Unit Trust Investment - Psychological perspective (Part 2,Final)

Investing in Unit Trust needs a different kind of approach and surely there is no doubt that it also requires you to regularly adjust emotionally to various level of ups and downs throughout your investment's holding period. While the 'journey' from point A to B (please refer to the chart posted under the same caption on September 29,2008), is deemed the initial period, or some refer it to the 'accumulating period', the 'journey from B to C,on the other hand is referred to the 'Profiteering period'. During this range-bound period, the higher number of units collected throughout the A-B line, will reflect a higher gross value to your investment. The higher units collected will automatically brings the units holding cost down to a lower amount than the holding cost per unit. This, then will enrich you in amount upon redemption. Significantly, the process of units accumulation is also prevalence in B-C stage.

However, it is also true that the opposite may hold water when the market got jittery. It simply means that even in B-C stage, the returns may plunge, but that calamity could be managed by taking appropriate diversification strategy. So, if there is not any single strategy enforced to manage risk, your portfolio is regarded as unstable, during which you might go through many sleepless nights.

So the next time you are confronted with a volatility in returns, do not panic!! It is always prudent to stop a short while and ask this question," Am i in the initial stage (accumulating units as line A-B denotes) or am i in the line B-C stage-the Profiteering stage?". If you are in the A-B stage and the returns plummeted, there is NO NEED to wory about. Let the prices of funds drop(it usually happens in a short or long bear market) as much as it wants because the lower the market goes, the cheaper the fund prices gets, and it gives you a buying opportunity. Smile and keep smiling while accumulating cheap units at this stage and you will be in a good position when the market makes an U-turn!

The only people who should be worrying are the investors who have been around for medium to long term tenure. For them, the time won't be suitable to liquidate their units,thus they need to wait a bit longer time for redemption.

Happy investing:)