Advantages and Disadvantages of Unit Trust

Advantages

   Diversification

Unit trust fund is pooled to obtain a wider spread of investment in different sector, which enable greater return too. At the same time risk are diversified. Affin Equity Fund had invest in different sectors such as technology, construction, infrastructure, industrial product, trading and services to achieve a wider portfolio of investment in order to spread or diversified risk among a large number of securities or other assets.

   Convenience

As investing directly in the capital market required a lot of research, analyze of the investment market and keeping track of investment may be difficult and it is time consuming, so for the investor who are unable to do research and analyze the investment by their own they can choose to invest in unit trust. Invest in unit trust is more simple compare to the investor that hold portfolio of investment in capital market by themselves.

   Professional Management

For those investor who are lack of knowledge in investment or they don’t have enough capital to invest in portfolio of investment, they can choose to invest in unit trust. The money that pooled through the unit trust fund are invest to wider portfolio of investment by some certified expert and professional manager of the unit trust company who could generate above average investment return in the long run.

Disadvantages

Fee and Charges

The service provide by the unit trust fund managers are not free. As the fund is managed by professional fund manager, that are some fee and charges payable by the unit holder. Affin Equity Fund charges up to 5% for the sales charge Net Asset Value per unit.

Opportunity Cost

This refer to money that put by investor in unit trust, they can’t use it elsewhere. Investor might produce a greater return by directly invest in the market. Of course, there is no guarantee that putting money in other investment will produce a positive return.

   Liquidity Risk

Liquidity risk refer to the ease of disposal of certain securities at or near to it fair value depend on the volume trade in market. When the fund experience large redemption, and if the fund has a large portfolio of securities that is less liquid, the fund manager may be required to liquidate the fund’s holding securities at a discount to fair value to meet its redemption requirement. This might have some effect on the fund’s net Asset Value per unit.