unit trust made easy : a practical guide to unit trust investing€¦ · · 2016-04-19unit trust...

Unit Trust Made Easy : A Practical

Guide to Unit Trust Investing Course Details

Type Unit Trust Seminar

Level Basic to Intermediate

Seminar Overview Success in personal wealth can be achieved through applying own set of planning and management skills in savings and investments. Adopt a positive view of economy growth over time and the desire to attain own financial goals is fundamental requirement. This half day seminar will discuss the Basics of Unit Trust, provide a practical guide to Unit Trust Investing as in how to set financial goals and gain the know-how about Unit Trust in building personal wealth portfolio.

Learning Outcome At the end of the seminar, the participants will be able to: 1. Understand the Basics of Unit Trust 2. How To Set Financial Goals and start Unit Trust Investing 3. Gain the Know-How in Unit Trust Wealth Management

Target Audience Individuals with basic knowledge about units trusts and stocks

Speaker Kathy Ong Yuh Chiann

Unit Trust Made Easy : A Practical Guide to Unit Trust Investing

Course Outline

8.00 am •Arrival of Participants and Registration

9.00 am Topic 1 : The Basics of Unit Trust • A Collective Agreement of investors with common objectives • Regulatory Framework in UT Industry • The roles of UT Asset Management Company • The roles of A Trustee Topic 2 : Getting Started in UT Investing • Set Financial Goals • “Pay Yourself First” to start UT Investing

10.30 am Tea Break

11.00am Topic 3 : The Know-How in Personal UT Wealth Management • Selecting suitable UT Funds • Sources and Ways to invest in UT •, Fees Involved and Units Entitlement • Monitoring of UT Fund performance, Periodical Review, Switching • The Rights and Entitlement of A Unit holder Q&A Session

1.00 pm End of Seminar

Topic 1 : The Basics of Unit Trust

UT Industry Statistics in 2005 (10 years ago): 10.86m A/Cs, Total NAV: RM98.5b, KLSE Market Cap RM695b of which UT is 14.17%


UT Industry Statistics in 2015 : 17.99m A/Cs, Total NAV: RM346b, Bursa Market Cap RM1,692b* of which UT is 20.45%

UT development in last 10 yrs 2005 vs 2015 Total No. of Accounts grew 7.13 mil, +66% Total UT Fund NAV surged RM248bil,+ 250%


Understanding Unit Trust Fund A collective investment that allows investors with similar investment objectives to pool their funds to invest into a portfolio of securities or other assets. A professional fund manager invests the pooled funds into a portfolio which may include the asset classes such as Cash, Bonds & Deposits, Shares, Properties and Commodities


Why Invest In Unit Trust ? Professional Fund Managers – posses the know-how to invest

Investment Exposure – access to multiple markets and regions

Diversification – widespread investment reduces risk

Convenience – eliminates the need for multiple accounts

Affordability – minimal investment requirement

Liquidity – buy and sell with ease


Regulatory Framework

Investors with Common

Objectives (Unit Holders )

Trustee (Safeguard

Assets)

UT Asset Management

Company (Fund Manager)

Unit Trust Fund

How does Unit Trust work, is it safe to invest my money ?

Topic 1 : The Basics of UT

Unit Trust is A Regulated Industry

Securities Commission Act 1993 and Capital Markets and Services Act 2007 empowered Securities Commission (SC) to regulate all matters relating to unit trust industry.

SC introduced Guidelines which govern the operations and administration of UT Funds.

It has power to prosecute and impose penalty when there is found any non-compliance or breach of law by relevant party with regards to the UT Funds.


The Roles of UT Asset Management Company (UTMC) Obtain approval from SC to launch new UT Fund.

To manage UT Fund in accordance to the Deed and Prospectus

that comply with SC Guidelines

Trust Deed : shows the rights of the Unit Holder : Rights, obligations & duties of the Trustee & UTMC : Maximum fees payable : Approved Investments Prospectus : UTMC is required to provide Prospectus for investors

to know about a UT Fund to make an informed decision to invest.

To advertise and promote UT Fund offer for subscriptions


The Roles of UT Asset Management Company (UTMC)

Form Investment Committee, Syariah Committee/Panel of

Advisers Required to set up Compliance Unit and Internal Audit Unit To comply with limit set for concentration and exposure risk eg. maximum investments in ordinary shares issued by any single issuer is 10% of NAV

Maintain adequate liquidity to promptly pay redemption Borrowing should not exceed 10% of the UT Fund NAV To ensure UT assets are clearly identified and properly segregated Proper valuation of UT assets in units and NAV price calculation Keep record of Register of Unit Holders Provide each Unit Holder with Annual Report


The Roles of A Trustee

A Trust company is registered under the Trust Companies Act 1949 or incorporated pursuant to the Public Trust Company

An independent party that act as Custodian . All assets of a UT Fund is held in the Trustee’s name for safekeeping.

Ensure UTMC managed the UT Fund in accordance with the Deed and comply with all Guidelines and Regulations

To immediately notify SC if it becomes aware of any irregularities

To keep, and ensure UTMC keeps a proper record of UT Fund

Topic 2 : Set Financial Goals

The Benefits of Goal Setting

• Give clarity and guide to fulfill your dreams

• Laying out direction and purpose

• Set financial targets to strive for

• Let you measure progress

• Be the best you can be


A practical way to set financial goal :

Rule 72

72/r = Years to double or halve an investment

To establish how long it would take to double our money with a given interest rate

Or

To establish the loss in real value given an amount of funds & an inflation rate


Example 1

Ms A placed her savings of RM20,000 in FD with 4.50%pa. Assumed no change in interest rate, how long does it take for Ms A to double her savings amount to RM40,000?

Answer :


Ms A placed her savings of RM20,000 in FD with 4.50%pa. Assumed no change in interest rate, how long does it take for Ms A to double her savings amount to RM40,000?

Answer : 16 years

Workings : Rule 72/4.5 = 16


Example 2

Her friend, Ms B also has RM20,000 savings. If Ms B wishes to double her savings amount to RM40,000 in 10 years time, what %pa return she needs to look for?

Answer :


Her friend, Ms B also has RM20,000 savings. If Ms B wishes to double her savings amount to RM40,000 in 10 years time, what %pa return she needs to look for?

Answer : 7.20% pa investment return

Workings : Rule 72/10 = 7.2


Example 3

Mr C has RM150,000 and wants an indication of how long it would take to halve the real value of the RM150,000 at a future date, assumed inflation rate of 3.5%

Answer :


Mr C has RM150,000 and wants an indication of how long it would take to halve the real value of the RM150,000 at a future date, assumed inflation rate of 3.5%

Answer : 20.6 years

Workings : 72 / 3.5 = 20.6

Topic 2 : “Pay Yourself First” to Start UT Investing

From “The Richest Man In Babylon” : Pay Yourself First

(1) Use Cash Flow Budgeting to create money

Cash In Flow - Cash Out Flow = Surplus / Deficit

(2) Save the Money

Take out at least 10% from Cash In Flow to save aside, use the balance to pay bills and other purposes

(3) Make the Money work harder

Save and accummulate the money as first pot of gold, put into investments to generate more money

Topic 2 : “Pay Yourself First” to Start UT Investing

Live Below Your Means

Budget your expenses so that you may have money to pay for your necessities, to pay for your enjoyments without spending more than nine-tenth of your earnings

Use Cash Flow Budgeting Method to create money :

Cash In Flow - Cash Out Flow = Surplus / Deficit

Cash In Flow

Cash Out Flow

Money saved to

build your “ Pot of Gold ”

Topic 3 : The Know-How in Personal

UT Wealth Management Type of UT Funds Characteristics

Money Market Funds Investing in short term bonds & other fixed income instruments. Sales Charge is usually zero.

Bond Funds Investing in medium to long term govt securities or corporate bonds. Sales Charge 0% to 2%

Balanced Funds A ‘Balanced’ mixture of bonds and equities. Sales Charge 5% to 6.5%

Equity Funds Exposure to the share market and securities listed on the stock exchange. Sales Charge 5% to 6.5%

Real Estate Investment Trusts (REITs)

Investing in property markets. Sales Charge 5% to 6.5%

Feeder Funds Funds that invest in other collective investments ie other funds. Sales Charge 5% to 6.5%

Syariah Funds Providing an alternative for investors who prefer to meet Syariah requirements. Sales Charge 5% to 6.5%


UT Wealth Management

Risk Profile Type of Unit Trust Funds

Potential Return / Risk

Need To Know

Defensive Bond Funds •Open ended •Closed ended

5 % to 6 % •Who is the asset management company •Fund size, inception date, fees & charges •Historical performance and returns*

Conservative Income Fund •Open ended •Mixed assets

8% to 10% •Higher % of fixed income securities and lesser % dividend yielding stocks •Distribution frequency (semi-annual, yearly)

Balanced Balanced Fund •Open ended •Mixed assets

8% to 15% •About equal % fixed income securities and equity stocks •Distribution frequency (semi-annual, yearly)

Moderately Aggressive

Growth Fund •Open ended •Equity stocks

10% to 20% •Mostly big cap and dividend yielding stocks •Distribution is subject to decision

Aggressive Hi-Growth Fund •Open ended •Small cap •Specific sector

10% to 30% •Mostly high growth equity stocks, small-cap or specific sector stocks •Usually distribution is not expected.

* Historical performance is not an indicative of future performance

Topic 3 : The Know-How in Personal UT Wealth Management

Sources and Ways to Invest Lump Sum Purchase (Cash / EPF) Investing a single cash amount in a Unit Trust Fund Investing via EPF (Account I, eligible invest amount based on age)

Regular Savings “Dollar Cost Averaging Strategy” : Investing same amount regularly

eg. Monthly, to take advantage of market fluctuations Channels to Purchase Licensed UT agency Banks Online portal

What To Consider When Investing Into Unit Trust Funds

Fees & Charges Involved in Unit Trust The information can be obtained from the Prospectus or Product Highlight Sheet. Application Fee / Entrance Fee / Sales Charge / Initial Charge eg. 5.00% to 6.50%. One time off.

Exit Fee /Withdrawal Fee eg. early redemption in Close-ended fund

eg 3.00% to 1.00% with specified conditions. One Time Off.

Annual Management Fee eg. 1.00% to 1.80%, recurring basis.

Trustee Fee eg. 0.8%, recurring basis


Scenario 1 Scenario 2

The NAV/unit of Fund XYZ is 0.25. The Sales Charge is 5.00% Mr D invests RM10,000 into Fund XYZ What is the Selling Price per unit? How many units are allocated to Mr D ?

Unit Selling Price = NAV x (1+R) = 0.25 x (1+5%) = 0.25 x 1.05 = RM0.2625 Units allocated = RM 10,000 / 0.2625 = 38,095.24 units

The NAV/unit of Fund XYZ is 0.25. There is promotional offer on Sales Charge at 3.00% instead of 5.00% Mr E invests RM10,000 into Fund XYZ with promotional offer. What is the Selling Price per unit? How many units are allocated to Mr E ?

Unit Selling Price = NAV x (1+R) = 0.25 x (1+3%) = 0.25 x 1.03 = RM0.2575 Units allocated = RM 10,000 / 0.2575 = 38,834.95 units Additional units gained: 739.71 units = RM190.48

The lower the Sales Charge, the higher units allocated.



Reviewing the UT Fund, Rebalance or Switching the Funds is important task to ensure we are on the right path towards achieving the Goals set. Monitoring the UT Funds Performance: Daily NAV price (website / Bloomberg app) Fund Updates , Market Outlook & Commentaries, News article

Review and Rebalance the Portfolio: UT Portfolio Performance Review Quarterly or Semi-Annual Set ROI Trigger Notification eg. 10% movement of up or down

to prompt notification to you Rebalance or Switch UT Funds based on performance return, or

change of risk appetite or circumstances

Topic 3 : The Know How in Personal

Wealth Management

The Rights and Entitlement of A UT Unit Holder

Cooling-off period of 6 working days

Information about the UT Fund and its performance

Rights to receive distribution of income

No liability to pay any addition to service fee

To redeem units and receive redemption amount

To make enquiries including making complaints to UTMC

To vote at Unit Holders meetings

To receive profile of Board of Directors, key management staff & Trustee



Advice is free, but make sure to consult only the Expert

A Unit Trust Consultant is someone who is….

Registered and possessed a valid FIMM Authorisation Card

Has relevant credentials, knowledge and industry experienced

A Value Proposition about his/her professional services

Go through with you in Risk Profiling and Investor Suitability

Great skills to uncover your needs and recommend solutions

Good personal discipline, Integrity with good reputation


Questions & Answers


End of Seminar

Thank You

unit trust made easy : a practical guide to unit trust investing€¦ · · 2016-04-19unit trust...

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