#137. Misconception On Unit Trust

Why You Need Trust

Recently, I was among some newly met acquaintances. Our conversation were on banking and investment products. We went around the table asking each one what do they invest in.

Of course, there are those that are investing in unit trust funds. Some are investing in properties. And a guy who is investing in properties told the group, "I don't need trust." There are those who just put their money in fixed deposit thinking it is the greatest investment.

So, many people are just limiting themselves to only these 3 categories when it comes to investment and making their money work hard: properties, unit trust and fixed deposit. In that group, I was the only one that mentioned that I invest in gold investment account.

There is of course merit in all these 3 categories of investment or 4 if you add gold investment. The biggest reasons for investing are to grow your money and to have passive income. As I always say "As long as you know what you are doing, any investment is good." Black cat or white cat, as long as it catches the rat, it is a good cat. I have no argument with those who say "I don't need trust."

Use the strengths of each investment

Different folks, different strokes. However, just be aware that no investment is better than any other investment. And it is really arrogant sounding to say "I don't need trust."

There are pros and cons in any investment. Just like the fingers on our hands. No one finger is better than the other fingers. They have their own unique purposes. Used together they become a powerful fist capable of throwing an impactful punch!

That's how we should use all kind of investments to achieve a powerful growth to our money. And most importantly, to diversify our risks and utilise the strength from each type of investment.

Fixed Deposit is the worst among all investments. However, since we need to have an emergency cash reserve of six months (as I always say), Fixed Deposit is then the best place to keep your money.

Properties are good investment, if you can bear with its lack of liquidity and the need of constant maintenance. The looking of tenants. The monthly loan repayments that has to go on even when you don't have a tenant. And so on. The growth can be slow to fast depending on location.

Unit trust on the other hand, has quick liquidity. Whenever you need the funds, you can quickly sell off some units and get your cash. It gives you dividend much like you collect rentals from your tenants. Yet, minus the headache of chasing tenants to pay up. You can do a monthly investment scheme much like you make your mortgage loan repayment to the bank. Every dollar you invest is yours. But every dollar for a property loan repayment you pay to the bank is mainly for the interest to make the bank richer. It does take a long time before you are able to build equity in your property.

And to add further, you don't own the properties until you have fully settled your loan. If you take a 30-year loan, that is how long the bank owns it. Not you. You don't own the properties. If you don't believe me, try to stop your payment to the bank and see if you can still call it "your" properties.

Different investment compliments each other. We should not narrow our mind to limit only to believing in one investment.

Different perception even among Unit Trust investors

Among Unit Trust investors. There are two types. The first is, "I have tried but didn't like it" type. The second is, "I like it."

During the group discussion, there was a guy who said he invested, and suffered losses and thus didn't like it. Another said he made some money but think it is risky, and he stopped investing. Another said he is still investing and it's for long term.

There are a lot of people out there who say that they got 'burnt' by investing in unit trust investment. These are unfortunate people who have no knowledge on unit trust investment. To add on to that, they were ill-advised by their unit trust consultants. Or they have different expectation to the duration of the investment to see their returns. Or other various reasons.

Let me ask this. When you first started riding a bicycle, or took your first baby step, or started driving a car, didn't you fall or knock into something? But that didn't deter you from riding the bicycle, walking and driving! You drive like a pro now, you can even run or cycle with one hand.

To sum this, it is the knowledge that we have in the investment that makes us a successful investor. If you have full knowledge on property investment but with zero knowledge on unit trust investment, you will definitely say "I don't need trust." But when you open yourself to all knowledge, you will say "We need all our fingers to deliver a powerful punch."

Knowledge is indeed power.

Learn, try and try again before you make a comment that an investment is bad. People get rich from all kinds of investment. We should learn from them. Even if they are investing in something you have not heard of.

One is all and all is one. Meditate on this phrase for a while. Happy investing.