INVESTMENT MANAGEMENT

FIN 358

INDIVIDUAL ASSIGNMENT

WRITTEN REPORT

FACULTY OF BUSINESS ADMINISTRATION

DIPLOMA IN BANKING STUDIES
JBA1195C

NAME: USWATUN HASANAH BINTI YUSRI

UITM ID NO: 2018428096

PREPARED FOR
SIR FERRI BIN NASRUL

SUBMISSION DATE
12 NOVEMBER 2020

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 TABLE OF CONTENT

1.0 INTRODUCTION 3
2.0 BODY CONTENT 4
2.1 Features 4
2.2 Characteristics 4
2.3 Mechanism 5
2.4 Advantages & Disadvantages of Unit Trust 6
3.0 CONCLUSION 7
4.0 REFERENCES 8

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 1.0 INTRODUCTION

There are many financial securities that can be chooser to invest money. One of them is
unit trust.

Unit trust is a form of collective investment scheme that allows investors with similar
investment objectives and strategies to pool their funds together. It is created under a trust
deed. Hence, professional fund managers will act on behalf of investors in invest the money
in portfolio of marketable securities. Unit trust investments generally tend to invest in a
number of individual securities.

However, there is a systematic risk that will affected by adverse market changes. It is
because of the similarity asset class or market sector of the securities. Investment managers
may diversify into non-correlated classes of assets in order to avoid this systematic risk. For
example, investors can hold their assets equally in equities and bonds.

Unit trust also a medium in which a small investor that uses a small amount of money
can participate in a diversified investment portfolio that could not have been possible if the
investor were to invest individually. The diversified portfolio allows risk reduction by
investors. The investors of the unit holder can enjoy income from their investment in the
form of distribution and appreciation of capital.

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 2.0 BODY CONTENT

2.1 FEATURES

 Managed by a professional fund manager

- Professional fund manager make decision based on investment objective on
what assets to buy or sell and also maintain the trust and improve level of profit.
 Diversified range of assets
- A diversified portfolio of a fund ensures that risks can be best distributed over
the fund's assets. Certain risks can be diversified, but all risks cannot be
excluded. So it is important to be prepared for changes in prices.
 Directly access to invest in difficult and expensive assets or markets
- You will face risks which are special to that specific fund. A fund that invests in
emerging markets. For example, it can be subject to political, legal and foreign-
exchange risks.

2.2 CHARACTERISTICS

The uniqueness of unit trust will attract investor to choose unit trust other than another
financial securities. Unit trust by itself is neutral. Characteristics of unit trust can be seen
through the objective, goals, personality and risk in unit trust:

 Objective
- Unit trust is the best choice among other financial securities to invest for medium
to long term which is more than 3 years.
 Goals
- Unit trust gives great opportunity for investors to get returns in the range of 5% to
8% .But this is not a guaranteed even for other investments. It is just an estimate.
 Personality
-Unit trust suitable for busy people that do not have much time for that. In addition,
unit trust can provide professional to handle your investment.

 Risk
- All investments have risk but in unit trust, it can reduce risk to exposure to a single
stock investment that may not perform well due to poor business performance by
diversification.

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 2.3 MECHANISM

There are 3 ways on how invest in unit trust will work. Invest can be made through cash
or lump sum investment, regular savings and EPF investment scheme.

Firstly, investor can invest in unit trust by cash or lump sum. Within 3 to 20 years, the
initial investment will grow and other income is earned in period of time. Unit redemption
will be made by investors. The unit-selling price will reflect the accumulation and
compounding of the capital that be invested within a certain period of time. For example,
someone who wish to invest the sum of money into a unit trust and keep for a long period
for some specific purpose such as children’s education. The proceeds of the sale of the units
will be the initial investment plus the returns on that amount, accumulated at the end of
keeping period.

Secondly, investor can invest by regular saving which means by monthly or quarterly. It
helps to collect capital that can be used in future. The amount accrued at the end of the
period would increase by making equivalent and daily contributions over a period of time.
This is generally referred to as averaging the dollar cost. The redemption (or sale) price of
the units kept at the end of the duration will reflect the accumulation of all contributions
plus the returns produced from the total contributions since the first transaction took place.
The longer the keeping and contribution duration, the effect is more obvious. This method
of saving is the basis for the accumulation of most pension funds.

Thirdly, EPF Members Investment Scheme is another way on how unit trust works. If
investors are eligible, they can invest from their EPF Account 1. They can refer to their EPF
statement along with the Basic Savings. Normally, invest in unit trust by EPF will bring to
get a higher return than 5 to 6% per year. Table of Savings to check their eligibility and the
amount of investment permitted.

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 2.4 Advantages & Disadvantages of Unit Trust

Advantages Disadvantages

 High liquidity  High Fees

-Investors can sell their investment and -Even though investors are not paying for
convert to cash easily. They will no need active management with unit trusts, fees that
to pay any fee for withdrawing at any time apply in unit trust are comparable to mutual
before the maturity of investment. fund loads. Unit trust fees are higher than
index fund or exchange-traded fund. Such fees
 Diversification
may ‘eat up’ the returns of the investors.
-Unit trust offers an efficient way to
diversify. Investors are investing into  Only One Way to Buy
diversified portfolio of investment rather -Unit trusts are not providing the level of
than investment portfolio of one or two convenience. However, investors that want to
investments or shares. It is because purchase individual stocks, they need to get
minimize investment risk is important. them from many brokerage firms and pay in
Diversification can also protect from commission. It is only can be buy directly
adverse market cycle. For instance, market from the trust issuer. Since the purchase
crisis that happen during this unexpected pricing is competitive, it gives negatives
Covid 19. impact to investors.

 Low Outlay  No Changes in Holdings

-Unit trust allows to started invest with - If a unit trust has been created, its underlying
low amount. It helps those who have small holdings are same until the date of termination.
capital which is RM1000 to participate to If those holdings perform well, that's an
invest with low risk. It is affordable for advantage, but if they fall in value, the trust
them to keep invest every month as low investor is left holding a bag full of laggards
RM100. The money will be managed by and losing cash. In and out of different
the full-time professionals fund manager. holdings, actively manage funds can trade.
In addition, RM 1000 can be a starter price Unit trusts can’t, and this exposes investors to
for invest in foreign market such as United the potential risk.
States.

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 3.0 CONCLUSION

As conclusion, it is prove that choosing unit trust for purpose of investment gives pros
and cons to investors. By investing in unit trust, it provides professional fund manager to
help us in invest our money. That is what most people choose to invest in unit trust.
Investors get more benefits from their investments by participating in a unit trust than what
they would have earned from direct investments in company shares. Thus, investors can
choose to invest by cash or lump sum, regular savings and EPF investment scheme.
Investment in unit trust brings increasing of financial security and economies of scale.
Investment schemes such as unit trusts encourage investors to engage in markets for equity,
derivatives, debt, and money. Uniqueness of unit trust gets attention lot of investors. Unit
trust takes care all types of investment goals, whether it is regular income growth or capital
growth. Uni trusts are preferred than other financial securities due to their affordability,
diversification and excellent liquidity.

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 4.0 REFERENCES

Philip Mutual. Retrieved from How to Invest In Unit Trust Funds:

https://www.phillipmutual.com/products-services/unit-trust/how-to-invest-in-unit-trust-
fund/

Philip Mutual. Retrieved from Benefits of Unit Trust:

https://www.phillipmutual.com/products-services/unit-trust/benefits-of-unit-trust/

ECONOMY WATCH.(23 November, 2010).ECONOMY WATCH FOLLOW THE

MONEY. Retrieved from Unit Trust:
https://www.economywatch.com/investment/unittrust.html#:~:text=Features%20of%20unit
%20trusts&text=Accumulation%20units%20are%20those%20that,on%20a%20previously
%20fixed%20date.

FIMM. Retrieved from Federation of Investment Managers Malaysia: Understanding Unit

Trust Scheme: https://www.fimm.com.my/home/investors/understanding-
investing/understanding-unit-trust-schemes/

Money Sense. (29 October, 2018). Money Sense Website. Retrieved from Understanding
Unit Trust: https://www.moneysense.gov.sg/articles/2018/10/understanding-unit-trusts