Unit Trust Misconceptions

Posted by Kris | Sunday, August 31, 2014 | , | 5 comments »

Nice Tatoo
Last few weeks, I accompany my friend to talk to a unit trust personnel at a local bank after she found out that my friend's account has been idling for some time and wanted to recommend new unit trusts to invest in.

The agent was a very young and pretty girl, heck all her fellow colleagues have considerable beauty.

I saw the name card and I was shock: Wow..manager at such a young age!



As we were going thru the details on the unit trust, her statements even shocked me!

a) She noticed that the unit trust price will fall just before the dividend declaration. She said in a way that this drop is something not expected by most people.

b) Because of A); Hence, you should time your buy and sell just after/before the dividend payout. Coincidentally, the trust fund declares 4 dividend payout yearly. So i cheekily double confirm ask her whether I will need to do buy and sell 4 times because of this; she say yes, else you experience price drop after dividend payout which is not so profitable.

After that I was dumbfounded and silent thru-out the conversation.

I told my friend about these statements, and he knows about the fallacies given but just to be the good guy , just nod in agreement. 

Later on, my friend (not available already) also scolded me on why I don't ask alot of questions so that I can have a chance to get to know her. Or even, ask me to invest so got chance to get close to her.. which I replied..sorry, not interested as not my type. :p

Deep down, I want to remind her that the unit trust price will surely drop after dividend payout simply because some shares that was invested by the fund managers need to be liquidated in order to pay for the dividend. Hence, the new price of the unit trust post dividend will surely be reduced to reflect this outflow of capital/capital gain.

Secondly, in unit trust land, you must NOT peform active BUY and SELL. This will just make the bankers rich because of the switching fees and front-load fees!!!

But you must do multiple buys: aka dollar cost averaging in order to get superior return over mid to long term frame for unit trust. 

Since 2011, I no longer touch unit trusts. 

And I never look back.Unless....





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5 comments

  1. ChampDog // 6:08 AM  

    Does the leng lui look like the picture that you showed above? If yes, very pretty leh! :)

    Ya, active Buy and Sell definitely is not suitable for UT. Some people losing money because of doing that.

    Unless, you screw up in your stock? lol

  2. Kris // 11:49 PM  

    My friend say quite okey looking. Marketing girls usually know how to take care of their appearances.

    Even if you suck at stocks, you can always invest in REITs or ETF, using dollar cost averaging if you suck in market timing.

  3. simplelife // 9:06 AM  

    These preeety girls are not good at investing at all! Personally had few rounds of engagements with them n they r the one that will back off, cannot understand investment question lor. To sell be knowledgeable first...

    My only rule for UT, buy when market is depressed n out around 2yrs later... - almost all fund win

  4. maveric // 8:27 AM  

    Hi Kris,

    Maveric here!How are you guys,the other guy being champDog..

    UT..I remembered myself literally 'diving' into it when EPF initiated the member own investment scheme in the mid 90's ..I think.This EPF officer showed you a list of approved nominated UT companies and you choose lei..! Really dumb..( mini2minorMO) ..got into BHL(BanHinLee)Pacific ..something ...some more masuk 'aggressive fund'..........!!

    Learning points! -Go in,straight lose money because of agent fee,overhead cost etc -KLCI go up but UT price still languishing(klci up 50pts,UT price up 2cents only) -everyyear,UT OH cost keep adding & if fund size get smaller,higher OH cost.

    Got to understand above in early '00 when frustration set in.When TDM gave way to PakLah in '0??,KLCI 'zoom' & I liquidate all UT at break -even pricing.

    Moral of story - Do not get into anything that you do not understand ..including sweet,pretty,tattooed UT agent lei!!



  5. Kris // 3:58 PM  

    Bad girl attract good guy mah and bad boys attract good girl...lol