Lesson 5 - Choosing The Best Way To Invest In A Unit Trust
Via Lump Sum
The minimum lump sum investment in a unit trust is typically in the range of RM500 to RM2,000. Although there is no limit on how much you can save and invest in a unit trust, it is usually advisable to spread your holdings among different funds, especially if you are making a very large investment.
If you are worried that the stock market could fall just as you invest your lump sum, you could consider investing it gradually through a regular savings plan.
Via a Regular Savings Plan
A regular savings plan allows investors to put in a monthly set amount into the unit trust of their choice, from as low as RM100. This is a convenient way of saving, as monthly additional investments are usually paid through a bank’s standing instructions.
The regular savings plan is also flexible since it is not tied to a particular period of time. This can enhance the returns from unit trusts that perform reasonably well over a long period. An advantage of the regular savings plan is that they even out fluctuations in the unit price. The same investment each month will buy more units when the price is lower and fewer when the prices are high. The effect of ringgit cost averaging, as it is called, is to make the overall cost of units slightly cheaper. Of course, another advantage is that you can cash in the whole lot or part of it without penalty on any business day. Regular savings plan can improve returns significantly in the long run.
