The following diagram show the definition for unit trust as well as definition for mutual fund which quoted from Peter Lynch's book - "One Up On The Wall".

Unit Trust allows individual investor to provide their financial resources to it to arhieve the investment objectives that set in the guideline or deed. In mutual fund definition, it stated that it allows people with small amounts of money to invest with diversification.Investors with small amounts of money are very hard to perform diversification in the stock market.In stock market, stocks that are famous with stability, high dividends and consistent growth mostly are blue-chip stocks which have higher share price.Investors with small amounts of money cannot perform diversification to invest in other stocks after invest in such a high price stock.For examples, an investor with financial resource $1000, will not able to invest on other stock after investing in 100 unit blue chip share with price $10, assuming 100 unit is the minumum unit for that transaction.

In unit trust, after it pools finance resources of many individual investors, the fund size is big enough to perform a lot of big transaction on various type of blue-chip stock and arhieve diversification objective.

As per Peter Lynch's quote, the mutual fund is a wonder investion but it is not necessary suitable for every one.The following are types of individual that are suitable to invest in unit trust.

• Individual with minumum knowledge or totally no knowledge on investment.
• Individual with only small amount of money for investment.
  
• Individual who are ready to invest their money for long term investment with timeline at least more than 3 years.
• Individual who spend most of their time for working and family and cannot have anytime to perform research on investment or even monitor market movement.
  
• Individual who are lazy to make any decision for investment.
• Individual who cannot take high risk in share market but are comfortable with the risk in unit trust.
• Individual who are knowledgeable investor but would like to invest in unit trust as diversification on various type of investment product.
• Individual who like to invest their retirement fund(EPF) in unit trust to arhieve higher return than return on retirement fund.

If you fulfill at least two criteria of above, you are suitable to make investment in unit trust.

The following are types of individual that should not invest their money in unit trust. If you meet at least two criteria of below, you are not suitable to make investment in unit trust.

• Individual with great knowledge in investment and can invest into stock market themselves.
• Individual with big amount of money who can invest by themselves but still meeting diversification purpose.
• Individual who are looking for short term investment with timeline less than 3 years.
• Individual who have time and capabilities to do their own research on investment in detail.
• Individual who want to make their own investment decision and do not want to depend on other.
• Individual who are comfortable to take higher risk on directly investing into stock market.
• Individual who are knoledgeable investor but does not want to invest in unit trust as diversification on various type of investment product or have other better option of investment product.
• Individual who are comfortable to allow their retirement fund management party(EPF) to invest their retirement fund.

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