Unit Trust Basics

Balance funds

For the moderately aggressive investor.

The objective of balance funds (also called mixed asset funds) is to provide both growth and regular income to the investor. Such schemes periodically distribute a part of their earning as income to the unit holder.

They generally invest up to 60% of its Net Asset Value into stocks and shares of companies listed or unlisted in Bursa Malaysia. With the rest of the NAV going into cash deposits or fixed-interest securities like bonds, government securities etc. The risk exposure is therefore reduced in the event of adverse share-market correction since only up to 60% of the NAV is exposed to stocks and shares.

In a rising stock market, the NAV of these schemes may not normally keep pace with the rise. Likewise,  when the market falls it will also not fall at the same pace. Balance funds are suitable for investors looking for a combination of income and moderate growth over the medium to long term (i.e. 3 to 5 years and more).

In Malaysia, Balance Funds can be further sub-divided into:

• Balance Growth Funds,
• Balance Income Funds.
• Balance Global Funds.
• Balance – Emerging Markets.
• Balance – Syariah.

This simply means that the choice of stocks and shares are of growth-biased companies or of income-biased companies. The former giving a greater potential of capital appreciation.

Balance funds are appropriate for the Moderate Risk Investor who is willing to forgo the higher potential capital gains reward in order to have lesser volatility in his/her investments.

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