Unit Trust : Is it worth buying?

By now, I am pretty sure that you have come across many people who tell you that you should buy unit trust or mutual funds if you are passive investors and you do not have time to monitor your investments. There are professionals out there who will take care of your money and leave you to do what some of us do best: eat, play and sleep (Don't worry, you are not one of them since you are spending your precious time reading my blog). Blunt and crude, maybe, but let me give you this piece of advice. There is no free lunch in this world. If you do not take care of your money, somebody will.

I will share my opinion regarding unit trusts in the following FAQ.

1) Is there any difference between investing in stocks and unit trust?

No. You are still required to understand what you are buying. To do that, you need to read the prospectus, annual and semi-annual report of the unit trust. You will need to know the fund manager and understand their investment strategy. You will also need to evaluate their performance. Basically, there is no difference between buying stocks and unit trust.


2) Why do I need to monitor my investment when there are professional being paid to do all these?

Professionals are still human. Sometimes, their actions may deviate from the strategies that they preach. And, yes, they also lose money (sometimes, more than what you wish). You should read the book called 'Beating the Street' by Peter Lynch. In the book, he described how a group of little children beat the professionals in stock picking. So, if you do not invest the time to understand what you are buying and the performance of the funds, you may and will lose money.


3) If that's the case, why do I invest in unit trusts?

This is because :

a) your few thousand dollars will not get you anywhere if you want to buy the expensive blue chip stocks. But, it should be enough for you to participate in a fund that invests in these companies.

b) the professionals are closer to the market and they are trained to pick stocks with a disciplined approach.

c) you do not access to certain market e.g. overseas stocks, etc.


If you are still interested to know how I evaluate these unit trusts, please read my next posting.



Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.