| Financial Planning is crucial for every individual. Though many of us aware of the importance of this but how many of us really take time and do a proper planning. As for me, financial planning is not a choice that is given to an individual but it is a must:) So, for those of you that done your financial planning, congratulations for your first step to financial freedom and to those of you still wondering…here is your first lesson;)
The below article is adapted from Public Mutual Webiste
Lesson 1 – Unit Trust In Brief |
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| WHAT IS A UNIT TRUST ?
A unit trust is a financial vehicle through which individuals may invest their money. The idea behind unit trust is better investment through collective investing. That is to say pooling the investments of many investors, individuals and institutions.
Investing in a unit trust offers investors numerous advantages, including :
a. Professional management at a low cost
b. Safety through the spreading of risk (diversification)
c. Liquidity
d. Ease of transaction
e. Capital appreciation/income stream
The operation of a unit trust may be best explained by outlining its similarities with the operation of a bank, with which most individuals are familiar.
Many individuals deposit money in the banks, for which they receive interest. These individuals expect complete liquidity where they must be able to withdraw their deposits in cash at any time. The banks employ professional managers to look after the deposits. The deposits are invested. These managers lend the deposits to other individuals requiring funds and a host of other profit generating facilities of the banks.
Similarly, unit trust holders wish to put their money to generate higher returns. The goal of all investments is to make money more productive, either through producing income or growth. Unit trust holders have liquidity because their units can be readily converted into cash at any time. By investing in unit trusts, it allows them to engage professional fund managers at a low cost to the individual investors. These managers diversifies the investible funds in many different securities and other approved channels to spread the risk.
The unit trust is constituted through a document known as a deed which brings together and binds the various parties to the deed :
- The trustee, who holds the assets of the trusts on behalf of the unitholders.
- The manager, who is the promoter of the scheme and provides investment and administrative expertise and markets units to the public
- The unitholders who provide the funds for investment and expect to receive the benefits derived from the investment. The effect of dividing the beneficiaries’ interest in the trust into units is that their interest is quantified into discrete portions.
Particular advantages of unit trusts over the pooled investments include :
- The provision of an independent trustee to hold the trust’s assets on behalf of unitholders and to watch over their interests on an on-going basis.
- The deed and prospectus are scrutinised by government authorities, prior to an offer of units being made to the general public. The managers and trustee are themselves approved by the regulators.
- A buy back provision or covenant in each deed which requires the manager to redeem an investor’s units within specified time limits at a price determined in accordance with the deed.
- Provisions in the deed under which the manager and trustee are in a fiduciary position in relation to the trust (i.e. they can only profit in ways laid down under the deed). The investor can determine in advance what costs and charges they will be required to pay to join and stay in the trust.
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I guess planning is the right word. Life will be less organized without plans. So my little advice to my family n friends…..act now before it is too late for your retirement:)
The below article adapted from The Staronline :
Majority neglect retirement plans
KUALA LUMPUR: More than half of Malaysian workers have not prepared for retirement while those who have, only started planning after age 40, according to a survey.
The average age working Malaysians began preparing for retirement was 41, while retirees said they did so at 47.
“That’s way too late. It doesn’t give them enough time to build their retirement fund,” Axa Affin Life Insurance Bhd branding and communications head Cheah Leng Sooi said in announcing the findings of the AXA Retirement Scope 2008.
In the survey carried out by research house Synovate, 313 working people aged 25 and above and 319 retirees aged below 75 in urban areas were interviewed over the telephone.
The survey, part of a global study conducted in 26 countries and involving 18,000 respondents, was undertaken for the first time in Malaysia, from July 23 to Aug 27 last year.
Among those who had planned for retirement, most began after they married, had children, or fell into financial difficulties or had health problems, Cheah said.
Their sources of retirement income included life insurance, Employees Provident Fund and personal savings.
The retired saved an average of RM478 a month, and the working RM704, figures that were considered low compared with other countries.
“Malaysian retirees feel that their retirement income is insufficient to cover household expenses. Their average income is RM1,243 but the amount they need is RM1,568 – a deficit of RM325,” she said.
In comparison, Singapore’s average retirement income is RM3,690, and the amount needed RM3,465; while Thailand’s average income is RM1,276, and the amount needed RM903, according to the survey.
The disparity between high and low income earners in Malaysia is wide, the high-income retirees having four times more than those with low income, the survey found.
Despite insufficient income, three-quarters of the retirees said their quality of life had improved if not remaining the same, while 83% of the working group expect their quality of life to improve or remain the same.
