Unit Trust is a collective investment scheme that pools the savings of a large number of investors.

The money collected is invested by the fund manager in different types of stocks, bonds, or other securities in various proportions depending upon the objective of the fund. The income earned through these investments and the capital appreciation realized by the scheme, after deducting the trading costs and expenses of managing and administering the fund are paid out to the unit holders in proportion to the number of units owned by them. Most of the unit trust funds in Malaysia are open-ended funds.The fund sells as many units as you and other investors want to buy and buys as many units you want to sell. This makes unit trust funds very liquid investments – though the price at which you sell may be less than your purchase price if the value of the fund has dropped.

Here are some types of unit trust fund. First equity funds. An equity unit trust is the most common type of unit trust. The major portions of its assets are generally held in equities or securities of listed companies. Equity unit trust funds are popular in Malaysia as they provide investors with exposure to the companies listed on Bursa Malaysia.

The performance of the units is therefore linked to the performance of Bursa Malaysia. A rising market will normally give rise to an increase in the value of the unit and vice-versa. There is a wide array of equity unit trusts, available in the market, ranging from funds with higher risk, higher returns to funds with lower risk, lower returns. Second fixed income funds. These funds invest mainly in Malaysian Government Securities, corporate bonds, and money market instruments such as bankers acceptance and fixed deposits.The objective of a fixed income or bond funds is usually to provide regular income, with less emphasis on producing capital growth for investors.

It is possible, however, for fixed income funds to generate both capital gains and losses during a period of volatile interest rate. Next Money market funds. It operates in a similar way to a bank account-the unit price is normally set at a fixed amount. Money market funds invest in low risk money market instruments that are in effect short-term deposits or loans to banks and other-low risk-financial institutions, and in short-term government securities. Another one is Syariah funds.The main objective of Syariah funds is to provide an alternative avenue for investors sensitive to Syariah requirements.

Syariah funds will exclude those companies involved in activities, products or services related to conventional banking, insurance and financial services, gambling, alcoholic beverages and non-halal food products. The advantage of invest in unit trust fund is unit trust is liquid means that there is ease in selling and buying the units compared with investing directly in stocks of companies where prices and the opportunities to transact depend on the supply and demand of the shares at that time.And the disadvantage is it Subject to market risks. Since unit trusts invest in marketable securities, they are of course, exposed to market movements. Diversification will help reduce the risk but it will not eliminate risk entirely. The prices of units go up and down, dividends may or may not be paid, and you may realise a gain or loss when you sell your units.