83) How You Can Diversify Your Unit Trust Portfolio?

83) How You Can Diversify Your Unit Trust Portfolio

The old saying, “Not to all put all the eggs in one basket.”
So, we were advised to put the eggs into a few baskets.
Even better if the egg baskets are at different locations.

This is what portfolio diversification is basically about. You diversify your portfolio to spread the risks.
 

In the volatile market, the return and risks of investment are always changing. Some investments gave positive returns, while at the time others gave negative returns. In another time, the investments that did well previously are now losing.

With Unit Trusts Investment, you can invest into 3 main types of asset:
a) Money Market
b) Bond
c) Equity

Money Market fund only invests in Money Market instruments.
Bond fund have Bonds & Money Market instruments.

Equity fund usually have all the 3 asset types. High percentage into equities, with lower percentages in bonds and money market instruments.

The Malaysia's Money Market funds & Bonds funds are usually invested in Malaysia only and does not have Equity.

When you invest into Equity funds, you indirectly invest into shares of multiple public listed companies. The shares represent part ownership of the listed companies.



There are many different equity funds, each with different objectives and strategies.

They are usually different by:
a) Local (Malaysia) or Foreign (different Countries, Regions, Global)
b) Market Capitalization (large, medium or small companies)
c) Growth, Dividend or all company classifications
d) Specific Sectors/Themes or all sectors
e) Conventional (All companies) or Shariah compliant companies

Shariah compliant companies exclude the main business in:
a) Conventional Financial institutions and banks
b) Conventional Insurance
c) Stock Broking
d) Gambling
e) Liquor
f) Tobacco

With the different types of Money Market, Bond and Equity funds, you are able to diversify your portfolio.