I wish to give my opinion on investment in unit trusts. From my personal experience, unit trusts are a complicated mode of investment with the risk of losing money outweighing the probability of making a profit. The following points may not be told by most of the unit trust promoters.

Most of unit trust funds charge a management fee annually. This means the unit trust manager will get their hecks regardless of the performance of unit trusts. The unit trusts managers have zero risk while the unit trust buyer bear all the risk of the investment.

The advertised return rate is usually misleading. Using the example of an advertised figure, the average return for Malaysian equity unit trust funds is 24% for 7 years, 56% for 5 years and 26% for 3 years which translates to annualised returns of 3.15%, 9.3% and 8.1% respectively.

These returns are without subtracting the upfront fee charged (entrance cost) when first purchasing the unit trusts which may be as high as 5 to 6%. There is also the annual management fee which is usually 1% annually.

In other words, my investment in unit trusts is down by 6 to 7% the moment I buy the unit trusts. Thus, the annualised returns would be much reduced as compared to what is advertised.

A long-term fixed deposit with a 3.5% annual interest rate would have given us returns of 10.87% for 3 years, 18.77% for 5 years and 27.23% for 7 years. Best of all, this is at no risk (besides inflation) and there are no other high fees charged unlike by the unit trust manager.

An EPF dividend of 4% annually would have given the depositors of 12.49% for 3 years, 21.67% for 5 years and 31.6% for 7 years. This return is comparable to most unit trust funds, if not all, with no risk of losing the capital.

What the Financial Planning Association of Malaysia says is absolutely true - there are many factors to be considered before investing in unit trusts. There are many reasons as well why the trusts sometimes have a loss value (one of it is the annual management fee as well as the entrance fee).

Investors have to be properly advised by financial planners before investing. A unit trust fund is not without risk and my question would be whether it would be worth it to invest your hard earned EPF money for an extra of 2 to 3% of possible profit?

This at the expense of an annual EPF dividend or fixed deposit returns at no risk? Moreover, the unit trust funds' management fee has to be paid annually which means a fixed negative outflow of your capital as long as you continue investing in that unit trust.

Not many unit trusts can consistently have a return of 8 or 9% for the next 10 or 15 years (the unit trust managers will warn you of this in the small print of their advertisement or prospectuses). Also, do not expect a return of more than 15 or 20% or unrealistic annual returns for the long term (more than 10 years or 15 years taking into consideration the management fee) because unit trust funds average the profit by owning a basket of stocks and thus the profit is also averaged and limited.

EPF savings are savings for the future. It is not supposed to be risked. There is a saying that you only invest with money you can afford to lose and this definitely does not include our EPF money. Remember, there is no such thing as a free lunch in this world. If the returns are too good, the risk of losing is high as well.

The only party who surely benefits from unit trusts without risk is the unit trust seller or manager. The investors have all the risks and this is the downside. The higher the possible rate of return, the higher the risk involved and thus, higher the likelihood of losing money including the capital.

Perhaps the government should only allow unit trust funds which guarantee capital preservation as well have no management fee. In this way, the risk is reduced to the loss of potential profit but not the capital itself.