Sunday, November 04, 2007

Reasons To Sell Unit Trust

At some point in time, we may become disenchanted with our fund. It could be due to poor performance or low returns. It may also be due to the change nature of our needs.

The following are 3 reasons why we should sell our fund:

(1) Our unit trust is under preforming in the market
There can be many reasons for this, but this trend tends to show that the fund is not as well manged as it should be. Do not fall in love with a unit trust. Since there are so many unit trusts, we can choose one that satisfies our investment objectives and return requirements and preforms in line with the market. We would better switch to a better managed fund.

(2) The fund manager is leaving the fund
If the fund is performing poorly, the fund manager leaving is a good sign. However, if the fund is performing well, the fund manager may not be replaceable. There are other funds with just as capable managers out there. We just need to do our homework and research.

(3) We follow market cycle
Our unit trust does well in a bull market (A financial market of a certain group of securities in which prices are rising or are expected to rise) but poorly in a bear market (A market condition in which the prices of securities are falling or are expected to fall). Lets say the current market is a bear market as what we think or predict. We will want to find a fund that performs well in down markets and switch to them. This strategy can be risky if we do not predict the market cycles accurately.

What else? That's all I can think of. Usually I will only sell or switch funds due to the first reason (under preforming unit trust). Reason 2 and 3 are unlikely to happen.


Peky said...

I'm still learning about UT. Any good recommendation :D and for me..i'll go with (1) too. Cos I probably wont have enough courage to believe that it's (3)...and I probably wont be that alert to realize (2) just happened..

ChampDog said...

Just read and understand prospectus before you buy any unit trust. Different trust serves different purpose. Funds are usually categorized into low risk, moderate risk and high risk. See which funds best fits you. You don't need to stick to one fund. You may also want to go for 20% low, 30% moderate, and 50% high risk fund for diversification. This depends how much risk you can take, your risk profile. For young people, they usually can take more risk. Then, you can adjust the % accordingly.

In Malaysia, Public Mutual Fund is the largest and most stable Mutual Fund's company. My majority of funds are bought from this company. But largest usually not the best performer but stable (My Opinion).

Mt. said...

largest implies powerful because it has a lot of modal. imagine 2 smart investors who have $1000 at hand and another has $100,000. assume both can get 20% return. One got $200 and another got $20,000. Assume both their cost is similar at $100. So the remaining net profit is $100, and $19,900. See the difference ? Who do you want to put your money in with ?

Mt. said...

there is this thing call technical analysis on stocks performance. Basically you apply certain "strategy" or analysis toward the stock price and it can tell you when to buy and when to sell. I use MACD, Moving Average and Stochastic combine. Although not 100% accurate but its an indicator better than guessing from the air. You can do a topic on this too ...

ChampDog said...

So, are there any reasons we don't want to buy from the largest Unit Trust company? That would be something interesting to know.

At first I thought MACD is tool but now it seems like is a method instead. Is there a tool for it? What tool you're using? Where can I download it? Thanks for mention it to me. Learn something new today. :)

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