One of the cheekiest unit trust investment disinformation being widely propagated is the concept that unit trust is a long term investment and therefore there is no need to bother with active monitoring. 
In other words, just Buy Hold and Wait for the next 10 – 15 years. The fund managers will “grow” your investments and take care of everything for you. You just relax and don’t worry about anything.
Many of you might have been told that unit trust is an ideal investment to purchase for building up a trust fund for your children’s education fund or for your own retirement fund which is some 10 or 15 years down the road. And because we have heard it so many times from "experts", we have accepted this storyline of unit trust as being used for long term financial planning ala auto-cruise.
But many people who have invested in unit trust passively ie Buy, Hold and Wait for more than 5 to 10 years will confess that their investments have not brought them the rewards that they were promised (better than fixed deposit/epf returns) when they were approached to invest in unit trust.
“I was told that in the long term, I could easily expect better than average return compared to my leaving money in Fixed Deposit. In actual fact, I have even lost some of my capital!” or you may have also heard people say, “I was led to believe that I could get better returns than what the EPF could give me, so I invested with my EPF funds. Now after 7 years, I realise that I should have left my money with the EPF.”
Case study: Mr. A bought $100000 worth of ABC growth fund in July 30, 1996. The value as at 28th July 2006 is RM96,655.28. He made a loss of RM3,344.72. His total investment value after about 10 years of investing is a loss of 3.345%.
What happened, how can this be?
One cannot be blamed for thinking that the fund that Mr. A purchased was a “lousy” fund because he started with RM100,000 and now he has only RM96,655.28.
But is this how the fund actually performed?
What can we learn from this? The charts shows us that fund A had increased to values of as high as $175,000 but then it came back down to $96,655.28. It fluctuated along the 10 years and did not move in a straight line. There are ups and downs in the value because the underlying investments are essentially stocks and shares.
The values can move up and down in similar fashion as the movement of the KLCI. If an investor is tracking and monitoring the fund and is aware of economic changes, a strategic switch could have been performed where the growth fund was switched to an income fund. This would have preserved its’ value rather than having the profits diminished when the stock market moved down again.
What is the lesson we can learn from this? Simply this – Track It or Lose It! If you don’t bother to follow your own money, nobody else will!
Whilst you may have a long term objective e.g. investing for your children’s education 10-15 years down the road, or preparing for your retirement nest-egg 20 years in the future, it does not mean that after making a purchase, you passively hold on to it and lock it up in the safe deposit box and expect it to increase in value automatically when you want to cash out in 15 or 20 years time.
You need to keep track of your fund’s performance in the context of the changing business and economic cycles by following the developments of the world economy in general as well as the happenings in the Kuala Lumpur Stock Exchange in particular.
If you are invested in growth funds, your investment portfolio’s value will be very greatly influenced by the swings of both the bull and bear markets. Therefore you should rebalance your portfolio through switching (rebalancing) from growth to income funds and vice versa. Switching is provided free of charge by most fund companies but unfortunately this facility is not made known to investors. Talk to your agent about this. (Read also article on Switching for Success – Use It or Lose It).
In conclusion, if you are investing, please do not make the same mistake as others. You need to monitor and make strategic switching when the market cycle changes. In investing, we say, Track It or Lose It.!
In other words, just Buy Hold and Wait for the next 10 – 15 years. The fund managers will “grow” your investments and take care of everything for you. You just relax and don’t worry about anything.Many of you might have been told that unit trust is an ideal investment to purchase for building up a trust fund for your children’s education fund or for your own retirement fund which is some 10 or 15 years down the road. And because we have heard it so many times from "experts", we have accepted this storyline of unit trust as being used for long term financial planning ala auto-cruise.
But many people who have invested in unit trust passively ie Buy, Hold and Wait for more than 5 to 10 years will confess that their investments have not brought them the rewards that they were promised (better than fixed deposit/epf returns) when they were approached to invest in unit trust.
“I was told that in the long term, I could easily expect better than average return compared to my leaving money in Fixed Deposit. In actual fact, I have even lost some of my capital!” or you may have also heard people say, “I was led to believe that I could get better returns than what the EPF could give me, so I invested with my EPF funds. Now after 7 years, I realise that I should have left my money with the EPF.”
Case study: Mr. A bought $100000 worth of ABC growth fund in July 30, 1996. The value as at 28th July 2006 is RM96,655.28. He made a loss of RM3,344.72. His total investment value after about 10 years of investing is a loss of 3.345%.
What happened, how can this be?
One cannot be blamed for thinking that the fund that Mr. A purchased was a “lousy” fund because he started with RM100,000 and now he has only RM96,655.28.
But is this how the fund actually performed?
What can we learn from this? The charts shows us that fund A had increased to values of as high as $175,000 but then it came back down to $96,655.28. It fluctuated along the 10 years and did not move in a straight line. There are ups and downs in the value because the underlying investments are essentially stocks and shares.
The values can move up and down in similar fashion as the movement of the KLCI. If an investor is tracking and monitoring the fund and is aware of economic changes, a strategic switch could have been performed where the growth fund was switched to an income fund. This would have preserved its’ value rather than having the profits diminished when the stock market moved down again.
What is the lesson we can learn from this? Simply this – Track It or Lose It! If you don’t bother to follow your own money, nobody else will!
Whilst you may have a long term objective e.g. investing for your children’s education 10-15 years down the road, or preparing for your retirement nest-egg 20 years in the future, it does not mean that after making a purchase, you passively hold on to it and lock it up in the safe deposit box and expect it to increase in value automatically when you want to cash out in 15 or 20 years time.
You need to keep track of your fund’s performance in the context of the changing business and economic cycles by following the developments of the world economy in general as well as the happenings in the Kuala Lumpur Stock Exchange in particular.
If you are invested in growth funds, your investment portfolio’s value will be very greatly influenced by the swings of both the bull and bear markets. Therefore you should rebalance your portfolio through switching (rebalancing) from growth to income funds and vice versa. Switching is provided free of charge by most fund companies but unfortunately this facility is not made known to investors. Talk to your agent about this. (Read also article on Switching for Success – Use It or Lose It).
In conclusion, if you are investing, please do not make the same mistake as others. You need to monitor and make strategic switching when the market cycle changes. In investing, we say, Track It or Lose It.!
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