Unit Trust: Things You Should Understand

Key Points

  1. Unit trust is a great way to diversify your portfolio without having multiple investments.
  2. Saving and unit trust are connected as both are long-term investments.
  3. Bear in mind that there is no return guarantee when investing through a unit trust.

Saving money and investing are both long-term skills, and both are marathons, which only show results in a long-term way. The sooner you start, the better off your investments will grow and make more profit for yourself.

For new investors, unit trusts are a great way to get started. These are regulated by the Securities Commission Malaysia and professionally managed. This can help you achieve your specific goals, such as investing in retirement or quickly growing your capital. The fund managers are monitored by a trustee, who helps ensure that investment decisions will be made in your best interests.

If you understand your investment goals and objectives, starting your investment through a unit trust fund would not be an issue. However, you’ll want to know some unit trust basics before investing.

What are unit trusts?

Unit trusts are funds holding assets, with profits that can be given directly into your pocket instead of reinvestment. They pool together money from various people to invest in assets like bonds or equities.

Unit trusts can be a great way to hold onto your investments while still getting the return you want. Professional fund managers will manage the money on behalf of investors, so they have varying levels of risk and returns.

How do unit trusts work?

Unit trusts are the solution for investors with too many options and insufficient cash. Diversifying your portfolio with several different stocks, bonds, or assets can be difficult. For example, if you need to subscribe for a particular retail bond, the minimum subscription fee is RM50k and above (depending on your chosen bond). As an investor, you will need to prepare a lot of funds to diversify your portfolio.

Unit trusts are a great way to diversify your portfolio without having multiple investments. With a unit trust, you can invest in many different assets with just one fund and have professional investors working on it!

Imagine you have RM1000 to invest, and two more people have the exact amount. Three of you could purchase stocks individually, but that would mean only being able to invest in ONLY one company. However, through investing in a unit trust fund, the three of you would pool the money together to invest across 3 different companies. All of you will get to enjoy a portfolio with multiple stocks.

Is unit trust a high-risk investment?

It’s important to understand that unit trusts carry risk like any other type of investment. Although unit trust funds are a great way to diversify your portfolio and balance the risks.

However, different funds cater for people with various risk appetites. High-growth funds come with higher risks and will be more volatile than lower-risk funds. Remember that returns aren’t guaranteed even if your chosen fund has been labelled as “safe” or low risks.

You should also consider the fees you would have to pay because these are charged whether or not you gain returns.

Why is diversification portfolio important?

There are three reasons why a diversification portfolio is essential.

    1. Minimizes the risk of loss

With a diversified portfolio, you can reduce potential volatility.

    1. Increase opportunities for return

Diversify your investment into various assets.

    1. Provide protection against an unexpected event

It will protect investors from unexpected market fluctuations such as the COVID-19 pandemic.

How do dividends work in unit trust funds?

The dividends you receive from a unit trust fund depend on the units invested and what they pay per share unit. Some unit trust funds will pay dividends from time to time. However, dividends are not returns on your investment.

Each unit’s Net Asset Value (NAV) will decrease accordingly every time your unit trust fund pays out your dividend. Dividends are helpful for:

  • Getting your hands on some cash without having any units or fees tied up in investments. You do not need to pay redemption fees or sell off your units to get cash.
  • Investing in more units to increase your capital gains when the NAV increases.

How to grow your wealth with unit trusts?

You may not be able to grow your wealth with dividends, but unit trusts can help you increase it through capital gains. It depends much on the fund’s performance and how much NAV of the units you have purchased.

The capital gains when their value increases more than what you paid. You will enjoy profits from your investment when their prices go up at redeeming the time.

List of unit trust in Malaysia

Unit trusts are a great way to diversify your investments and access many different markets. If you don’t know which one is right for you, you can look at the list of some best unit trusts in Malaysia.

Of course, there are more unit trust funds in Malaysia you can find other than the list mentioned above. Feel free to do some research and choose one that suits your needs.


One last thing you should know is that unit trusts are NOT protected by Perbadanan Insurans Deposit Malaysia (PIDM). You should always consider your circumstances before investing, including the risk level of what you choose and any financial situation or knowledge that may apply. Do not be afraid to ask experts for more advice.

Related: Understanding Types of Investment in Malaysia | Top 5 Low-Risk Investments in Malaysia

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