Understanding Investment Thoroughly

Article nie aku jumpa dalam majalah Unit Trust Today Volume10 2012 yang memberi focus kepada investor..so,aku just share article nie untuk korang supaya korang dapat tambahkan lagi knowledge pasal investment unit trust nie..selamat membaca.. :)

Encik Ahmad has been investing in unit trust since year 2000. He has seen the markets up and down, made a few mistakes along the way. When he first started, he was influenced by his friends who had made money when they started investing end 1997 to 1999. They encouraged him, “Ahmad, look how much money we made, we sold at a profit and it is better than the banks’ fixed deposit rates. We are now going in again, for the second round of profits”.

Caught up with the excitement and euphoria of his friends gain, he quickly signed up with an agent who approached him at the shopping mall a few days ago. “Oh, Encik Ahmad, this is our latest equity fund, recently launched. If you invest with me during this launch period, the company is giving a bonus of extra 5% units of your original investment. Plus, if you look at all our previous funds, see how many awards we won for our funds’ performance!”

That day, Ahmad was happy, he had put in RM10,000 of his money which he took from his savings in fixed deposit which had matured. Expecting good returns, he waited for a year. The markets dropped and the gains did not come.He decided to wait another 6 months, the market fell a bit more. By then, he started to worry and called his friends.

“Alamak, Ahmad, we are caught too. The market doesn’t look good and we are thinking of selling off to cut losses.You may want to do that. Take your money first, than when the timing is right, we can go in again”.

Flustered, Ahmad called his agent to let him know of his intention to redeem his investment. His calls went unanswered. By then he panicked, thinking something may have gone wrong. He quickly went to the unit trust management company’s office to check on his account.The customer services personnel helped him check his investment and notified him that the value had dropped by 15% due to the drop in the share market. The agent servicing his account had resigned. Apparently the market drop had affected the agent’s income and he went back to employment. Ahmad’s case is now re-assigned to the resigned agent’s upline, Ann. The customer services personnel called Ann to inform her regarding Encik Ahmad’s case. Within minutes, Ann called Encik Ahmad’s handphone and made and appointment to see him the next day at his office.

The next day, Ann called at Encik Ahmad’s office. “Thank you for your time, Encik Ahmad. On behalf of my resigned team member, I apologize for the short break in contact with you. Customer services informed me of your concern with your investment which had dropped because of the share market. I appreciate your meeting with me before carrying out your decision to redeem”.

Encik Ahmad nodded in agreement and told her what had happened and now he wanted to redeem and get whatever he can back as his friends are doing so. It is such a bad experience for him. Ann agreed that it is natural for Encik Ahmad to feel fear as it is his first time in unit trust investment. She took out a prospectus and showed him how unit trust investment works. She then walked him through the proper process for unit trust investment in terms of investment goals, time horizon for investment and how they can work together. When she asked him whether he is comfortable with the process and would like her to carry on, he agreed.

She asked him what was his objective in investing, to which he replied to make more profits. She decided to delve a little deeper by asking him what he would do with the profits. Encik Ahmad gave a quick thought and said that since he is still single and intends to buy a house, this investment can be earmarked for it.

Understanding and identifying your investment goals

Ann very quickly helped Encik Ahmad to calculate how much he needed to buy his dream home and together they worked out how much he needs to save and the duration required to save.

Selecting the right investment portfolio

With the objective identified and worked out, Ann then went on to uncover Encik Ahmad’s ability to take risk using a Risk Profile Questionnaire. From there, she was able to determine a suitable portfolio which consisted of various unit trust funds with different asset classes to build the portfolio. She even showed him how the percentage of different asset classes of unit trust funds he should have in his portfolio and how she would help him to systematically re-balance his portfolio when the share market changes. She explained that portfolio management is a systematic way of taking profits and averaging down cost of his various unit trust funds.

Encik Ahmad felt better with what Ann has done for him,but he still had concerns over his current loss. Ann then went on to patiently explain to him that she will help him to switch at no extra cost, his current investment, to the suitable portfolio and over time, he will recover his loss and go on to make gains.She even showed him case studies of similar situations,to help him understand about unit trust investment. She explained the power of ringgit-cost-averaging, combined with the strategy of building a portfolio to mitigate short-term risks and focus on longer term gains to achieve his financial goals. Encik Ahmad and Ann then discussed the level of service he would need and how often they would meet to review his investment portfolio. By then, Encik Ahmad felt more confident in his investments and arranged with Ann to meet up next week to start his regular savings so that he can have that dream house of his.

Know your rights and responsibilities

Ann praised Encik Ahmad for taking the initiative to contact the unit trust company when he was unable to contact his previous agent. She explained to him that as an investor, he should always issue a cheque or bankers cheque in favor of Unit Trusts Management Company and avoid giving cash or banking money into the agent’s account. This is to ensure his money is invested in the unit trust funds instead of going astray. She also clarified that he should get a confirmation advice from the company within a week of his investment and in the meantime, the agent should let him have a copy of his application form duly stamp received by the respective unit trust company.

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How to be an informed investor

Encik Ahmad asked Ann how he can know more about the funds he has invested in and whether the agent he is dealing with is genuine. Ann then referred to the Master Prospectus again and showed him pages where there is a summary of the funds and flipped to the respective pages which had full description of each fund  and investment strategies. She also informed him of the interim report and annual report on the funds he has invested in, which will be sent to him either in the form of a booklet or CD and he can always call her for clarification in any areas of the review. Encik Ahmad wanted to know how to find out the value of his investments without having to keep calling Ann. Ann took out the newspaper and turned to the unit trust quotation page, then took Ahmad’s ledger and showed him how to calculate the number of units against the latest price to determine the value of his investments. She also reminded him that his investment is for a longer term, so he need not check it frequently as she will be calling on him for their agreed review intervals.

She also informed him that he can always check whether a unit trust agent is registered through Federation of Investment Managers Malaysia (FIMM) website and also if he is working with a financial planner, then he can check with the Securities Commission of Malaysia whether the financial planner is certified. Also, planners and agents do carry their authorization card, so he can always request to view them if need be.She showed him her FIMM authorization card so that he knows what it looks like.

Ann then checked with Encik Ahmad whether there is anymore clarification he needed and set the appointment for the following week to get his regular savings plan started. “Thank you so much for your time, Encik Ahmad, when we meet up next week to do your regular savings, we should discuss about how to protect your regular savings plan. I will share some ideas with you, is that alright?”

Shaking Ann’s hand, Encik Ahmad replied “Sure Ann. I am glad I met up with you. I feel very relieved and have a better idea about my investment now. I will be sure to call you if anything about investment comes to my mind. Appreciate your help and yes, we shall meet again next week. Let me talk to my group of friends and see if they will meet up with you. I think they can do with your advice. I only hope they have not sold all their unit trust investments yet”.

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What is Ringgit Cost Averaging?

Hari nie aku nak share info tentang RCA atau Ringgit Cost Averaging (kalo kat tempat omputih,dorang sebut sebagai DCA or Dollar Cost Averaging)..Info ni aku amik dari website sebuah syarikat pelaburan yang terdapat di malaysia..Just Copy and paste..haha..sebab kat situ,dia dah explain semua..So, selamat membaca..

Introduction:

“If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen in the stock market.”
– Benjamin Graham, author of “The Intelligent Investor”

Investing would be so simple if only one could predict when is the best time to buy or sell. However, timing the market is impossible and many have made huge losses due to trying and consequently failing. One of the ways to ride out the ups and downs of the constant volatility of the stock market is to use ringgit cost averaging. This method ensures we benefit from the historical strong returns shown in the long run and hedges the effects of retracement and slight downtrend in the short term.



Ringgit cost averaging is an investment technique intended to reduce exposure to risk associated with making a single large purchase by investing a fixed amount on a particular investment (such as unit trusts) at regular intervals (either monthly or quarterly), regardless of the unit price. For example, you can choose to transfer RM500 to RM1,000 from your paycheck to a unit trust fund or you can even make a RM1,500 or RM3,000 investment every quarter. The amount and frequency of your investments depend on your financial means and future goals.

How Dollar Cost Averaging Works
“Save little save often – dollar (ringgit) cost averaging works, if you stick to it.”
– Paul Clitheroe, “Ten Key Steps to Wealth”, 2002.

To illustrate dollar cost averaging better, let’s say you want to save RM12,000 each year for your child’s education fund. Instead of investing it in a lump sum and bear the risk of entering when the market is high, you decided to invest RM1,000 into a unit trust fund each month as shown in the chart:



Results
Average Cost Per Unit RM0.1923
Unit Price as at December RM0.2510
Value of Investment as at December RM15,664.48
In this example, by using the method of ringgit cost averaging, the average cost per unit invested was only RM0.1923, instead of RM0.2549 if the investor has invested a lump sum in January.


A Long-term Investment Strategy
“Discipline is the key to success for the long-term investor. He or she must not fall into the trap of managing holdings by newspaper headlines, sound bites, mindless predictions, gut feelings or the last time period results.”
– Frank Armstrong, author of “The Informed Investor.”

Regardless of the amount of money invested, dollar cost averaging is a long-term strategy. While the financial markets tend to fluctuate, they often move in the same direction over fairly long periods of time. Bear markets and bull markets can last for months, and sometimes even years. Because of these trends, dollar cost averaging may not be as effective if only applied for the short-term.

For example, an investor might choose to make 10 purchases of a unit trust fund within one month. Although it is highly unlikely that the purchase price of the units will be the same for each transaction over such a short time frame, there will not be a significant difference as well.

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However, over the course of a longer market cycle, you would probably go through a bull market and a bear market, with the price of a given security changing considerably. Dollar cost averaging will help ensure that your average cost per units represents both the premiums of a bull market and the discounts of a bear market, as opposed to just the premiums usually paid by investors in a bull market.


Tips to Get you Started
“Those who put an investment programme in place will have a lot more money
when they come to retire than those who never get around to it.”
- Australian financial author Noel Whittaker.

Many unit trust funds allow you to begin investing with a minimal amount with the option to make further contributions through regular deductions from your paycheck or bank account.If you’re interested in dollar cost averaging, here are a few tips to help you put this strategy to work for you:

•  Get started as soon as possible. The longer you have to ride the ups and downs of the market, the more opportunity you have to build a sizable account over time.
•  Stick with it. Dollar cost averaging is a long-term strategy. Make sure that you have the financial resources and discipline to invest continuously through all types of markets, regardless of price fluctuations.
• Take advantage of automatic deductions. Having your investment contributions deducted from your paycheck or bank account is an easy and convenient method to invest, and can help you get into the habit of investing regularly.
•  Be prepared for losses. Dollar cost averaging does not guarantee that there will always be profits and no losses in your portfolio. Even though you paid a lower average cost than the average price of the units, you could still lose money if you choose the wrong time to exit the market, particularly when prices are low.

Building wealth by investing in unit trusts is more a matter of patience and persistence than of investment skill and luck. The major decision that must be made is whether or not you are willing to forego immediate gratification to achieve your long-term financial goals. If you are, then dollar cost averaging can be a very effective way to help you get there.

So,aku harap article diatas dapat menambahkan knowledge korang pasal pelaburan atau bahasa omputihnya,investment..