Lesson 5

Lesson 5 – Choosing The Best Way To Invest In A Unit Trust

Most unit trust managers offer you a choice of ways to invest.

As A Lump Sum

The minimum lump sum investment in a unit trust is typically in the range of RM500 to RM2,000. There is no limit on how much you can save and invest in a unit trust, though if you are making a very large investment, it is usually advisable to spread your holdings among different funds so that you do not have all your eggs in one basket.

If you are worried that the stock market could fall back from a peak just as you invest your lump sum, you could consider investing it gradually through a regular savings plan.

Via A Regular Savings Plan

Regular savings plan allows investors to put in a set amount monthly to the unit trust of their choice. Usually the minimum initial amount is RM1000 though it may vary with fund managers. The minimum monthly additional investments usually start from RM100. This is a convenient way of saving, as monthly additional investments are usually paid through a bank’s standing instructions.

The regular savings plan is also flexible since they are not tied to a particular period of time. This can enhance the returns from unit trust that performs reasonably well over a long period. An advantage of the regular savings plan is that they even out fluctuations in unit price. The same investment each month will buy more units when the price is lower and fewer when the prices are high. The effect of ringgit cost averaging, as it is called, is to make the overall cost of units slightly cheaper. Of course, another advantage is that you can cash in the whole lot or part of it without penalty on any business day. Regular savings plan can improve returns significantly in the long run.

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