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Growing wealth with unit trust investment

KUALA LUMPUR: There are various ways to grow one’s wealth through investments. However, the lack of awareness and investing know-how has caused many investors to suffer losses.

Upon investing, investors usually expect to get returns that can help them grow their wealth, and possibly even the promise of high returns. Armed with knowledge, it is easier for investors to understand which forms of investment yields the desired returns, or even help avoid investments that will give them losses.

Therefore, the first aspect that an investor needs to understand is risks and returns: when there is a high risk, there would also be high returns.

The risk of losing investment capital is inevitable, especially when the investment promises a high return, such as in the stock market.

For example, when there are capital gains from the stock market, investors enjoy good returns. However, during the 1997 Asian Financial Crisis, which caused the Bursa Malaysia Index to fall to 856 points, the lowest since 1993, many investors suffered heavy losses.

The relationship between risk and return is a basic concept that needs to be understood before an investor decides on an investment.

Besides the stock market, there are various types of investments that give reasonable returns with minimum risk, such as fixed deposits, unit trusts, bonds, commodities and the money market .

Fixed deposits come with low risk and yields returns of about three to four per cent depending on the period of savings, while unit trusts in general come with medium risk and medium returns.

However, in this country, there is a unique unit trust which is not be found in other countries, called Amanah Saham Bumiputera, offered by Amanah Saham Nasional Bhd. A ASNB unit trust is priced at RM1 per unit, in comparison with other unit trusts, which has daily fluctuating prices.

Besides it being offered at a fixed price, investors are also able to withdraw their investments at any time, making ASB similar to saving money in the bank.

Since its inception in 1990, ASB has yielded returns of about eight per cent per annum, in comparison with saving money in the bank, which yields between one and two per cent per annum.

However, despite the decline in ASB returns in recent years, the yield is still competitive and is in line with the current economic performance. In comparison with the Base Lending Rate (BLR) in 1993, ASB gave a return of 9 sen per unit and a bonus of 4.5 sen per unit when the BLR is at 9.5 per cent.

In 2013, when the BLR was at 6.7 per cent, ASB gave a return of 7 per cent per unit and a bonus of 1 sen per unit. ASB has also consistently provided income distribution which is better than the nation’s inflation rate, therefore allowing investors to protect the value of the shrinking ringgit due to inflation.

As a unit trust fund in which fund managers invest in portfolios that include the stock market and cash, among others, the capability of ASB in giving returns will depend on the economic performance inside the country and abroad.

Therefore, ASB unit holders need to realise that the returns from ASB investments also has its ups and downs. According to analysts, when making a comparison on ASB’s return performance, it needs to be made against a fixed deposit or savings that have similar traits.

It is unreasonable to expect ASB to continue to give a high return without taking into consideration the current economic situation.

This is where it is important to have investment knowledge. As long as the returns from ASB is higher that fixed deposits and performs better than inflation, investors will still be getting profitable returns, as their initial capital will not decrease.

However, investors are discouraged from withdrawing the dividends gained annually, as they would then not be able to profit from compounding interest.

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