PART 1:Set Aside Your CSF Prior To Investing!!

Some people approached me and want to know more about the Unit Trust Scheme and how to become rich. The very first statement which would come directly out from my mouth is this,"UNIT TRUST IS NOT A SCHEME TO BECOME RICH. IT IS A SCHEME THAT WOULD RELIEVE YOU FROM FINANCIAL DIFFICULTIES IN FUTURE SHOULD A DISTRESS FALL ON YOU". Insurance products works on the same tag line too!!

Not everyone needs to invest in unit trust. This scheme is just another investment product prevails in the capital and financial market. One should choose the instrument diligently before making the first move to invest because all investment products inheritates several risks. To some risk means different from the others. In general, get the advice of your financial planner on your distinguished risk profile and the type of investment instruments you should embark on. A wrongly chosen product that mismatches your risk profile can spell a disaster to your anticipated return in future, of which would deplete of your capital. Earlier i said that not all need to jump onto the wagon of unit trust scheme. Cash rich people and people who do not have a future financial goals or those who have their future fiancial goals secured may not need to come in.

Having said that, what than my advise shall be to those who does not fall in the above category?

For those who are thinking about plucking their nose into the unit trust scheme, my advise will be, DON'T!! Hmmm....that is a bit unwelcomed advise, isin't? Laugh Out Loud!!

Well. let me get to the bottom of it now. Unit trust scheme (UT) is a scheme where once your money is transfered into the investment account, it should be kept and managed at least for a medium term horizon. Rule of thumb says a 3 to 4 years horizon reflects a medium term duration. Furthermore, to achieve the objective, strategies like Dollar-Cost-Average(DCA), Asset allocation and diversification across wide broad industry based funds are essential to be practised. You see, for the implementation of this strategies to take place, TIME plays an important factor!! Undoubtly, for the result to be visionalised, TIME again become an important resource!

Therefore, if you can stomach the wait-and-see attitude and that you are willing to 'depart' from your invested funds, then UT could be suitable for you, otherwise just dismantle the intention to jump onto this wagon!

Okay!, say that you understood and are prepared to come in, what next?

Next, my dear readers, is the CSF! No..no..! Not the CSI (crime scene investigation) or UFO!!. It is the CRITICAL SUPPORT FUND (CSF) concept which i am amusingly trying to sell to you. So much for my comedian act...lol!

The CSF concept is nothing new to you and me. The concept depicts one of the most valuable lesson in our existing life i.e., 'Preparation"! No one knows how and when a financial peril may strike you but when it strikes, it leaves a catastrophe condition in our life. Loss of source of income that for long have been the majestic driver of your household activities may drastically 'deform' not only yours but also on your dependants' way of life. Those so well and craftly engineered activities added with delicately architectured dreams entrusted to lift your family's current standard of living into the unforseen future will come to an abrupt if you do not have supporting financial means to cater for the lost of any financial catastrophe that catches you with pants down. The million dollar question i would like to ask you is, should you channel your surplus money into investment for future cash generation or with that surplus money, should you set aside a sufficient amount to cater for the financial perils that would strike you indefinitely?

Answer is overwhelmingly, the latter! My strong advice is, you should set aside from your surplus money, an amount equivalent to 6 months of your monthly total expenditures. Assuming your average household expenses for the last 12 months is RM 4000, ideally you should set aside an amount of RM 24000 (6 months x RM 4000). Treat this as a CRITICAL SUPPORT FUND and park this amount in a risk free investment return products, such as the Fixed Deposit (FD) or the Fixed Income (FI) unit trust funds. Alternativley, you may also want to consider the prevailing Amanah Saham 1Malaysia distributed and managed by the Permodalan Nasional Berhad (PNB). Although i have suggested unit trusts an avenue to park your CSF, those funds are more like capital guaranteed funds which means that your capital invested are preserved. Honestly, it lacks liquidity but it is an option besides the FD.

As a conclusion on this session, allow me to summarise the salient point intended to forward. One must only invest their hard earned money into any chosen financial products only AFTER SETTING ASIDE THE CSF! Do this first!

Regards,