My First Investment: Unit Trust Funds

Up until I graduated from university at the age of 26, I have no idea about financial planning.

While waiting for my first employment, I incidentally found a book sitting on the book shelf at home.

It is about financial freedom.

Out of curiosity, I decided to flip through the book. Fortunately, it is an easy-to-read book, as the financial planning lessons are presented in relevant stories. 

I managed to finish the book and felt somewhat "enlightened". As financial planning was new to me that time, I decided to follow the advice of the book.

This book is written by fund managers of KL Mutual (now Public Mutual). It was probably given to my father as a gift by a unit trust agent. So, it is not a big surprise that I ended up buying unit trust first.

I put almost all my lifetime savings at that time, which was RM7000, to buy Public Ittikal Fund as recommended by an agent.

I did not bother about the 6-month" buffer" fund mentioned in the book.

After I have accumulated enough money from my salary, I bought more unit trusts. Within 2 years from 2004 to 2005, I bought a total of 5 unit trust funds, they are PIttikal, PDSF, PFSF, PIOF & PFES. Other than Ittikal, all are newly launched funds at that time. I started with RM2000-4000 in each funds.

I like Public Mutual as it always ranks high in Lipper and MorningStar rating at that time. However, now it seems like many other unit trust companies have caught up with Public Mutual.

I was quite lucky as the timing of my purchase was right in 2004-2005. The stock market gained a lot until early 2008 when the bear took over. So the earlier gain has shielded me from paper loss.

I planned to hold the 5 funds for mid-long term. They were for:

1. Retirement
2. First house
3. First car
4. Wedding/Honeymoon
5. Others

I do dollar-cost-averaging for all the funds as advised by the book, in which I put in RM100 monthly via standing instruction for all of them. So, it is a forced saving of RM500 a month.

Ten years have passed. I have got married and have bought my first house and car.

Currently I only have 2 of the 5 funds left in my portfolio, which are PDSF (not sold any units) & PIOF (sold 90%). I added another fund Public Smallcap Fund in 2009 for children education.

Now, all the 3 unit trust funds will be my children education fund. Retirement fund & others will be in the stock market directly.

The smallcap & PIOF are aggressive funds while PDSF is more on the conservative side.

For those who have no time or interest to invest directly in stock market, unit trust might be a good option as a safer investment tool that beat the fixed deposit. History has shown that unit trust can fetch 8-10% annually.

As shown in the graph of Public Dividend Select Fund above, it has gained more than 170% since its inception in May 2005 which is 9 years ago. But if you buy this fund in the end of 2007 or early 2008, you will suffer loss for 1-2 years. If you keep longer, you will reverse the loss and gain even more.

We have to pay a management fee of around 5% to the fund managers but only when we do initial or additional investment. In the long run, as unit trusts also pay dividends and appreciate in value, the little management fee will be well worth it.

From now on, I don't think I will buy more unit trust fund as I will concentrate directly in the stock market.

Anyway, unit trust will remain one of my diversification in investment and I will continue the practice of dollar-cost-averaging in my 3 existing funds.

As for the "Financial Freedom" book above, I highly recommend it to every person who wish to know the basic of financial planning.