Types of Unit-Trusts

Unit Trust can be divided into several categories depending on their investment objectives and focus. Primarily they are divided into 3 categories:

[1]. Shares
[2]. Bonds
[3]. Balanced Fund that combined shares & bonds

Some funds are invested in a single country, some in specific regions (eg. Asia, Europe) and some even globally. There are funds that focus on specific sector or industries such as Technology, Healthcare and Property.

In recent year, capital guaranteed or capital protected funds have become very popular. It is also possible to invest in funds that Invest "passively". Such funds invest in the component stocks of a market index and thus require no skill or judgment on stock selection. Given the large number of possible choices, it is important that you select those that meet your Investment objectives and Risk tolerance.

If you invest in unit-trust, you have to pay various fees There are fee that are one-off and mainly paid to the distributor of the fund. These are paid when unit are purchase ("front-end" fee) and, sometimes, when units are sold (redemption fee). These fee are also called "load" and can be as high as 5% of your initial investment in a unit trust.

In addition there are those fees that are recurrent in nature - the management fee paid to the investment manager for managing the fund. This is usually around 1% to 1.5% of net asset value (NAV). Other fees include the trustee fee, registry fees, valuation fee and audit. Together these fees make up what is called the total expense ratio (TER).

If your unit-trust fund is linked to an insurance plan known as Investment Linked Plan (ILP), you may need to pay the extra cost like mortality which can increase with each passing year, policy-fee, insurer management fee and other cost as stated in your policy document.

For your unit trust to grow in value it must generate sufficient income or capital growth to all these costs. Investors should find out a fund's cost before deciding in it.