If you are an amateur investor or one
with little knowledge on unit trust investing, more often than not, you would
rely solely on your unit trust consultant (UTC) for advice. However, would you
be able to know if your consultant is acting in your best interests as an
investor? As an informed investor, you have the right to ask your consultant as
many questions as necessary, because it is your hard earned money that is on
the line. This article will help you to:
·
identify the key questions you need to
ask your unit trust consultant; and
·
make an informed decision for unit trust
investing after asking the questions.
Question #1: Is this unit trust fund
approved by the relevant body/ Is it a legal unit trust fund?
All unit trust investment products must be
approved by the Securities Commission, Malaysia (SC). To ensure that an
investment product is approved by the SC, call
03-6204 8000 and ask for the Managed
Investment Schemes Department or visit the SC’s website at www.sc.com.my under the “Data &
Statistics” section.
Question #2: How can I gauge the
performance of a unit trust fund? Where can I find information on the unit
trust and relevant fund management company?
You can find out the track record of a
unit trust fund by reading the latest annual reports. However, you need to
remember that the past performance of a fund does not guarantee its future
performance. Information regarding the unit trust and relevant fund management
company can be obtained from the prospectus. Make it a point to read through
and understand the prospectus before investing.
Question #3: Does the fund suit my
investment goals and risk profiles?
Before your UTC can answer this
question, it is important that you sit down with him to discuss and come to an
agreement on this first. With many categories and types of funds in the market,
each with its own benefits and risks it is imperative that you understand
the funds being offered and for you to choose a fund or funds that really suit
your investment goals and risk tolerance. You should not be pressured by any
UTC to invest in a fund that is not suitable for you. “Do not invest in
something you do not understand!”
Question #4: What will happen to the
money that I put in a
fund? Where will it be invested?
Each unit trust fund has its own
investment objective. You should understand the fund’s strategies in meeting
these investment objectives. For example, for an equity fund, generally, most
of the funds’ assets will be invested in equities of companies listed on the
stock market. It is therefore crucial for an investor to know which investment
products/instruments the funds will be investing in, as this will have a direct
implication on risk tolerance of the investors.
Question #5: How do I know if my
fund is doing well? How can I compare it with other funds?
Each fund has its own benchmark
(something that you can compare its performance with), which is stated in the
prospectus. You can compare the rate of return of your
fund with this benchmark. For example,
for bond funds, it is normally the average 12-month fixed deposit rate of
banks. Alternatively, you can compare your fund with other funds with similar
characteristics. A more complex unit trust fund may have a more complicated
benchmark.
Question #6: How will I make
money from this fund?
If you invest in unit trusts, your
returns will usually be in the form of :
(i) Capital gains (if the price moves
favourably), and/or
(ii) Distribution of income (if the
management company
announced any). Get your UTC to explain
this and read the prospectus. However, be mindful of any promises made by your
consultant. Consultants should not be promising you specific returns as a
fund’s performance is influenced by various factors. you can contact the
Federation of Investment Managers Malaysia (FIMM) at info@fimm.com.my or call 03-2093 2600.
Question #7: Do I have to pay
any fees or charges?
Every investment will have costs
involved and investing in unit trust funds is no exception. Generally, unit
trust management companies will impose the following fees and charges:
(i) distribution / transaction charges,
such as a sales charge and / or redemption charge, when you buy and sell units
(ii) management fees
(iii) trustee fees
Your UTC must explain this clearly to
you. Read the prospectus for more details on the typical fees and charges
imposed in a unit trust investment.
Question #8: If I change my mind
after I have invested in a fund, can I sell it back to the company and get a
full refund?
Eligible first-time investors are given
a “cooling-off” period, which means the time given to investors to reconsider
if they want to continue investing in the unit trust fund or otherwise. The
cooling-off period is for six (6) business days from the date of receipt of an
investor’s application by the management company.
Question #9: How easily can I
sell the fund if I need my money right away? How long do I have to wait before
I can get my money back?
Unit trusts are liquid investments. You
may approach your distribution agents and submit a redemption notice to redeem
the units and get your money back. Ask your
UTC for details regarding the period of
redemption etc.
Question #10: Will I be getting
any statements regarding my investment status from the management company?
Yes. Find out how frequently you will be
getting such statements from your UTC.
Question #11: Where can I get
more information about the fund?
Most of the information about a unit
trust fund is in its prospectus and annual report. Ask your UTC for a copy of
the prospectus and read it before investing.
Brought to you by Securities Industry
Development Corporation (SIDC), the training and education arm of the
Securities Commission Malaysia, as part of its ongoing efforts to create
well-informed and savvy investors in the capital market. The information provided
in this article is only for educational purposes and should not be used as a
substitute for legal or other professional advice. For more information, log on
to www.min.com.my, call 03-62048889 or visit
our Facebook page at www.facebook.com/PelaburMalaysia
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