There are four major ways to start investing in unit trusts:

Lump Sum Purchases

This is where an investor with a lump sum of monies invests into unit trusts. This may be the only investment the investor wishes to make. Over a period of time (3-20 years), the initial investment will increase as distribution and other income is earned by the fund. When redemption or sale of the units take place, the unit-selling price will reflect the accumulation and compounding of capital over the relevant periods. It is this compounding effect over time which makes accumulation type investments, such as unit trusts, so attractive to the investor.

For example, someone who has recently inherited a sum of money may wish to invest the funds into a unit trust and hold it for an extended period to save for some specific purpose. e.g. children’s education. At the end of the holding period, the proceeds of the sale of the units will be the initial investment plus the returns on that amount, accumulated over the period.

Regular Savings

Some people invest in unit trusts by making regular (e.g. monthly) contributions to their fund. This is an ideal, disciplined and useful way to accumulate capital for a future need. By making regular contributions over a period of time, the sum accumulated at the end of the period will increase. This is commonly known as dollar cost averaging.

At the end of the period, the redemption (or sale) price of the units held will represent the accumulation of all contributions, plus returns generated from the total contributions since the first purchase was made. The effect is more noticeable the longer the holding and contribution period. This form of savings is the basis of most pension fund accumulation e.g. the Employees Provident Fund.

EPF Savings

In addition to investing in unit trust by cash or through a regular savings plan, you can also invest using EPF Members’ Investment Scheme. The EPF will process a request to transfer an amount from a member’s Account 1 to approved unit trusts funds if:

  1. The Account 1 balance is not less than the required basic savings, details of which are enclosed in the table 1 as prescribed by the EPF for respective age of the EPF members.Table 1 – Basic Savings Amount in Account 1 (Effective from 1 January 2014)
    18 1,000 37 54,000
    19 2,000 38 59,000
    20 4,000 39 64,000
    21 5,000 40 69,000
    22 7,000 41 76,000
    23 9,000 42 81,000
    24 11,000 43 88,000
    25 13,000 44 95,000
    26 15,000 45 102,000
    27 18,000 46 109,000
    28 21,000 47 117,000
    29 24,000 48 125,000
    30 27,000 49 134,000
    31 30,000 50 143,000
    32 34,000 51 153,000
    33 37,000 52 163,000
    34 41,000 53 174,000
    35 46,000 54 185,000
    36 50,000 55 196,800
  2. The member is less than 55 years old
  3. An account in the approved Unit Trust Scheme has been opened into which the transfer can be processed
  4. No transfer has been made in the previous three (3) months from the EPF Members’ Investment Scheme

    Transfers under the EPF Scheme is made at an intervals of three (3) months from the date of the last transfer, subject to the availability of the required balance in Account 1.

  5. The amount eligible for transfer is not less than RM1,000
  6. The amount to be transferred is not more than 20% of the Account 1 balance remaining after deducting the required amount of basic savings prescribed by the EPF (subject to minimum of RM1,000)

Credit: FIMM Malaysia