Way to Invest in Unit Trusts

Lump Sum Purchases

This is where an investor has a lump sum of monies to invest into a unit trust. This may be the only investment the investor wishes to make. Over a period of time (3-20 years), the initial investment will increase as distribution and other income is earned by the fund. When redemption or sale of the units take place, the unit-selling price will reflect the accumulation and compounding of capital over the relevant periods. It is this compounding effect over time which makes accumulation type investments, such as unit trusts, so attractive to the investor. For example, someone who has recently inherited a sum of money may wish to invest the funds into a unit trust and hold it for an extended period to save for some specific purpose. e.g. children's education. At the end of the holding period, the proceeds of the sale of the units will be the initial investment plus the returns on that amount, accumulated over the period.

Regular Savings

Some people invest in unit trusts by making regular (e.g. monthly) contributions to their fund. This is an ideal, disciplined and useful way to accumulate capital for a future need. By making regular contributions over a period of time, the sum accumulated at the end of the period will increase. This is commonly known as dollar cost averaging. At the end of the period, the redemption (or sale) price of the units held will represent the accumulation of all contributions, plus returns generated from the total contributions since the first purchase was made. The effect is more noticeable the longer the holding and contribution period. This form of savings is the basis of most pension fund accumulation e.g. the Employees Provident Fund.

EPF Savings

In addition to investing in unit trust by cash or through a regular savings plan, you can also invest using EPF Members’ Investment Scheme. The EPF will process a request to transfer an amount from a member’s Account 1 to approved unit trusts funds if :-

1. The Account 1 balance is not less than the required basic savings, details of which are enclosed in the table 1 as prescribed by the EPF for respective age of the EPF members. Table 1 - Basic Savings Amount in Account 1 Age (Year) Basic Savings (RM) Age (Year) Basic Savings (RM) Age (Year) Basic Savings (RM) Age (Year) Basic Savings (RM) 18 1,000 28 14,000 38 37,000 48 78,000 19 2,000 29 16,000 39 41,000 49 84,000 20 3,000 30 18,000 40 44,000 50 90,000 21 4,000 31 20,000 41 48,000 51 96,000 22 5,000 32 22,000 42 51,000 52 102,000 23 7,000 33 24,000 43 55,000 53 109,000 24 8,000 34 26,000 44 59,000 54 116,000 25 9,000 35 29,000 45 64,000 55 120,000 26 11,000 36 32,000 46 68,000 27 12,000 37 34,000 47 73,000 2. The member is less than 55 years old 3. An account in the approved Unit Trust Scheme has been opened into which the transfer can be processed 4. No transfer has been made in the previous three (3) months from the EPF Members’ Investment Scheme Transfers under the EPF Scheme is made at an intervals of three (3) months from the date of the last transfer, subject to the availability of the required balance in Account 1. 5. The amount eligible for transfer is not less than RM1,000 6. The amount to be transferred is not more than 20% of the Account 1 balance remaining after deducting the required amount of basic savings prescribed by the EPF (subject to minimum of RM1,000)

Borrowing

Although an investor may obtain a loan from a financial institution for the purpose of investing in unit trust funds, investors should seek appropriate advice as there are additional risks involved when using borrowings to finance an investment in unit trust funds. Investors must bear in mind that interests on borrowings can reduce the potential returns of their investments.