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.