Questions and Answers
What is the primary purpose of a Unit Trust Scheme?
Which of the following is a benefit of investing in a Unit Trust?
What is the main objective of a Capital Growth fund?
What is the key feature of a Money Market fund?
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What is the term for the profit made from selling a security at a higher price than its purchase price?
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How often do Unit Trusts issue reports to investors?
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What is the primary source of returns for investors in a Unit Trust?
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What is the risk level of a Bond fund, compared to other types of funds?
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Study Notes
What is a Unit Trusts Scheme?
- A collective investment where investors with similar investment objectives pool their savings together
- Invests in a portfolio of securities managed by investment professionals
Benefits of Unit Trust
- Diversification: investment in different asset classes
- Investment Exposure: access to different markets and regions
- Professional Management: expertise of investment professionals
- Liquidity: easy access to funds
- Ease of Transaction: convenient buying and selling
- Investment Cost: lower costs compared to individual investments
- Dollar Cost Averaging: regular investments to reduce market volatility
Disadvantages of Unit Trust
- Opportunity Cost: potential benefits given up by investing in a unit trust
- Loss of Control: investors have limited control over investment decisions
- Risk: investments carry inherent risks
- Fees & Charges: administrative costs associated with unit trusts
Unit Trust History in Malaysia
- Malayan Unit Trust Ltd. introduced unit trusts in Malaysia in 1959
- Arab-Malaysian Unit Trusts Bhd. launched the first Shariah-compliant fund in 1993
- RHB Islamic Bond Fund launched the first Islamic Bond fund in 2000
Net Asset Value (NAV) of a Fund
- Calculated by adding the value of all assets owned, including equities, bonds, and money market instruments
- Includes dividend, interest, and coupon payments received
Methods of Investing in Unit Trusts
- Lump Sum: investing a single amount at one time
- Regular: investing a fixed amount at regular intervals
- Reinvest Income: reinvesting dividends and interest earned back into the fund
Fund Objectives
- Capital Growth: focuses on increasing the value of investments
- Income: generates regular income for investors
- Capital Growth & Income: balances growth and income generation
Risk Level of Fund Types
- Money Market: lowest risk, liquid, short-term investments
- Bond: low to moderate risk, fixed income investments
- Balanced: moderate risk, mix of equity and bond investments
- Equity: highest risk, investments in company shares
Unit Trust Reports
- Annual Report: issued at the end of each financial year
- Interim Report: issued six months after the annual report, does not include an auditor's report
Returns from Unit Trusts
- Distribution: receiving income from the fund
- Capital Gain or Capital Appreciation: profit from selling units at a higher price than the buying price
- Capital Loss: loss from selling units at a lower price than the buying price
Cooling-off Rights
- Available to first-time investors, excluding corporate, UTC, and staff investors
- Can exercise cooling-off rights by submitting a document within six business days
Repurchase and Transfer
- Repurchase: money received within 10 calendar days
- Transfer: changing ownership of units from one person to another
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Description
Learn about unit trusts, a collective investment scheme where investors pool their savings together, and its benefits, including diversification, investment exposure, and more.
