Unit Trust Scheme - What Now?

Hi! I am back!

Please read my preceding blog article before proceeding.

If you have not invested in this scheme and currently are contemplating to step into the world of Unit Trust Investment, here is my advice.

But before that, if you are already in it and your have been holding some units for , lets say 2 years now, what should you do? This is what you should do. Hold it for further few more years. Why?

Because, you can never see any profits for any growth type funds during the first 3 to 4 years of commencing investment. This period is very crucial for the reason of expenses incurred during entry point. The prevailing service charges and GST (6% ) will erode your units in hand. Therefore to cover back these 'lost' units, your investment normally will take about 3 to 4 months time to breakeven. Some say that this period is akin to a human life. The infancy life during the process of the evolution of human is so vital that in this years, great care, providence and nurture is given in order to bring that infant into becoming a full fledged strong human.

In Unit trust scheme too, in order to strengthen the investment from all kinds of investment risk, be it specific or systematic, an investor should practise the habit of accumulating as many number of units as possible, and this is done only when the cost of holding the units is below the current traded Net Asset Value (NAV) of funds in circulation. Hence, this is ritually performed by pumping in additional units into the scheme by virtue of injecting new capital. Practise this method and you will see your holding cost per unit heading south, which means your cost per unit will go down - as planned! 

However, be cautious! With regular monitoring, should the current NAV hovers over the units holding cost, kindly stop accumulating further units. Failing to do so, your holding cost per unit will bounce back higher over the market NAV price. We don't want to do that, do we?

To recap, buy in units during the first 3 to 4 years of your investment to optimize your number of units. Have you heard some people say, "BUY LOW, SELL HIGH?" Well, it couldn't be more right in this context!

Okay!, what if you have not started investing, and you are contemplating to step into this field?

First and foremost, please remember that Unit Trust Scheme is not for a short term gain thing!

It works slow and steady by way of accumulating units over the years and if you can't part from your money for a longer term (usually 5 to 10 years or more), please abort! If you can, then please read through.

Your main job will be accumulation of units either during the infancy stage - 1st to 3rd or 4th years, or whenever opportunity knocks on your door. When i say opportunity it means as and when the current NAV trades below your holding cost per unit. You have to be ready for this as you will not know when it will knock on your door but when it do, you should go in to optimize your units.

For this reason, you have to practise the method popularly used in this industry - Dollar Cost Averaging! Continue to do this and you will see your units will accumulate fast, faster than other investors who fail to do this.

Well, how about to those investors who have been holding some units for more than 5 years now? Should they redeem now especially when the economy is still bleeding gradually and crippling the chance of redeeming units to make handsome profit? 

Monitor closely and you will find some opportunities in between the sober performances of your funds. Look for any funds that are currently trading at NAV lower than your holding cost per unit.

You will surprisingly find most of your NAVs are getting lower , making the funds even cheaper to obtain. If true, why don't you purchase these (now) cheaper funds? Remember the Dollar Cost Average strategy? You can practise it in here too. Buying the same funds cheaply means you accumulate more units and this subsequently will raise your potential of making higher return when the economy begin to bounce back.

HAPPY INVESTING!