A friend asked me recently whether it is still good to buy unit trusts given that the markets are in doldrums now. In turn, I asked him what he wants from his investment in unit trusts. As quoted in the novel 'Alice's Adventures in Wonderland' by Lewis Carroll, “If you don't know where you are going, any road will get you there.” To understand the features, risks and benefits of investing in unit trusts,refer: http://www.moneysense.gov.sg/resource/publications/guides_publications/MoneySENSE_UT_Guide.pdf.
Unit trusts are the best tools for diversification or even asset allocation when put together as a portfolio. It is one of the the most effective ways to gain exposure to the markets when they were to recover from this crisis. Remember March 2009 when the markets rebounded more than 50% from its low after the Great Financial Crisis (GFC)? I sure do. Investing in unit trust make sure you stay invested throughout and not miss the rally.
Again, my friend asked whether does it make sense to invest all his money at one go or in stages. With this current sentiment, if you have a sum of $100,000, you might want to do it in stages, say $20,000 a time. This would ensure that you have the ‘bullets’ to take opportunity of the market if it goes lower. Moreover, unit trusts allow us to participate in dollar cost averaging through the monthly regular saving plan. This allows investors to buy more units when the market is low and thus average out our buy-in prices.
Essentially, you pay a front-end load of 2%-5%, depending on the types of unit trusts, and the annual management fees. Just as you won't go to a plumber for diagnosis when you are sick, investing is best left to the professional fund managers. So if you insist an answer to the above question, it is an absolute 'yes' provided you use it appropriately.
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