Understanding Mutual Fund

Technical detail of Mutual Fund or Unit Trust.

1. Mutual Fund is a group of selected stocks/bonds that are professionally picked by the fund Manager. The picked stocks/bonds are believed to yield acceptable returns.

2. The selling price will be charge around 6.7% percent above the Net Asset Value (buying price).

3. Selling price = the price you have to pay to buy the mutual fund.

4. Buying price(NAV) = the price that you will get when you sell your mutual fund

5. There is a 1.5% annual fee (depends on type of unit trust) that you have to pay each year.

When will I know that I have actually gained profit?

Mutual fund price is just like usual stock price, which goes up and down everyday. The price is determined at the end of trading period each day. Below is the price table for Public Mutual Funds:

Basically, you will buy your mutual fund using ’sell’ price (right-hand price) and you will sell your mutual fund using ‘NAV/buy’ price (left-hand). To earn profit, the current NAV must exceed the sell price when you bought that fund. From past performance, Public mutual could achieve 6-15% per year.

Example of calculation:

A year ago, I bought RM10000 Ittikal Unit trust with selling price RM 0.7500 per unit. So total unit that I get was 10000 / 0.75 = 13333.33 unit

Yesterday, the NAV/buy price has became RM 0.8004. I decided to sell all my unit trust. So the total money that I get from the selling is 13333.33 x 0.8004 = RM 10672

Basically, I earned RM672 from this investment.

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