Thursday, January 3, 2008

Why Isn't One Investment Plan Right For Everyone?

Before investing, decide what you want your investments to do. Investing is simply using money to make more money. Investment ringgit are not meant to be used for daily living essentials.

You might choose to invest in bank deposits, government bonds, securities, or life insurance. They are all different, and no single investment channel fits the needs of every individual. Neither can a single financial product fulfill all our needs at different stages of our lives.

Since most unit trusts or collective investments limit their investments to securities, let us explore some of the reasons why investors, both institutional and individuals, might want to own a unit trust. Many prefer unit trusts because they are easily bought and sold. They represent variety and flexibility of returns. Unit trusts can be bought at varying prices, from very low to very high, and small amounts can be invested at convenient intervals. Unit trusts can be selected, often with excellent results, by having limited investment background.

When investing in unit trusts, investors can profit in two ways. They may receive distributions. Since the market value of unit trusts fluctuates, investors also profit when selling their unit trusts in the event of substantial or marginal increase in value. However, fluctuation also means the value of your unit trust can go down in value. That is why unit trusts are recommended for medium to long-term investment programme. Regardless of which unit trust is selected, it should meet the investment goals. A basic rule is that it should not be done on impulse.