Unit Trust Game Rule #3

Asset Allocation

I think this is not only limited to Unit Trust, but any investment instrument as well.

The allocation in UT mainly has 3 categories, Equity fund, Balanced fund and Bond fund.

An investor need to review his asset each year to determine if re-allocation is required, due to needs change and age change.

The simple rule of thumb, when we are approaching retirement age, we will need to reallocate high risk instrument to a lower risk instrument. Same go for child education plan, when we approach the time for withdrawal for the kids, then, we should start re-allocating the fund into a lower risk instrument, to warrant the return gained in previous years.

Everything doesn't run away on the principle of 'financial planning'.

Have you start thinking and plan for yourself and your beloving one ?

Federation of Investment Manager Malaysia

Do you know FIMM govern the unit trust industry in Malaysia ? They have very basic informations which would help an investor to understand unit trust before get 'too involved' in this area .... take a look ....

http://www.fmutm.com.my/

Top 17 SCAMS in Malaysia

Have you ever think of putting little money for "small" investment ?

There are lots of scam out there. I found this interesting write-up. It is not new, but 'skim cepat kaya' tricks are all old tricks where still people being 'con' .....


http://www.meshio.com/2009/05/top-17-scams-in-malaysia/

Unit Trust Game Rule #2

Here come rule #2 .....





Dollar Cost Averaging ??!!

3 things:
1) Works well in a highly volatile market to accumulates more units at a lower average cost
2) Cushion the impact of a falling market
3) Ignore Timing Issue




What you do is : you save a fixed amount of money every month in buying Unit Trust Fund.

First, Invest in UT lower down your risk if compare to invest directly in share market. Dollar cost averaging will 'lagi' lower down your risk in investment.

It works very logically. If the NAV is rising, should we invest more ? NO. Hence, with the same amount of $$, we buy less unit. If the NAV is dumpling down, why not we buy more ? Hence, with the same $$, we buy more unit.





Second, it is forced saving, promise yourself every 1st of the month, save the $$ into the UT account.

Do you know why your highest amount saving account is EPF ? Because it is forced saving. You save into that EPF account before you can event withdraw a cent for spending, that's why you have huge amount there. Same go for this, if you plan to save for longer term, think about saving into UT too, beside putting them into FD only.





Third, it is stress-less.


No sweat if the market rise, less sweat when the market fall. Because, you know you will buy less when the market is already 'high', and you are buying more when the market is 'low'.





Below is a chart showing the total return for a patience investor start with RM1000, and keep saving RM200 each month from the first day the fund launched and until to-date.







Hence, do your dollar cost averaging, for UT, for FD (opppsss... FD rate don't change too much), foreign currency etc etc .....

Unit Trust Game Rule #1

Why invest in Unit Trust is always a "at least 3-5 years" saving plan ? This seems like a magic number ... the number 3 & 5 ....

Actually, it is not, it is a survey and statistic run that proven if you have this kind of patient (wait for at least 5 years ??), and the fund selected is not really that BAD (well, be realistic, we have people score all As' and some score nothing, so does Mutual Fund)....

I had checked out several funds, seems like this is the acceptable timeframe one needs to wait for their fruit grows if they are prepare not to do much 'watering' and 'gardening'

For sure, this don't apply to those who is in 'Unit Trust TRADING" .... they managed their investment differently.

I am taking one fund to show the example.
Say, an investment of RM10K, comparing with FD & EPF return.
Green line = investment return
Yellow = EPF return
Blue = FD return

















This chart shows an investment for 17 years. (2009 -1992 = 17 years)

Suprisingly, even in the last round of global crisis where the return is badly affected, but still the return is better then EPF & FD. Kind of 'down turn proof' already.

Same fund, but invested 5 years ago.

The return is impacted and return is lower than EPF and FD at early year of 2, and, it is bad during the down turn.

However, it picks up again when the economy recover.

If a fellow panic and sell off during the down turn, this must be the fellow that you met once upon a time and tell you UT sucks where he loses huge in the game.

Hence, a person who don't have enough patient, might not able to play the UT game well and win in the game.

How Much is Needed for Retirement ?

Have you ever got the 'courage' to calculate how much you need for to live until the 'last day', without depending on others to support you .... but only on your early days saving ....

Have a look the screen capture. By only saving the money for a day 3 meals, you need about 550K ... so, ask yourself, have you ever save enough just for 3 meals a day for 23 years ?

Don't forgot, you need money to pay your electrical bill, water bill, other utility bill, medical bill ... did you plan enough for your old age ? Put aside a few minute to think about it ....