Do you think that unit trust is the good investment tool for non-professional investor?

Unit Trusts or Mutual funds is a good starting point for investors who do not have the time to research on stocks themselves.

The Pros are:
1. save you the trouble (or robs you of the fun of) of researching on potential stocks and to construct a portfolio of your own.

2. easy way to get involved in the stock markets.

The Cons are:
1. MANDATE! - Every mutual fund has a FIXED mandate that requires them to be almost fully invested at all times. As mutual funds have portfolios that are generally bullish, they only do well when stock markets do well... if the stock market crashes, the fund crashes with it and there is nothing the fund managers can do. The mandate prohibits the fund managers from bailing out of the markets even if they know the market will crash! This brainless way of investing in the stock markets has made hedge funds a lot more attractive recently.

2. Fund Expense. There is a fixed expense ratio for every fund which pays for the fund manager's salary, admin costs, advertising costs etc... The profit performance is what is left after all these are paid for. That is why you see many fund managers driving nice, big cars even though their funds are not performing well.

3. Tie Down Period. There is always a tie down period where you cannot withdraw out of a mutual fund without incurring some kind of penalty charge. That can rob you of short term cashflow when you suddenly need money.

4. Withdrawal Charge. Yes, even if you fulfill the tie down period, there will usually be a withdrawal charge for getting out of the fund.

Profiting from the stock markets is already a difficult thing to achieve consistently. By investing in a mutual fund, it makes the difficult thing more difficult by having so many expenses built into it. Frankly, when the markets do well, you would be better off just buying an ETF on the local index and when markets start to fail, you will be able to bail out quickly and safely without any penalties or expenses at all.

Mutual funds is only one of the many ways to get involved in the stock markets. There are a lot more ways, some safer and with higher returns, to invest in the stock markets and you need to read and research on your alternatives.

I recommend some pretty good books that have benefitted myself at http://www.bestoptiontradingbooks.com...

hope these helps.




http://www.mastersoequity.com




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Hi, I'm Sean Toh from Singapore. Definitely, unit trust is a good investment tool for investing as the design behind the mechanism of unit trusts has already considered diversification of the risks involved when investing. The next best thing is the fund is managed by professional fund managers who are trained to invest for you. However, the cost of investing in unit trust is much higher as you have to pay for the services offered by the fund manager. Unless, you invest through the internet and purchase purchased no load funds or else cost will be incurred. The problem with investors when they invest in unit trust is they will invest a lump sum of money over counter in a bank when the the fund is a best performing fund. This is a serious mistake because they are buying the units at price which is pretty high with one lump sum of money. There is alot more to learn before someone start to invest. Click the links below and get educated before you put in the money.

Yours Sincerely
Sean Toh
Author of 'Four Steps To Financial Freedom'