Aliyawanders

Yesterday, I met a friend who’s going through a rough patch in her career – her future feels uncertain, and she’s understandably stressed. During our chat, she shared how a unit trust agent approached her at the café she is currently working at. The agent, initially pretending to need her mobile number for venue bookings, later tried to convince her to open an emergency fund using unit trust investments.

Now, as a financial planner, I was taken aback. Even with my knowledge, I’ve never advised anyone to use unit trusts for emergency funds. The risks are just too high. So, let’s talk about why unit trusts don’t fit the bill – and highlight better alternatives, like Amanah Saham Bumiputera (ASB) and Tabung Haji, which provide more security and stability.

Why Emergency Funds Need Stability

Your emergency fund is your financial safety net, so it needs to tick a few key boxes:

1. Capital Guarantee – The amount you save must not lose value.

2. Quick Accessibility – You should be able to withdraw the money immediately when needed.

3. Risk-Free – Emergency funds are not the place to chase high returns or gamble with market fluctuations.

Unit trusts, on the other hand, can’t guarantee these qualities.

So, What Are Unit Trusts?

In simple terms, unit trusts pool your money with other investors’ money, and fund managers use it to invest in things like stocks, bonds, or money market instruments. Sounds fancy, right? But here’s the kicker – it’s meant for growing your money, not stashing it away for emergencies.

Why Unit Trusts Don’t Work as Emergency Funds

Here’s the issue with using unit trusts:

1. Market Risk

Unit trusts invest in stocks, bonds, or other assets that fluctuate in value. Imagine saving RM10,000 but needing it during a market downturn when your fund is worth only RM8,000. That’s a financial hit you don’t want to deal with during an emergency.

2. Redemption Delays

Unit trust redemptions can take 3-7 business days—or more. If your car breaks down or you face a medical emergency, waiting for your money isn’t an option.

3. Sales Charges and Fees

Opening a unit trust account typically comes with upfront sales charges (usually 3%-6%) and ongoing management fees. That eats into your returns, making it less effective as a savings vehicle.

Unit Trusts: Not the Villain, Just Miscast

Let’s be clear – unit trusts aren’t bad. In fact, they’re great for long-term investments like retirement, your kid’s education fund, or even a dream vacation fund (I’m still dreaming of staying in a glass igloo and watching the aurora). They’re just not the best choice for emergency funds because they lack the stability and quick access you need when life throws you a curveball.

Better Alternatives: Amanah Saham Bumiputera and Tabung Haji

When I advised my friend, I highlighted two fantastic alternatives for emergency funds:

1. Amanah Saham Bumiputera (ASB)

ASB is a capital-guaranteed investment vehicle for Malaysian Bumiputera. Here’s why it’s a solid choice:

• Capital Guarantee: Your savings won’t lose value, even in turbulent times.

• Fixed Unit Price: Unlike unit trusts, the price per unit doesn’t fluctuate.

• Consistent Dividends: ASB generates income from low-risk investments in bonds and equities. These returns are distributed as annual dividends, which are often higher than regular savings account interest.

2. Tabung Haji

Tabung Haji is another great option, especially for Muslims who plan to perform the Hajj. It’s more than just a savings account—it’s a secure investment vehicle.

• Capital Guarantee: Like ASB, the money you save is protected.

• Shariah-Compliant Returns: Tabung Haji invests your funds in low-risk, Shariah-compliant ventures like real estate, plantations, and halal manufacturing. The profits are shared with account holders as annual bonuses.

• Convenience: Withdrawals are fast and easy, whether for emergencies or planned expenses.

How These Funds Work Behind the Scenes

Both ASB and Tabung Haji generate returns through carefully managed investments.

• ASB’s Strategy:

ASB’s fund managers diversify investments into low-risk bonds, blue-chip stocks, and government securities. The goal is to achieve consistent, stable growth without exposing investors to high volatility.

• Tabung Haji’s Approach:

Tabung Haji uses its pool of funds to invest in profitable, halal businesses, including real estate projects, agriculture, and Islamic financing. They focus on long-term growth and low-risk ventures, ensuring steady annual payouts for their savers.

A Teachable Moment

I explained to my friend why ASB and Tabung Haji are much better choices for her emergency fund. These vehicles are capital-guaranteed, stable, and designed to grow your savings steadily without exposing you to the highs and lows of the stock market.

The agent who approached her might have meant well, but pushing unit trusts as an emergency fund shows a lack of understanding about their purpose.

The Final Takeaway

Building an emergency fund is about peace of mind, not profit. While unit trusts are great for long-term goals like retirement or education, they’re unsuitable for emergency savings. Instead, consider ASB or Tabung Haji, which offer the security, liquidity, and returns you need in a financial safety net.

Now that we’ve cleared that up, what’s your next financial goal? Ready to start your emergency fund, or are you eyeing some long-term investments? Let’s plan wisely!

If you’re looking to secure your finances and build an effective emergency fund tailored to your needs, I’d be happy to guide you. As a financial planner, my goal is to provide clear, practical advice that helps you make informed decisions. Feel free to reach out for a consultation! You can contact me directly at 0122231623 or click on this WhatsApp link to get in touch instantly. Let’s work together to achieve your financial goals!

Thank you for enjoying my articles, photos, and videos! I truly appreciate your support. To maintain the integrity of my work, please refrain from reproducing, copying, or sharing any of my content without my written consent. If you’d like to use something, feel free to reach out to me directly, I’m more than happy to discuss it with you. Let’s keep it professional and respectful.