Unit Trust & Investment Link: To Go In Or Not Now?

A friend who read my commentary on "Latest Updates/Events Pertaining To Economic & Market Overview", posted on Sep. 12, posed me this question: "What about buying unit trust (UT) now? Don't you think UT funds could be considered as safer or less risky assets, or deemed also as defensive assets, in the current downturn market experience?"

I replied that I concurred with him. For that matter, I also said the same statement may be applicable to investment link  (IL) product, which essentially is UT plus some some life insurance coverage. I would be inclined to classify single premium IL in the similar category as UT.

Why do I opine that now may also be the opportune time to go for UT or IL? My rationale for saying so is as follows:

* Fund managers of UT and IL funds place the money received from customers into varied baskets of equity stocks (for customers who prefer to go for equity assets), thus the investment risk is more contained by spreading out across a range of stocks.

* Many fund managers use specific indexes as benchmark reference. In some ways, their investment philosophy or approach may somewhat be in line with the list of stocks in the specific index. If I recall correctly, this is termed as Relative Return Strategy (Note to my friends who are well-versed in this territory - please correct me if I am wrong).

* Allow me to illustrate by way of a simulated situation. Let's take the scenario of the previous recession period of year 2008 when the key local stock market index,  KLCI (now FBM-KLCI) plunged to around 800 points. Presume that you had invested in a UT or IL equity fund which traded in the varied stocks in the list of the index at that time. FBM-KLCI hit almost 1,600 points at its peak this year, and it is now hovering around 1,400+ points in the latest bearish market situation. Even at 1,400+ points now, your simulated investment would have seen noticeable gains compared to the time of purchase three years ago when the index was around 800 points.

That's all I want to add. I welcome comments.

Disclaimer: The above are my personal opinions. You are advised to form your own conclusion with regard to my sharing. You may choose to concur or disagree with me. Please be notified that should you decide to invest in UT or IL now, it is your personal choice based on your own conclusion or opinion

Best Regards.