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Is It Good Time To Be Investing In Unit Trust Now?

This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
Tel : 03 - 469 5560 Fax : 03 - 294 5561

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The local unit trust industry, a popular form of managed investment, has been greatly affected by the beleaguered local stockmarket. Generally, the local unit trust performance received a heavy beating particularly for growth funds that invest principally in stocks.

Some unit trust investors who thought that they were buying a lot cheaper not very long ago may be disappointed with unit prices sinking even lower. Unit trust investors should not panic and sell all their investment holdings amid the on-going market turbulence.

You should not cut losses

Cutting losses on your unit trust investments which should be viewed as medium-to-long term is certainly not a wise strategy. You should take the current attractive prices as a buying opportunity.

Why worry about short-term declines if you are investing in unit trust funds for your retirement which could be 10 years away?

Adopt dollar-cost averaging method

If you are a disciplined investor, adopting dollar-cost averaging method (consistent buying regardless of market scenarios) should be a more preferable thing to do. You do not have to crack your head trying to identify the ýrealţ market bottom. The method will likely help you to avoid making past mistakes of trying to time the market.

Dollar-cost averaging is a very simple method that can often reduce the volatility of your portfolio. Although dollar-cost averaging does not guarantee that you will not lose money but it minimizes your losses. Those who invests large sums at one particular point are likely to suffer more if they had not timed their investments properly.

Do not try to speculate in unit trust

Unit trust is not a vehicle for speculation and will more likely improve on any market rebound. While avoiding the market right now seems to be the attitude adopted by many, unit trust investors should in fact do the opposite - buy now at a greater discount.

Always keep in mind that you invest in unit trust for long term. Forget about investing in unit trust if you are a typical stock punter who buys stock XYZ at RM2.50 today hoping that it will rise to RM3.70 tomorrow.

Unit Trust-not necessarily a risk-free investment

Like any other form of investment such as shares or derivatives, unit trust investments involve some risk although it is generally termed as safe investment. The amount of risk involved depends on the type of unit trust you select. In short, you should not view unit trust as a totally risk-free investment.

It is hard to determine whether your unit trust is a good or bad one. If you have been investing in a unit trust with asset allocation of more than 80% in stocks, you should not be surprised to see double digit losses in your account - higher risk.