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The Importance of Financial Literacy – Unit Trust

Rich People

Recently, my wife has just gotten her annual performance bonus. She told me she want to invest. If she does not invest, her money will depreciate over time. Thus, I asked how? She replied that her company has just invited a financial planning company to give a lunch time talk. She indicated her interest to let the financial planner plan for her how to “grow” her money.

I told her based on my experience, most financial adviser will surely either sell her endowment or unit trust. She refused to listen and went ahead to meet with the financial adviser. I was right! The financial adviser tried to sell her unit trusts.

I used to invest in unit trusts in my earlier investing days. What most of us didn’t know that the fund manager makes money whether the funds perform or not. If you read up about the funds, watch out for the section called Fund Charges. It is not a one time charge. They charge you annually.

Fund Charges

On a separate note, my wife claimed one of the fund that she bought last year pays her dividends quarterly. I asked her.

  1. Is the price on an uptrend or downtrend? She replied going downtrend.
  2. Overall, are you making a gain after deducting the losses? Have you collected more money than currently the amount the fund is losing? There was a dead silence.

The person from the bank who sold the unit trust to her has changed job. She collected dividends consistently but overall, the unit trust is making a loss. In layman terms, the fund is paying my wife back her own money without any gains.

I hope readers can share this and learn how to better manage your hard earn money.

7 thoughts to “The Importance of Financial Literacy – Unit Trust”

  1. I can understand the frustration despite having a close one nearby to advise, those “scammer” still manage to skim off some from your loved one. There is some level of unexplained psychology that overwhelms your advise that is not on the investment itself. On the bright side, this will help spouses to grew closer at a small price. 🙂

  2. I do not know why people do not believe their family members or friends who had did fairly well and trust only “financial Adviser”. The only advise they get is to buy sometime from them. Some people don’t even know buy unit trust = buy stock that they have no idea about + fees.

    Manage to save my lady friend when she told me she just sign up a ILP when she approach me to teach her about investment. Pointed out the expneses in ILP is actually Unit trust with higher fees. She had since cancel it. But unfortunately, she decided not to invest for now, maybe its too overwhelming for her to understand investing. (then again she is lazy to read the book I lend her & links I sent her on ETF DCA)

    Too many people are ignorant and lazy

  3. Same thing happened with my mum. She wanted to invest some in ILP no matter what. At least she bought some of her own stocks (although, she’s just looking at the price and not the value, so I don’t know if it’s worse…).

    Sometimes, you just have to learn things the hard way.

  4. Unit trust is just an investment product. The problem is picking the right one. There are tens of thousands of them. Coupled withs sale charge and management fee, it is even more difficult than picking the right stock.
    Nevertheless, it is possible, but difficult, to make money. One has to invest time for reasearch though.

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