A unit trust is a financial vehicle through which individuals may invest their money. The idea behind unit trust is better investment through collective investing. That is to say pooling the investments of many investors, individuals and institutions.
Investing in a unit trust offers investors numerous advantages, including :
a. Professional management at a low cost
b. Safety through the spreading of risk (diversification)
c. Liquidity
d. Ease of transaction
e. Capital appreciation/income stream
The operation of a unit trust may be best explained by outlining its similarities with the operation of a bank, with which most individuals are familiar.
Many individuals deposit money in the banks, for which they receive interest. These individuals expect complete liquidity where they must be able to withdraw their deposits in cash at any time. The banks employ professional managers to look after the deposits. The deposits are invested. These managers lend the deposits to other individuals requiring funds and a host of other profit generating facilities of the banks.
Similarly, unit trust holders wish to put their money to generate higher returns. The goal of all investments is to make money more productive, either through producing income or growth. Unit trust holders have liquidity because their units can be readily converted into cash at any time. By investing in unit trusts, it allows them to engage professional fund managers at a low cost to the individual investors. These managers diversify the investible funds in many different securities and other approved channels to spread the risk.
The unit trust is constituted through a document known as a deed which brings together and binds the various parties to the deed :
The trustee, who holds the assets of the trusts on behalf of the unitholders.
The manager, who is the promoter of the scheme and provides investment and administrative expertise and markets units to the public.
The unitholders who provide the funds for investment and expect to receive the benefits derived from the investment. The effect of dividing the beneficiaries’ interest in the trust into units is that their interest is quantified into discrete portions.
Particular advantages of unit trusts over the pooled investments include :
The provision of an independent trustee to hold the trust’s assets on behalf of unitholders and to watch over their interests on an on-going basis.
The deed and prospectus are scrutinized by government authorities, prior to an offer of units being made to the general public. The managers and trustee are themselves approved by the regulators.
A buy back provision or covenant in each deed which requires the manager to redeem an investor’s units within specified time limits at a price determined in accordance with the deed.
Provisions in the deed under which the manager and trustee are in a fiduciary position in relation to the trust (i.e. they can only profit in ways laid down under the deed). The investor can determine in advance what costs and charges they will be required to pay to join and stay in the trust.
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Acknowledgment: This article was published in IMC’s Internet Marketing Chronicles in 1998. While the original web site is no longer available, the advice is still 100% spot on!
After 10 years, it’s sad that people are still making these simple mistakes. What are the 10 Top Internet Marketing Blunders?
Blunder #1: Using free or cheapo web hosting services.
Let’s get one thing straight, you absolutely can not run a business web site using a free web hosting service. No matter what you may think, it just isn’t going to work. As they say you get what you pay for.
There is no bigger turnoff than visiting a web site that is hosted on an obviously overloaded web server. We won’t mention any names, but a few of the free services are just terrible. Your web site is the most important asset you have, and it must give a good first impression.
Besides, nothing is really free anyway. When you get “free” web space you are normally required to show the hosting company’s banners and advertisements in prime locations on your web site. This is absolutely insane if you really think about it from a business standpoint.
These days you can find a good web hosting company that will provide what you need for as little as $7 a month. Let’s be real, if you aren’t willing to spend $7 a month on a good web host how serious can you be? Many good prospects are immediately turned off by this blunder.
And while we’re on the subject of web hosting, be sure to get your own domain name. Again, if you aren’t willing to spend $10 to claim your stake on the web…what are your potential customers going to think? Take your business seriously, or you will ultimately fail.
Blunder #2: Destroying your site with graphics, java, music, etc.
This has got to be the 2nd most offensive Internet marketing blunder. If you are running a business online, your web site’s most important job is to sell your products and services. Anything that detracts from this should be avoided like the plague. And we mean it, literally!
Unless you are a graphic designer, graphics that take forever to load are not going to sell anything. And neither is java that crashes your visitor’s browser. Same thing for any but the most popular plug-ins. Sound or music clips on your web site? Heck no!
Unless you are selling CDs, sound does not belong on a web site - not yet anyway. Sure you can argue this, but the bottom line is that it can cause your visitors problems. Fancy graphics, java, flash, sound files, etc. do nothing but make your pages take forever to load.
Don’t take it from us, just look at any of the top 100 sites on the web. Heck, look at Google which is undeniably the most popular web site on the Internet. When was the last time you saw anything coming from there that would slow you down?
Blunder #3: Not asking for, and acting on, visitor feedback.
This is another big one, and we can personally attest to the value of asking for and acting on feedback. One thing that many people seem to forget is that it’s the prospect who has to like what they see - and not much else matters. Here’s a real-world example.
A while ago we launched a web site, and initially used a special layout. We were aware of the potential problems, and spent lots of time tweaking it to be as browser-friendly as possible. But after asking for feedback we discovered that many visitors hated it.
And the scary thing is that unless we asked for feedback we probably never would have realized this. Everything looked and worked well for us, but a significant number of our visitors had problems with it. We redesigned the entire site and immediately our sales increased.
You will be literally amazed at the valuable feedback you will receive if you just ask for it. Remember that your prospects are the ones buying your products and services, and despite what you may think, the way they perceive your site and your business is what counts.
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Tens of thousands of Malaysian workers from the services and manufacturing sectors in Singapore will be retrenched when employers, hit by the recession, start downsizing in the island republic.
Though the recession has not translated to retrenchment, 300,000 Malaysian workers in Singapore are starting to feel jittery over the prospect of losing their jobs if the country’s economy takes a turn for the worse.
For many Malaysians working in Singapore, the main concern is how to continue supporting their families if they are retrenched. Some said they were willing to take a pay cut and return to Malaysia. Others were even prepared take up two jobs back home to supplement their income.
1. I am glad to hear that Malaysia will be spared from the fallout of the systemic collapse of the whole world’s financial system. This ability to isolate Malaysia and Malaysian banks from the effect of the bankruptcies of all the biggest banks in the world must be regarded as a miracle. Our ability to manage our financial system better than others must earn us the admiration of the world.
2. I hope we are right in forecasting the effect on us of the collapse of the world’s financial system. But I have a sneaking feeling that all is not well.
3. We are a trading nation which trades with all countries of the world. The United States and Europe are among the biggest of our trading partners. Roughly 40 per cent of our total trade is with them. I may be wrong but I believe that if our buyers cannot pay for what they import from us, we would not make the profit we had expected. In fact we would lose a lot of money as we will not recover the cost of the goods we sell even.
4. Now the common practice is for importers to open Letters of Credit (LCs) with banks to ensure that when they receive the goods the corresponding banks will release the money. However, if the importers’ banks go bankrupt they would not be able to transmit the payment.
5. They may be bailed out by the US Government. But they may not consider paying Malaysian exporters as a priority. In which case, we will not be paid. Worse still we can no longer entertain orders coming from this market. Our trade must shrink.
6. We are not talking about one company. We are talking about hundreds of companies trading with America and Europe and other countries not getting paid for their exports. We are talking about tens of millions, even hundreds of millions of Ringgit worth of goods not being paid for.
7. These companies all borrow from banks to finance their operations. They hope to pay the banks from the proceeds of their export. When they cannot pay the banks, the banks in turn would have a lot of non-performing loans.
8. The banks would be wary of lending money to not only the exporting companies but to others as well. There will be a credit squeeze which would hurt other businesses. There will be margin calls. When the borrowers cannot meet this there may be foreclosures.
9. We see a lot of construction in Kuala Lumpur, all dependent on borrowed money. If these buildings are not sold or rented, payment by the developer to the banks would not be forthcoming. Again there will be a lot of non-performing loans.
10. When the Government withdrew the subsidy for oil the pump price increased by 40 per cent. The immediate result was to increase the prices of a wide range of food, goods and services commonly needed by the people. In other words the purchasing power of the people had been reduced.
11. Since then the price of oil had been reduced three times. But the prices of food, goods and services have stayed up.
12. Some cranks estimated that every citizen had lost purchasing power by RM300 a year. Since we have a population of 27 million, the country’s loss of purchasing power amounts to RM8.1 billion. That is lot money which is lost by food suppliers, cooked and uncooked, goods and service providers at various levels. A lot of small businesses would just fold up.
13. The Government has given back some money but not enough to reduce the losses sustained by the economy.
14. Now the corridors cannot be fully implemented. But this is fine because nothing had been implemented anyway. Unfortunately the anticipated earnings by contractors, sub-contractors, suppliers, workers, teh tarik and nasi lemak sellers would not materialize.
15. Maybe we will not need several hundred billions to bail out our banks. But the banks will also face the problem of unpaid loans incurred by their credit card users. They have been rather lax in providing credit card facilities to their customers, many of whom have no accounts with them. It is believed that unpaid credit card loans is in excess of RM20 billion.
16. Will the Government guarantee depositors will not lose their deposits when the banks which had in the past made huge profits now go bankrupt because of their mismanagement?
17. This is what the peoples of America and Europe are asking. Their money is used to bail out the banks whose profits had enriched their Chief Executive Officers and their share holders so much in the past. The people did not get a share of the profit, but they must pay for the losses.
18. We are told that six billion Ringgit in Foreign Direct Investment would flow into the country. But what about the RM30 billion outflows as foreign investors pulled out of the stock market?
19. I pray that I am wrong. I pray that the Government is right in declaring that the whole world may collapse but we would be the only country which won’t. We will sail calmly through the seas of shattered economies.
20. What is happening in the world today is the total collapse of the international financial system. This has been brought about by greedy people abusing the system. Instead of doing business in goods and services they now do business in money, in fictitious money.
21. We had experienced the effects of the trade in our currency in 1997-98. For no very good reason, our Ringgit was devalued so that its purchasing power was halved. And we became poor.
22. Fortunately for us we succeeded in stopping the trade in Ringgit and restoring its value. But the system is still in place. And now it is the US Dollar which is devalued.
23. But trading in currencies is only one of the abuses. The banks are lending more money than they have. They actually go to the people to persuade them to borrow.
24. Their clients can borrow 100 per cent of the money to buy a house for example.
25. They need not worry about paying or servicing the loan. The price of the house would appreciate. You may even have a second mortgage. You may even sell at a profit.
26. In the meantime the bank would register the loan and add the projected earnings from interest maybe over 20 years. That done the bank can put all the loans together and sells it to the hedge funds at a discount after adding potential interest.
27. The more risky the loan the higher would be the interest and the higher would be the profit. The hedge funds which buy the loans can basically sell the mortgages to investors in the fund or to the huge Government financed Federal National Mortgage Association, nicknamed Fannie Mae, and the Federal Home Mortgage Corporation, nicknamed Freddie Mac.
28. Now the hedge funds and the banks would feel safe and enjoy the huge profits that they have made.
29. But when hundreds of thousands of house buyers find themselves unable to pay simply because they have no money, and could not sell the houses and could not borrow from banks, Freddie Mac and Fannie Mae would not be able to pay the hedge funds. Then the hedge funds would collapse and drag down the banks with them.
30. This simply is what happened. The same applies to credit cards. People with little or no money would be given credit cards. They would spend more than they can afford and the banks would be faced with huge amounts of non-performing loans. The banks cannot pay the bills submitted by the sellers of goods or suppliers of services. The banks would collapse and there would be a run on the banks and on other banks which had lent the money to the affected banks. And so we see one after another of the giant banks of America and Europe going bankrupt.
31. The Government may try to bail them out. But the confidence does not last long. Soon the bailout would be seen to fail.
32. Actually I am giving a very simplified version of what is happening. All these shuffling of papers and figures cannot but encourage cheating. The bigger the amount of money involved the bigger would be the returns. The tendency is therefore to play with very large sums of money.
33. But where does the money come from? From nowhere! The Government and the banks, including the Federal Reserve Bank conjured up the money from nothing. If you ask yourself where do the US700 billion Dollars come from when you know the United States’ Government has to borrow US1.5 billion every day, you will find no answer. Is the US Government holding US700 billion Dollars in its treasury just in case it has to bail out the banks? Not likely when it cannot even make ends meet, when it has twin deficits.
34. So money can be conjured up out of thin air. And this must be the money the banks lent, the money the hedge funds and currency traders play with, the payments for expensive wars etc.
35. Basically the international financial system and the market economy has failed. Unless and until a new system is introduced and Governments regulate with the running and operation of national and international finance and the so-called free market we are going to see the financial turmoil and collapse repeated over and over again.
1. I am glad to hear that Malaysia will be spared from the fallout of the systemic collapse of the whole world’s financial system. This ability to isolate Malaysia and Malaysian banks from the effect of the bankruptcies of all the biggest banks in the world must be regarded as a miracle. Our ability to manage our financial system better than others must earn us the admiration of the world.
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