Unit Trust vs Open Market Stocks: Which Is Right for You?

Many people are keen to start investing, but not everyone understands the difference between unit trust (amanah saham) and open market stocks. Both can deliver good returns, but the approach, risk, and level of control are very different. So before you put your money in, you need to be clear about what you are actually buying. Let us look at the real differences between these two types of investment.

1. Investment Approach: Who Manages Your Money?

With unit trust, you do not buy company shares directly. You buy units in a fund managed by professional fund managers such as Public Mutual, Principal, or ASNB. The fund then invests in various stocks, bonds, and other assets. You give them the mandate to handle everything. On the other hand, with open market stocks, you buy shares of companies like Maybank, Petronas Chemicals, or MR DIY yourself through a broker platform. You decide when to buy, when to sell, and which stocks to pick. Full control is in your hands.

2. Risk Level and Returns: Depends on Your Style

Unit trust typically carries lower risk because your money is invested in a diversified manner (spread across many stocks and assets). However, returns may be slower as the fund follows a conservative strategy.

Open market stocks are riskier – if you pick the wrong stock, you could lose big. But if you have the knowledge and the right strategy, the profit potential can be much higher than unit trust.

3. Knowledge and Time: Who Should Choose Which?

Unit trust is suitable for passive investors. This means you do not need to analyse companies one by one. The fund manager does all of that for you. You simply choose a fund that matches your investment objectives.

Open market stocks are for active investors. You need to read financial reports, study market trends, look at technical analysis – in short, you need interest and effort.

4. Costs and Fees: Do Not Overlook This

Many people overlook the fees. Unit trust comes with sales charges (2-5%) and annual management fees (1-2%). All of this is deducted from your returns.

Open market stocks only have a brokerage fee (usually below 0.5%). The more you invest on your own, the more you save on fees.

5. Liquidity: When Can You Sell?

Unit trust cannot be sold at market price whenever you wish. It is sold based on the daily NAV (net asset value) price. If you sell today, the actual price is calculated based on the NAV price later that evening.

Open market stocks can be sold immediately at the current market price. If you see the share price rise this morning, you can sell right away and get your money.

6. Starting Capital: You Can Start Small

Both options can be started with a small capital. Unit trust can be started with as little as RM100. For open market stocks, depending on the share price, you may start with as low as RM10–RM100, as long as it is enough to buy 1 lot (usually 100 units).

So, Which One Is Right for You?

If you are someone who is busy, not keen on analysing the market, but still want to grow your savings – unit trust can be a safe choice. But if you enjoy learning, love analysis, and are willing to take a bit of risk for higher returns – open market stocks are more appealing. You do not necessarily have to choose just one. Many smart investors use a combination of both to balance risk and returns.

Frequently Asked Questions (FAQ)

What is the main difference between unit trust and open market stocks?

Unit trust is managed by professional fund managers and is suitable for passive investors. Open market stocks require you to do your own analysis and buy directly on Bursa Malaysia, giving you full control but requiring more knowledge and time.

What is the minimum capital to start investing in unit trust and open market stocks?

For unit trust, you can start with as little as RM100. For open market stocks, you can start from as low as RM10 to RM100, as long as it is enough to buy 1 lot (usually 100 shares).

Can I invest in both unit trust and open market stocks at the same time?

Yes, many smart investors use a combination of both to balance risk and returns. Unit trust provides stability while open market stocks offer higher return potential.

Which is more suitable for a new investor with no experience?

If you are busy and not interested in analysing the market in depth, unit trust is a safer choice. However, if you enjoy learning and are willing to take some risk for higher returns, open market stocks are more appealing.