Table of Content
Difference between Investing in Unit Trusts & the Share Market
– Investing in the Share Market
– Investing in Unit Trusts
What is NAV?
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Unit trust is actually one type of Collective Investment Scheme (“CIS”). CIS is a concept where a group of investors pool their money together in order to take advantage of having a bigger pool of money to invest. If you have RM100 available to invest, you can’t buy much. But if 100,000 people each chip in RM100 into a pool, the pool will have RM10 million available to invest. The extent of investment choice and diversification that the RM10 million pool can achieve is definitely much greater than what RM100 can do. And this is the inherent advantage of a CIS.
Difference between Investing in Unit Trusts & the Share Market
[1]. Investing in the Share Market

To buy shares, investors need to go through a securities/stockbroking firm as the middleman to conduct the transaction. Assume you wish to buy shares of Company A, which is currently trading at RM1.30 for each share. You decided that you want to buy at RM1.25 a share. You then call your remisier (an agent, for the stockbroking firm, who holds the license issued by the Securities Commission) to inform him or her about the trade.What your remisier will then do is to find a seller who has Company A’s shares and wishes to sell at RM1.25 a share. If the remisier finds a willing seller at RM1.25, he will match and complete the trade. If he is not able to find a seller at the price you want, then either you have to revise your price to RM1.30 a share or wait for other sellers who are willing to sell at RM1.25.


Figure 1 below shows the relationship. An alternative to a remisier is an online trading platform, where investors would be able to trade and manage their own transactions.

Figure 1: Investing in Share/Stock Market


One may ask why would we still need remisiers in this technological age, when we can trade on our own? Remisiers actually play a very important role for investors who just started investing in the stock market. They would be able to guide and “hand-hold” investors on “what-to-do” and “what-not-to-do” when investing. In addition, remisiers can help to monitor the trades on the investor’s behalf, compared to the investor having to keep checking on his trades.


The mathematics for unit trust and share investments works the opposite way. Say Company A’s share is trading at RM1.30 a share. Shares are traded at a “lot” of 100 shares. So, at the minimum you must buy 100 shares of Company A, which is RM130, excluding brokerage charges. If you are buying two “lots”, you will have to pay RM260 (RM1.30 x 200 shares) before brokerage charges.


Share Price X Number of shares + Brokerage charges = Amount to be paid by investor


[2]. Investing in Unit Trusts


Unlike investing in shares, investors who wish to invest in unit trusts would need to get in touch with unit trust agents. Unit trust agents are representatives of unit trust management companies, and hold the license issued by The Federation of Investment Managers Malaysia.


Now assume you want to invest in Fund B and you approach a unit trust agent for Fund B. The agent will assist you in submitting your request to the unit trust management company (“UTMC”) of Fund B. For unit trusts, there is no matching of trades needed. All buying and selling of unit trusts is between the investor and the unit trust management company, transacted at the Net Asset Value of the unit trust (or NAV, which we will explain further later). What this means is when you want to invest in Fund B, the UTMC of Fund B would need to sell you the units in Fund B. When you want to sell your units in Fund B, UTMC of Fund B will buy the units from you.


The unit trust fund’s investments are managed by a fund manager, which is employed by the UTMC. The fund manager’s role is to make the investment decisions and manage the investments on behalf of the investors.


From Figure 2 below, one can see that unlike investing in shares, the investor only deals with the UTMC when the investor is buying or selling units, and the investment decision is handled by the fund manager of the UTMC.

Figure 2: Investing in Unit Trusts

Now instead of a listed company, Fund A is a unit trust and has a Net Asset Value (or NAV) of RM1.30. For investment into unit trusts, subject to the prospectus of the fund (i.e. the rules of the fund), investors can invest any amount. Assume that you now only have RM100 to invest.


Amount the investor invested (after deducting sales charge) ÷ Net Asset Value = Units received by investor


The differences between buying shares and unit trusts can be summed up by the diagram below.

What is NAV? 

NAV, or Net Asset Value, is the total investment owned by the fund, including cash, minus the liabilities owed by the fund. Liabilities owed by the fund consist mainly of expenses that the funds have yet to pay its service providers, such as brokerage charges, management fees, etc.


Table 1 below shows the example of the calculation of NAV, using the example of InterPac Dynamic Equity Fund (details extracted from the fund’s 2017 annual report).


Table 1: Extract from InterPac Dynamic Equity Fund’s 2017 Annual Report
Assets RM
Investment 2,000,738
Amount due from Manager 26,955
Dividends receivable 7,715
Cash & bank balances 15,622
Total assets (a) 2,051,030
Other payables (b) 27,638
Net Asset Value (a – b) 2,023,392
Units in circulation (c) 4,819,524
NAV per unit (NAV ÷ c) 0.4198


For those who are keen to understand more on financial statements, Part II will give a basic guide to understanding financial statements.

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