#11. How To Earn 13% Return Annually From Bond Unit Trust

The Secret Of Getting 13% Return Revealed Here

Look at the chart above, it shows a 157.08% return for an investment in a bond unit trust from the period of June 1996 to February 2008. That's around more than 13% return annually.

13%? Yes, you can earn 13% annually with Bond Unit Trust. Look at what you are now getting from your Fixed Deposit. 3%? Why not make your money work harder? Give it a 433% boost! Make your money works more than 4 times harder for you!

May people are surprised when I show and tell them that through this kind of investment they can make more than 10% return annually! They look at me as if I have told them that I have been to the Sun!

What is Bond Unit Trust? Well, Unit Trust funds collected from the investors are used to purchase a few kinds of investment. One of them is bonds. Bonds are a form of lending instrument agreed between an organisation and another.

For example, the government needs money to build some mega projects. The government issues some bonds to some organisations like the banks or the unit trust management companies or some other financial instutions or anyone with big money. What is said on this bond (a piece of paper) is something like this. Upon the completion of the projects, the government will pay back the money borrowed plus some interest. This project lasts a few years long, and the lender will get the money back after a few years.

What happens next? The unit trust management companies that bought this bond from the government (it could also be some big companies) will then break it up and sell as units to investors as a Bond Unit Trust. Perhaps the government agrees to pay a 15% interest annually, so, the unit trust management companies will keep the 2% for themselves and give the investors the rest of the 13%. That's how you can make the 13% annually!

Of course, in the real situation, the unit trust management companies bought a lot of bonds from many big corporations such as PLUS that need money for building highways, government, and other companies. And each bond has different returns agreed for. And each bond has a different length of years to maturity. But it doesn't affect you as the investor. You can sell and buy your units anytime.

I always hear "Unit Trust investment is risky. It moves up and down." Well, let me tell you, it's a myth. Like I said, you may have heard some risky things from your wise aunt. You need to learn more and research more on your own to truly know about Unit Trust. It can be low risk, it can be safe.

Bond Unit Trust has the lowest risk among other types of Unit Trust Funds, yet it gives a high return.

Why is the chart showing an upward trend? And not showing a more volatile (up-down-up-down) graph? Well, as you already know, it's a Bond Unit Trust and the borrowers (government and corporations) have agreed to pay the money back to the lenders/investors with interest. Therefore, it's not subjected to any market volatility like how our KLCI (KL Composite Index) moves.

Let me describe about Bond Unit Trust in another way.

It's also much like how you keep your money in Fixed Deposit with the Bank with them agreeing to pay you a 3% return annually. What the Bank does is lend this money out to borrowers for mortgages, credit cards, car loans, personal loans, etc at a higher interest rate. The Bank makes the profit and pays you quite a miserable 3% for using your OWN money! They borrow from you (your Fixed Deposit money) and lend it back to you for your mortgage at 6%. Get it?

Wah! "I am cheated by the Bank!" Well, that's what you will say when you know about Bond Unit Trust is. But hey, we all learn through the hard way sometimes. Anyway, they didn't really cheated you, they gave you a place to keep your money safe, in the bank vault. Or maybe in other people's house (through mortgage).

My 6 months reserve sits in Bond Unit Trust because I feel it makes my money work harder than just remaining in Fixed Deposit.

Now you know this secret, invest wisely and make your money work harder for you.