Where To Invest? - Mutual Funds (Unit Trust Funds)

For those who are interested to invest in stocks but don't know what to buy, do not have the necessary knowledge to trade or have no time to monitor their stocks, where else can you go and what can you do? The best option is probably to leave your money with the professional experts, i.e, qualified fund managers. In other words, you can invest your money with mutual funds (or also known as unit trusts). Mutual funds are simply a collection of stocks and/or bonds, managed by qualified fund managers. You can also think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities.

There are 3 ways you can make money from mutual funds:

1. Income is earned from dividends on stocks and/or interest on bonds.
   
2. If the fund sells securities that have increased in price, the fund has a capital gain
3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.

The general types of funds in the market are:

1. Equity fund: primarily invested in stocks

2. Fixed income fund: a fund that invests primarily in bonds
   

3. Balanced fund: invests in a balanced mix of stocks and bonds
   

4. Money market fund - invests in short-term debt instruments, mostly treasury bills

5. Real estate investment trust (REIT): a fund that invests only in real estates.

Equity funds can be further categorized into various categories, such as index-linked funds, growth funds, large capitalization funds, small capitalization funds, etc. The key for investors before buying into any mutual funds is to study the fund's risk and projected returns which can be found in the Prospectus (for new funds). It is also important to understand the fund's investment objectives and principles of investment. Select the one that fits your risk profile.

Most mutual funds come with a one-time sales charge and annual management fee. Both of these charges vary from fund to fund. It is important for you to be aware of these charges and the percentage of charges as often, these charges will consume any profit that you may gain from the fund.