INTRODUCTION TO UNIT TRUST ~ AZNAN HASSAN signature

Author: Max Chin

For some the word "Unit trust" seems to be so alien to them, but however with internet rising as a new form of communication; information are available to many by a click but however many people still do not truly understand how Unit trust works and are still taking risk to purchase it under the influence of sales person or some personal financial consultant. As an investor, understanding of the world of unit trust have to be there before making any investment decision; this article will provide you the basic information you need to know all about unit trust and further reading will be publish accordingly.

First of all, we have to understand who regulates the Unit trust industry, why is it so important for us? it is simple, when something went wrong or you are not satisfied with the service provided by your personal financial consultant you as a customer and investor have all the right to make a complain. Around the globe, unit trust are normally regulated by the Central bank of the country or sometimes it is by a regulatory body such as the security commission who are responsible to regulate the industry to ensure that all players abide by the law set forth by regulator. Thus for each and every unit trust company to be in the industry certain guidelines are to be meet which are too wide to be discuss here in this introduction page.

Secondly, as investor you need to some basic knowledge of how unit trust work. Unit trust works as a collective investment from several thousands of investor like you and me that constitute as a trust deed, here a fund manager will be appointed to manage the fund for thousands of investor which forms the unit trust fund. Investor must understand that each and every fund manager is different and are human being just like us, therefor they too have different investment approach; thus it is advisable that investor understand how these fund managers invest your money. How the studies can be done? I will share it in the coming articles.

Thirdly, Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. It is always important for investor to monitor the net asset value of the fund to determine the fund performance, though it is important to note that when fund manager release bonus or dividend to investor the net asset value will went down but it should not be a long lasting trend due to the fact that fund manager utilize the fund to paid off dividend.

Last but not least, is that investor need to know that prices of units are changing on a daily basis and therefor investor must monitor the prices of their respective fund and make sound investment decision. Investor must be taken into consideration that investment in unit trust by having two main approaches which is the cost averaging and value averaging method that is well known among players in the unit trust industry. Cost averaging method result in more unit being purchase when price fall and fewer unit when price went up; while value averaging is that investor set up a predetermine value that they want to achieve each and every month and make investment commitment accordingly to reach the set forth target, these two investment approach had its pros and cons which vary depending on investor investment objective. I will discuss this further in my coming articles.

As a conclusion, Unit trust is not as complex as some may think but it definitely takes times to fully understand it professionally. Investor are advice not to over rely on personal financial consultant and instead do some study before investing money in to the industry and be well inform about the industry operation so much so that the investor know exactly what he is up for.

Article Source: http://www.articlesbase.com/wealth-building-articles/introduction-to-unit-trust-3774427.html

About the Author

The author had past experience working in the financial industry and are constantly studying the industry for years being investor himself the author writes with good understanding of the industry as a whole. for more information please visit the author homepage at http://financialmarketguide.blogspot.com/