is only 1.15%. in 2004, it was reported 4.75% and 2005 increased to 5%. with this, EPF may not be enough to maintain your standard of living in 30 years from now. uh, i have only 31 years to retire!

how to overcome this? would you move to any countryside to avoid high living rate?

the words are financial intelligent. financial wisdom will not come naturally. it is a lifelong process. one has to know his goal and plan before setting up a financial plan.

the very first step in financial planning is understanding how to set your budget. budgeting is not listing down your income and expenses then leave it to be filled again tomorrow without any expulsion.

watching out your expenses is not highly necessary. the thing is, watch out your saving. when you keep your saving strictly, your expenses could be controlled.

simple steps to start budgeting are:
1- write down all your source of income. you may want to do it per month. eventually you'll know how much you earn per month.

2- make a list of things you have to spend at per month and how much you spend. it may be you house, car, land, insurance, parents, etc.

3- set how much do you wanna save permanently. half of your salary? quarter? or rm100? decide and stick it in your brain that you won't use the money unless you may die if you don't use it.

4- set how much do you wanna save for emergency. car breakdown? you may need the money one of those days but not everyday.

5- list down your daily expenses. food? clothes? gas? oil? chocolate? magazine?

6- optional fund!. you maybe wanna go somewhere for vacation. you may use all your money residue to be kept in this very personal fund.

to have a comfortable living, extra work or side income is not really necessary. it might give you extra money but without proper financial plan i.e. good saving plan, it is merely nothing. millionaires are not only have vast of income but also being frugal. it means strictly save your money and let your money makes money.

it's where you should put your permanent saving. choose a venue that could increase your money. use Rule of 72 to decide where should you invest your money so that i would doubled in a certain time.

project your money using Rule of 72:
easy, just use your calculator. if you want to know how long it will take to double your money at 7.5 % return, divide 72 by 7.5 and you'll get 9.6. you need 9.6 years to double your money with 7.5% return.

but this is not considered inflation rate. however, you'll get the picture how your money works passively.

easy, choose a medium that offers more return and you money will doubled shortly.