Unit Trust is still the way to go!

At the current level of the KLCI, anyone who had bought unit trust in the past one year must have been feeling jittery right now. Generally, it has dropped off 20% of the value when they bought one year ago. So what now? Is it time to redeem for cash now?

Well, this question depends on the individual. If you need this money, of course you are forced to sell off your unit trust. Or maybe you have some investment ideas, or you foresee some great chances to increase your earning, by all means, sell off your units. Do not risk incurring opportunity cost.

But, if you sell off your unit trusts just to keep in the savings account, then the answer to the question above is a definite NO! The reasons are simple:

1) You suffer losses by selling off your unit trusts at current price.
2) You denied yourself a chance to recover back your losses.
3) Your money will lose out to the effect of inflation.

Investing in unit trust can be ANYTIME. Yes, even during the current financial crisis, as long as you are doing dollar cost average. Dollar cost averaging is a concept to minimize your risk, especially during the current crisis.

Of course it is possible that after you buy in, the price will continue to drop off. But with dollar cost average, you are picking up units at price lower than your 1st time to purchase, therefore covering your losses from your 1st investment.

Unless you are a stock market expert, normal people can never know exactly when the market will rebound, but we do know that historically, everything that fall down will climb back up again! So pick up the units gradually when the market is low (though no one knows whether this is the bottom or not).

For those who invested lump-sum and suffering paper loss now, if you don't need the money now, DON'T SELL. Unit trust has a better chance of recovering, with medium risk.

Consider this, even during this crisis, there are still investor buying into unit trust. These money enable the fund manager to do bottom-fishing, accumulate stocks at low price, and this will enable the funds to recover their price more swiftly when the market recover.

If you are buying into a blue chip stock, can you have this privileged? NO! Not at all, you can only hope it reached the price above your buying price, provided that the company's earnings and prospects remained positive. What if the counter you bought do another Transmile (a former blue chip counter who drop from RM13 to the current 55 sen at time of publishing)?

Therefore, unit trust remain the best bet for the general public to invest in, especially during the current crisis where we can get more units at less price.