First Step:
Identification of investment needs: Your financial goals would vary based on your age, lifestyle, financial independence, family commitments, level of income and expenses among many other factors. Before investing it will be helpful to clearly understand the purpose of your investment. Whether you need regular income or need to buy a home or finance a wedding or educate children or retirement needs or combination of all these needs.
Further, determine the level of risk that you are willing to accept the fact that your investment value may fluctuate or that there may be some short term loss to achieve a long term gain. Moreover, try to understand your cash flow requirement from the investment. It will help to clearly understand whether you need regular cash flow or lump sum amount to meet a specific need in the future after certain time or you do not need cash but want to build your assets for the future. By clarifying these points will make you clear what you want out of the investment and can set out a strong foundation for a successful Unit Trust Investment.
Second Step:
Once you have identified a clear strategy in your mind, you know how to choose a Unit Trust that matches you needs identified in step one. The Explanatory Memorandum (EM) gives details of fund objective and details of other investment opportunities offered by the Fund Manager. You may analyse the track record of the Fund Manager, efficient service, degree of transparency and frequent communications etc.
Third Step:
Once you understand about the different schemes offered by the Fund Manager, select a combination of funds and schemes that will match your investment objectives and needs. By constructing a mix of investment you may structure a scheme that you are comfortable with and focused towards your financial goals. You may define your combination that you are comfortable with. It is important to note that you may discuss your plan with more knowledgeable financial advisors of respective experts in the Fund Managers’ office to ensure that you have structured a best mix of schemes that will work for you.
Fourth Step:
Invest in the Unit Trusts regularly. The approach that works best is to invest a fixed amount at specific intervals say monthly or quarterly. By investing regularly you buy fewer amounts of units when the markets are rising and the unit price increases and more units when the markets are falling thus unit prices falls and you get more units. This method referred as rupee cost averaging and is a disciplined investment strategy followed by many all over the world. You can speak to the Fund Manager and determine this method of saving habit.
Fifth Step:
The tax incident is lower when investing through the Unit Trust schemes. The tax regulations in Sri Lanka is designed to help small investors thus the income received from the Unit Trusts are exempted currently. Hence the investors do not have to complicate their tax when they have a convenient way to invest without tax implications.
Sixth Step:
It is desirable to start investing early in your life and stick to a regular investment plan. If you start now, you will make more than wait and invest later. The power of compounding let you earn income on income and your money grow at a compounded rate of return.
Seventh Step:
All you have to do is to contact the Fund Manager or their agents to open a unit Trust account and save regularly and benefit in years to come. Unit Trusts are suitable to any kind of investor whether you are at the entry level of your carrier or retiring, conservative or risk taker, income seeking and growth oriented. Unit Trusts can match all investment needs of people whether they and big or small.
The Unit Trusts are easy to invest and administer and hazel free with many benefits and advantages as highlighted last week.
