Wednesday, January 23, 2008

Advantages of Unit Trust Scheme - Investment Cost

When we make direct investment, as a small investor we are facing transaction cost,e.g. stockbroker commission, that are much higher than those paid by large institutional investors such as Unit Trust Company Fund Manager. Unit Trust Company's fund managers invest large amount on behalf of Unit Trust Investors, so economies of scale apply.

Also, because fund managers invest in much larger amounts, they are able to gain access to institutional rates of return and to investments to which smaller investors like us may have no, or only limited, access.

For instance, the smaller investor cannot directly access to government securities market, where the amount of each transaction generally in million. Fund managers have ready access to this market because of the amount they can invest at any one time.

Institutional investors, including Unit Trust fund managers, often receive preferential allocations of initial public offerings of shares of companies seeking to be listed, to which smaller investors like us are excluded or limited.