How To Pick The Best Unit Trust Fund For You
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For many people, one of the earliest instruments of investment that they are exposed to is the unit trust fund – sometimes also known as mutual funds. If you’ve ever come across names such as FSMOne, Public Mutual, or Affin Hwang, then you may have already encountered some of the funds offered by these unit trust marketplaces.

In general, unit trust funds are seen as a good kick-off point for individuals who are just starting out on their investment journey – for several reasons. A key factor is the convenience that it provides as a form of passive investment; your funds will be entrusted to professional fund managers, so you won’t need to personally monitor your portfolio at all times. On top of that, your can set a standing instruction to automatically invest a specific amount each month (or other period of time), making it even more easy and convenient to invest.

Aside from that, unit trust funds also tap into an important investment strategy – diversification – as they consist of a mix of assets, including shares and bonds. Many individual investors will find it difficult to diversify their investments due to the time and research required, so leaving it to a professional fund manager makes plenty of sense, as diversification helps to balance the risk and return in your investment portfolio. Finally, unit trust funds are regulated by the Securities Commission of Malaysia (SC).

That said, with hundreds of unit trust funds available to Malaysian investors, how exactly does one determine if a particular unit trust fund is worth investing in? What makes Unit Trust Fund A “better” than Unit Trust Fund B? Thankfully, the prospectus of a unit trust fund carries most of the information that you need, and in this article, we’ll tell you about some of the things that you should look out for. Read on and gain some insights from our licensed financial planners (CFP), Azril Ikram and Hann Liew.

Fees & other charges (aka Cost Of Investment)

Unit trust funds come with a few fees and charges at varying rates, so take time to identify the fees and charges that are applicable as they can significantly affect your returns in the long term. Some common fees that you should be aware of include:

  • Initial fee/Sales charge: A one-off fee that is charged as a set-up cost for purchasing into and investing in your selected fund. Depending on the firm or bank that you’re purchasing from as well as the fund, the sales charge can be as little as 0% (yes, no sales charge!) or go up to more than 5% of the invested amount.
  • Annual management fee: Covers the operating cost of the fund – such as audit and administrative charges – as well as the fund managers’ salary. Typically falls between 0.5% to 2%.
  • Trustee fee: The trustee fee is often included as part of the annual management fee, and is charged for stewardship services to ensure that the assets held in a fund are managed appropriately.

Other additional fees that you may also come across include switching fees (incurred when switching from one fund to another within the same asset management firm) and exit/redemption fees (incurred when you sell your units from the fund) – all of which will eat into your initial investment and subsequent profit. As such, it only makes sense that you always aim for high-performing funds that come with low (or at least acceptable) charges. Do also take note of the minimum initial investment amount as well as minimum additional investment amount!

Insights from Azril and Hann: Your selected unit trust fund should ideally have a one-off total sales fee that is less than 1.5%. Meanwhile, the annual management and trustee fee combined should fall below 1.95%. These recommended percentages will help you minimise your investment cost and ensure that it does not reduce your returns excessively.

Historical performance

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Another key criterion to consider before making any moves is the historical performance of the fund. More importantly, don’t just look at how the fund performed in the last year or two – these may be influenced by cyclical events. A better way to do this is by looking at the performance of the fund over a longer period – preferably over the past 10 years (or more).

Of course, you should know the oft-repeated phrase that “past performance of a fund is not an indication of future performance”, but a fund that has recorded consistent returns over a long period of time is a key indicator to look out for. A historically stable performance over the last 10 years or more is a sign of long-term stability and potentially good management on the part of the fund managers – which should bode well for investors seeking long-term returns.

Insights from Azril and Hann: Go for unit trust funds that showcase a return of more than 9% p.a. for their 10-year historical performance as this is a good indicator of a stable and profitable fund.

Sharpe ratio

Aside from the past performance of the fund, you should also take an extra step to check out something called the Sharpe ratio – a method that can be used to calculate the risk and returns of your investments. Essentially, it lets you estimate the potential returns that you can gain for accepting a certain amount or risk. In other words, it can tell you that if you are willing to take X amount of risk, you will be compensated with approximately Y amount of profit.

As a general rule, funds that have a higher Sharpe ratio will offer better returns in relation to the risks that they bear. Note, though, that this ratio should only be used as an estimate as it can sometimes oversimplify the measure of risk in certain funds.

Insights from Azril and Hann: Look for unit trust funds that report a Sharpe ratio of more than 0.35 across three years as these are good options to consider.


Most unit trust funds should have a percentage of its holdings in cash or cash equivalents – these are usually mandated by management policies. This is useful for two reasons.

First, having liquidity means the fund can invest into new opportunities that arise without having to sell its existing positions. The fund manager can then rebalance the portfolio to meet the mandated liquidity.

On the other hand, unit trust funds must also have some form of liquidity to assist investors who sell their units and withdraw their investment. Illiquid funds take a longer time to process the withdrawal (because it will have to sell some of its holdings to release to the investor). Since fund value per unit fluctuates every day, you may end up selling your investment at a different unit price than when you set your sell order.

However, since virtually all funds have some percentage of cash or cash equivalents, the scenario above is unlikely to happen. That said, different funds take different times to process withdrawals – some can be as swift as three working days, but it usually takes up to seven.

Insights from Azril and Hann: Preferably, the unit trust fund that you’ve selected should allow for withdrawals to be processed and carried out in less than seven days. It would also be a good idea to invest in funds that have a fund size of more than RM50 million. This ensures that there will be an available pool of cash so that the redemption of your units can be processed promptly.

Growth drivers

The prospectus of unit trust funds will also contain information regarding the various growth drivers that underpin the fund’s overall performance. Take time to find out about its growth-risk profile, fund categories, investment strategy and asset allocation, as well as global exposure; these factors will help you to determine if a particular unit trust fund matches your own risk appetite and investment profile.

Keep an eye out for the geographical exposure of the funds – in other words, the regions that the funds are investing in. Some unit trust funds may invest solely in domestic assets, making it relatively limited in terms of exposure and with similarly lower risks, whereas others may tap into high-growth powerhouses, such as United States and China. Finally, those with a higher risk tolerance may venture into riskier funds that invest in emerging markets like Vietnam and Indonesia.

Generally, investing in various overseas markets will help further diversify your investment portfolio, which in turn, reduces the risk of your portfolio. However, note that if you are diversifying mostly into riskier markets – such as emerging markets – the potential of encountering losses is also higher. Be sure to do your due diligence as the economic activities and growth in each region will be influenced by various factors, ranging from political and health issues to environmental and social governance (ESG) matters.

Time horizon

Finally, it’s crucial to recognise that unit trust funds is an effective way of building long-term wealth, usually rewarding individuals who stay invested over an extended period with higher potential returns. This is because the fund managers themselves invest the fund’s monies with a long-term horizon in mind, letting the investment grow gradually.

Additionally, a long-term investment horizon allows unit trust investors to better ride out the ups and downs of market cycles. The subprime mortgage crisis, which began in December 2007, lasted over 19 months. But what followed was the longest bull market in history, and the best-performing one since World War II ended.

Insights from Azril and Hann: Try to stay invested for more than five years (medium to long-term) in order to reap better returns. It would also be a good idea to invest in funds that have exposure to successful growth stories – such as Amazon, Facebook, and Alibaba – as they will give you the confidence to remain invested for a longer period of time.


Now that you know the key things to focus on when doing your research on a unit trust fund, you’re one step closer to embark on your own investment journey! If you’re ready to set out, why not check out one of the largest unit trust fund platforms within Malaysia: FSMOne?

Highly popular among Malaysian investors, FSMOne offers a broad selection of unit trust funds from multiple asset management firms, which means you will not be limited in terms of choice. The platform is well-known among investors for offering low fees, along with frequent offers of discounted sales charge – sometimes going as low as 0%. Recently, FSMOne has also upgraded its marketplace with the Managed Portfolio feature, an online asset management and advisory service. With this, you can request for assistance from FSMOne’s dedicated fund managers to manage your investments for you based on your risk appetite.

Thanks to our partnership with FSMOne, RinggitPlus readers can enjoy 0% sales charge on nine unit trust funds – recommended especially by our licensed financial planners, Azril and Hann:

  • KAF Vision Fund
  • PMB Shariah Growth Fund
  • Kenanga Growth Opportunities Fund
  • Principal Greater China Equity Fund (AUD Hedged, MYR, MYR Hedged, RMB Hedged, SGD Hedged, USD)
  • Eastspring Investments Dinasti Equity Fund
  • Affin Hwang Select Asia (Ex Japan) Quantum Fund (AUD, GBP, MYR, SGD, USD)
  • Manulife Investment US Equity Fund
  • Principal Global Titans Fund
  • RHB US Focus Equity Fund

This offer is valid only until 15 July 2021, and is available to new FSMOne customers who sign up through this link. Don’t miss out!

Disclaimer: The article above does not constitute as financial advice. Investors are encouraged to do their own research before making any investment decisions.

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