For all we know unit trust agent or company is charging 3%-7% at the point of entry. So they are earning their money first before you profit anything you’re your investment. Not only that, on annual basis they will also charge you fund administration fees and agent will get extra commission through “trailer fees” if you don’t realize your fund end of the day.

2. Inflation

Never in my entire working life know that unit trust is the tools use to fight against inflation. Some agent might say you can average down your UT investment through monthly investment and by the time you retired you will have so much and so much. But who knows how going to happen next 20 years. Furthermore, did your agents who keep asking you to invest and enjoy dollar cost averaging ever asked you when to sell? No right? So try asking your agent now, when is the best time to sell your investment.

3. Returns and Appreciation

Your returns and appreciation is solely base on how good is your fund manager foresight. If he focus wrongly your money might to extra few year to recover but even they did well the most you make is 10%-30% returns. Of course some company will declare dividend or bonus units but how much you can expect from the returns every year? I personally invest RM5.8K when KLCI was about 1000 end of 2008. But when I sold my UT last 2 month when index was at 1150 surprisingly my UT still losing 15%? Why? I don’t want to know since I sold it already.

4. Availability

Fund house can increase the numbers of unit in the market anytime (approval from Bank Negara) once it was sold out. The fund house will continue selling through their agent and will capitalize your money to continue invest in the market. Making money or not is not their main concern as they are charging upfront fees. And even if they concern about your retirement fund, my question is, can they consistently achieve 10% returns every year?

5. Factor affecting appreciation

UT investment solely affected by government moves and global equity market. A lot of my client who purchase European and China UT last year experiencing at least 70% capital loss. Even market has rebound substantially but the losses never recover. I would say 100% of UT company experiencing losses during the economy meltdown and for your information even “bond” fund also experiencing losses. What happen if your wealth is depend on tomorrow morning news? Can you sleep well?

1.  Agent fees

Agent normally will ask for 2% commission but not from you. The vendor or seller going to pay for it. These you are saving 2% or even more if you can buy below market value property. In unit trust investment you can “never” buy below market value.

2.  Inflation

All investments guru will agree property is the best tools against inflation. Anyone ever loss money when you dispose of your property? Last few years I heard there is one Singaporean old lady who purchases a unit of bungalow early 1970’s for SD300K. She is collecting SD8K per month rental now. The tenant actually rebuilds her bungalow and extends another 10 years term for her after their proposal to purchase the unit for SD8M has been decline. She is retired comfortably now with SD8K @ RM20K per month with fully settled property worth RM20M. Can your UT investment achieve this return?

3. Returns and appreciation

Capital appreciation in property can be huge depending on area and types of property you own. Of course time frame is very crucial. Besides getting slower but firm capital appreciation, you can actually gain from rental collected. So both ways you are winning. One of property I purchase back in 2005 for RM166K now worth RM310K. That is 87% increase over my purchase price but if against my capital injection of RM20K my return will hit 720%. (RM310K-RM166K divided by RM20K) This is excluding positive rental I have been receiving for the past 4 years. Can your unit trust provide you this return?

4. Availability

You cannot Grow Land. None of the human in the world can add another inches of land especially area like Gaya Street, KLCC, and Penang Island. In Penang Island, land is virtually more expensive than GOLD.

5. Factor affecting appreciation

Property appreciated mainly affected by surrounding development. I remember few years ago land next to Survey Putatan is valued not more than RM30K per acres. But today the value easily hit RM1M and worst some land owner don’t even want to sell at this price. Definitely property also affected by global equity market but it’s different for KK market and I would say 98% of property is not affected. For instance, few properties launching last 2 month still enjoying 70%-100% take up rate.

I’m not against any unit trust investment or helping any property agents but whatever I share here is just to notify and hope we can learn for better tomorrow.

Your Choice

The important things here are to see your wealth growing upward parallel with your hard work. I don’t want to see your hard work when down the drain. Use your common sense when you decide your investment as whatever decision you make today will affecting your wealth tomorrow.