Unit Trust

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Unit trust funds are promoted as a long-term investment instrument. It is also a form of indirect mechanism for participating in capital market instruments. Investment in unit trust funds carries a relatively lower risk-return profile, hence would appeal to you if you are a conservative investor with a long-term investment horizon and who lacks the time and skill to directly participate and monitor the investments in the various capital market instruments. In general, small, busy and inexperienced investors will find it attractive to invest in unit trust fund. The first is Small Investors. They are the one who do not have enough capital to expand or diversify their risk. They solve their problems by investing in unit trusts. By using this method, they are able to achieve diversification without having a large amount of capital outlay. Second is Busy Investors. Although they might have enough financial resources and the investment knowledge, they usually don’t have the time to monitor the financial markets. So, to solve this problem, they may wish to delegate their investment decision by hiring professional fund managers who can monitor the market closely. The third is Inexperienced Investor. The lacks of expertise to analyse security will drive them to invest in unit trust to avoid inability to identify under-priced or overpriced securities. By investing in unit trust, they can exploit the stock selection and market timing skills of professional investment managers. The Individuals also should invest in unit trust. However investors who are well verse in stock market investment may find it more cost effective to invest their own money rather than the delegation to professional fund managers. The offers only perfect for medium to long terms investment only. To investors who expect unusually large capital gains within a short period of time are not recommended to invest in unit trust.
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