For the average investor, unit trust is one of the common investment options used to meet their financial milestones. Check out these 5 key takeaways before you invest in unit trust:
Do Your Homework: Make an effort to comprehend the fund factsheets before finalizing your selection. At the least, make time to understand the underlying assets – whether it is equity, bond, or hybrid to match your financial milestones. If you have a pool of cash meant for the down payment of your property in 12 months’ time, equity fund may not be the best option.
Do Not Rely on Past Performance: Never pick a fund just because the chart in fund factsheet reveals a strong positive growth for the past 10 years. This should NOT be the key determining factor in fund selection as it does not necessarily reflect future performance.
Diversified Portfolio: Investing in one unit trust (equity) fund does not make your portfolio well diversified. Yes, owning one unit trust (equity) fund is a good start instead of owning one stock but a well-diversified portfolio requires you to consider different asset classes such as fixed deposit, money market fund, bond fund, and equity fund. This is to ensure your portfolio provides you the essential liquidity without compromising your long-term goals – and a well-diversified portfolio helps to ride through crisis like in 2020, when COVID19 visited us.
Patience Pays: Don’t expect quick profits as it’s meant for medium to long term returns. Here is an analogy to illustrate – have you ever tried to fill ice cube tray with fast flowing water? I’m sure you will observe water flowing out of the tray more than it fills the cubes. Just when you wanted to quickly fill the cubes, you are actually spilling water out of the tray. Instead, fill it with slower flowing water and you’ll observe how water easily fills up from one cube to another.
Invest Regularly: Don’t time the market – you should never analyse when is the right time to park your investment. Timing can habitually put you on a rollercoaster ride and very likely, you will end up chasing the market and missing out on opportunities. The best option is to stay invested at all times by investing regularly. Also, do not succumb to frequent switching in and out of your funds as you may not get it right all the time.
Strengthen the way you manage your portfolio today – if you aren’t already practising the above, start now. The results will show in your Unit Trust portfolio performance.
