Is Unit Trust Investment Right For You? (Part 3)

Dollar-cost-averaging is an effective way to reduce your holding cost by having fixed amount of invested at constant interval without consideration of price. This practice can be more effective in unit trust investment. In other words, with, say, monthly fix amount, you will buy more units when current month’s price lower and buy less unit when next month price higher. In average, your average holding cost will be lower than current market which means, for long term, your return can be ensured. The beauty of this method is that you do not need to care about what the current price is. What you need to do just buy on fix amount with constant interval. That is it.


Please take note that we do not need to pay so much attention on unit trust price, it does not mean you can apply the same strategy for share investment. It is simply because the nature of share investment and unit trust investment are different. Share investment involves in holding individual shares while unit trust investment is holding a pool of shares. Therefore, risks of holding individual share will definitely greater than a pool of shares. As explained in the early part of this chapter, a pool of share will bring the effect of diversification that will reduce the risk of price fluctuation while this is impossible to be achieved by holding individual share. Therefore, it is important to determine entry and exit point for individual share for profit locking.

Of course, the reward for taking higher risk on holding individual share will be higher. The logic is very simple – high risk, high return. Therefore, the return for unit trust will comparably lower due to diversification for more stable return. For those investors who are passive, no experience, conservative or no time, unit trust investment is definitely one of the best investment alternatives to have share investment exposure.

In Part 4, some tricks used by fund managers will be revealed and you should decide whether Unit Trust investment is right for you.