Why I Invest in Unit Trust

Since I was young, my parents taught me to save money. Back then, whenever I have savings especially after Hari Raya, I will bank in the money into my ASB account. Being a kid, I actually didn't see the purpose of saving money let alone growing them. I just thought it was something noble to do. Maybe I will need it later. For what, only time will tell.

When I started working, I began to search for something fulfilling to invest in. Of course I wanted something that gives high return. Things that came to my mind at that time was stocks. I started to learn about stocks. Somehow along the way, I came across about Futures. I attended classes by a guy from CIMB. I tried to learn about all the technical stuffs. Graphs, candlestick etc. But along the way, I found out that I can't actually understand all these stuffs. It seems that I'm pretty bad at reading graphs and projecting what's going to happen. At last, I didn't even invest a single cent in Futures.

When I went to a property expo in Midvalley Megamall back in 2006, I came across a unit trust agent. He was promoting a new fund. To be frank, that was actually the first time I heard about unit trust. Without realizing it, ASB is actually a unit trust which back then I thought was just a normal bank account where I can keep my money and collect dividends yearly. He explained to me about the fund he was promoting. It impressed me that unit trust can actually generate returns of about 15% per year. I only understood about returns at that time.

Being new and skeptical, I went back and asked my friends about this particular unit trust management company. My friends gave good remarks about the unit trust management company. So there I go with my first unit trust investment. I started investing without knowing too much about unit trust. Only after being an investor did I learn more about unit trust.

What seems to be easy about investing in unit trust to me is that I don't actually have to crack my head on what stocks to invest in. I only need to choose a theme and put my money in. If I like Malaysian stock market, then I just choose a fund that invest heavily in Malaysian stocks. If I like China stock market, there are China funds available. If I like property market, there are Real Estate Invest Trusts (REIT) to choose from. All the stock selection will be done by the fund manager. As long as I choose a good fund with a good fund manager in a good unit trust management company, that should be good enough.

Even though the service charge for unit trust is quite high, 5% to 6%, I believe it's money well spent since I don't have the expertise to pick good stocks. The fund manager will do the thinking for me. Bottom line is I must make money from the investment. Not to say I can leave it entirely to the fund manager. As long as I know what to do and when to do it i.e repurchase/switching, I should be fine. I set my long term goal and I use unit trust to achieve it.

Choosing an Apartment

My first encounter of being a landlord started in 2006 when I bought a medium cost apartment in Ampang. The reason I bought the apartment was to move our from the apartment that I was staying with my brother back then since he had a few plans laid out for himself. Instead of renting, I thought it might be better off to buy a cheap apartment for my own stay. My budget at that time was a below RM 100k apartment.

Before I went searching for an apartment, I first laid out the criteria that I wanted in an apartment. The criteria I developed not through reading books but instead from my own experience staying in an apartment for the first 2 years of my working years. Here are the criteria:

1. Find a property with freehold title. Well this reason is pretty obvious and you can find it in any property investment books. Among the advantages of freehold property easier to sell, faster transfer of land ownership and higher price compared to leasehold property.
2. Find apartment near amenities. Well this is also an obvious reason since I don't plan to stay in that apartment forever. Renting it out in the future is a possibility. So this criteria will make the apartment more appealing to tenants.
   
3. Try avoiding units at the highest level. Certain books do mention about this criteria. When I stayed at the apartment with my brother, occasionally my room will be flooded due to very heavy downpour. Anything got to do with the roofs, certainly the top unit will have to bare the costs of repair or will suffer due to leaking roof.
4. Try also avoiding the ground floor unit. There are 2 reasons for this. First, the ground floor unit will likely be the main pathway where residents go up and down the apartment. It's likely that this area will be noisy and dirty. Secondly, imagine car alarms going off in the middle of the night and it don't stop until the next morning. Scary? Yup, that's the reality. If it's your car, then fine, you can always switch it off. But what if you don't even know the car owner? Can you stand the alarm until next morning? Even staying at higher floors does not guarantee that you will not hear the car alarm. But the effect is quite minimal compared to the ground floor.
5. Try finding apartments with no or minimal maintenance fee. Well this is not a common thing but there are certainly these type of apartments out there. To spot these apartments, here are few criteria; normally low rise with 4-5 storeys and no lifts, no perimeter fences and no security guards, they are unlikely to have swimming pools or shops within the compound. Reason for choosing this type of apartment is the fee is beyond your control. The property manager can always increase the fee without justifying the reasons. There might be certain laws to address this issue that I don't know. If the maintenance is not up to the standard, what can you do as property owner?
6. Find an apartment with water connection direct to the Water Board i.e Syabas, Puas etc. What is normally done by property managers nowadays is that they buy water from the Water Board and sell them to the apartment residents, of course at a slightly higher price. Residents pay their water bills to the property manager, not to the Water Board. The property manager even goes one step further to cut the water supply in case the resident do not pay the maintenance fee. How dissatisfied you are with the property management, you basically can't do anything rather than complaint which they might or might not listen too. Having your water bills paid directly to the Water Board will eliminate this risk. Just in case you are not satisfied with the property management standard, just don't pay the maintenance fee until actions are taken. At least you have something to hold on to.

I did manage to get some of the criteria mentioned in my first property purchase, not all of course. Having these criteria in place certainly helped narrowed down my choice of apartment.

Inspired to Change - 0 to 13 Properties in Only Four & Half Years

1. I guess this is the hardest book to come by. I only managed to find it at Midvalley's MPH. Even that was the last copy on the shelf.

2. I came to know about this book through a forum. Somebody recommended it as a good read. Since then, I went searching until I finally got it.

3. If you are expecting this book to be about the technicality of owning properties, then you would be disappointed. This book is more like a motivational book for you to succeed in property investment.

4. Nevertheless, do read between the lines for tips from them such as refinancing their parent's property in order to get cash to start their property investment and buying properties with little or no money down. Although they did not elaborate on these methods, at least it gives an idea on what's the tricks to be used to be successful.

5. In this book, the author repeatedly mentioned about the need to attend property seminars. Since I'm convinced with the reasoning, I would like to attend a seminar within this year to enhance my knowledge.

Lessons Learnt #2

Be Prepared for Road Accidents/Breakdown

I've described about the road accident I encountered last year in my previous posting here and here. I would like to go back further into my memory lane on why I started taking towing services.

When I was still using a Kelisa back in 2006, some mishap happened to my car. The rear tire rod broke causing the car to sway excessively even at 30km/h. I had to sent the car to the workshop for repairs since I can't even go more than 30km/h. At that time, I was staying in Bandar Seri Permaisuri, Cheras. I wanted to tow my car to Perodua Service Centre in Keramat where I use to send my car for periodic service. It is about 20km away.

I thought I was lucky since I took up a motor insurance coverage which stated that they offered FREE towing service to the customers. So I called the insurance company to request for the towing service. To my surprise and disappointment, the operator told me that they don't actually offer that service. They can only guide and recommend on which tower to use. I have to pay for the towing service. The operator then called their panel tower and sent him to me.

Guess how much did it cost for the 20km towing service? RM120! RM110 after discount! Like it or not, I have to pay since I had no options. Later I found out that whatever towing services offered together with your motor insurance are just gimmick! They merely don't offer the service like in my case, or they only cover for a short distance. More than that, you have to fork out your own money.

Since then, I've never failed to take up towing services independently. I only pay RM70 per year for that service which includes personal accident coverage. And when I need it the most during that accident, the service came to my rescue. I always remind people around me to take up that kind of service but somehow many of them are reluctant. Perhaps when they need it the most, then only will they realize the importance of it. Be it Road Warrior or AAM, just take one and be prepared in case something wrong happens.

Singapore's Public Transport

Last week, I had the chance to visit Singapore. This is my second visit to the island after the first visit when I was still very very young. I took a bus from Larkin Bus Station to Singapore instead of driving. The reasons are that I don't have any GPS and I'm not familiar with the roads there. Besides driving around the island costs quite a sum of money. So the simple solution was to take the public transport. Besides, Singapore is dubbed to have one of the most effective public transportation system. So I really wanted to experience it myself. These are my findings of their public transportation system that Malaysia can improve on:

• The most obvious difference is that Singapore's main rail system is using the Mass Rapid Transit (MRT) system instead of our Klang Valley's Light Rail Transit (LRT) system. The difference between these two systems is that MRT caters for bigger crowd as compared to LRT. MRT has wider and longer trains. There are MRT and LRT lines in Singapore with the latter built only to cater for small housing areas and integrated to the main lines. But our LRT lines are build for the whole of Klang Valley. I do hope for the proposed Kota Damansara-Cheras line, it will be a MRT instead of LRT to cater for the growing crowd. If costs is an issue, I do hope the authorities will do the first thing right. Instead of building another LRT, its wiser to build a shorter MRT line and later extend the line when the funds are available. MRT and LRT have different requirements such as station size, width of platform, rail size etc. Its better to have the fundamental in place rather than building something that will only last for the next 10 years.
  
• What makes their system efficient is that it only uses single ticketing system regardless of any lines you are taking. There are 4 MRT lines and 3 LRT lines. Our different rail systems require us to buy new tickets when we switch lines. Our own rail system consists of Ampang Line, Kelana Jaya Line, Monorail and KTM Komuter. Every switch is really a hassle when you need to buy new tickets.
• At the MRT stations, the escalators are generally faster unlike ours. In simple terms, the escalator's speed is not the same as the one used in shopping malls. Its faster because the general need of commuters who are always on the go.
• Most of their citizens do not buy tickets at the vendor machines. Only tourists do. They pay for their ride using a card payment system similar to our Touch 'n Go. Since usage of Touch 'n Go among Malaysian commuters are still low, the government's decision to give fare discounts for Touch 'n Go users starting next year are timely and most welcomed.
• Door openings of their trains are wider as compared to ours. This eliminates the problem of packing the exit door when commuters are still coming out of the trains. Simple solutions like this do go a long way in eliminating such petty problems. It does come down to the commuters own attitude while using the service as well.
• A network of rail system is certainly incomplete without buses. There are lots of buses interchange at the MRT stations. You only need to know which station to go and the rest of the journey will be with the bus. There are certainly not many bus interchange within our rail system. This need to be improved if we want to encourage more commuters to use the public transport. And the bus interchange should be a proper one. Not just a mere bus stop.

These are among the findings that I could gather from my one day visit to Singapore. I plan to forward these suggestions to the Department of Railways for improvement of our public transportation system. Should you have any other suggestions, please include them in the comments section. I would compile and send all of them.

For a better public transportation system.