Unit Trusts… the centre of the financial universe

What are they?

For as little as a few hundred rand, you get to invest into a large investment pool managed by a fund manager in accordance with a specific objective. The investment is priced in units (hence the name) based on the value of the fund. There are around a thousand to choose from locally, and thousands more globally.

They are protected

They are carefully regulated. The fund is held in a trust and is not owned by the fund manager or service provider. This offers protection for your investment.

Unit Trusts are used in most investments such as pension funds, endowment policies and retirement annuities in varying combinations.

They are easily accessible

The main benefit is their liquidity. They can be cashed in at any time, and the fund manager has to pay you the unit value at the closing price on the day you sell. This provides easy access to your funds when you need them.

They provide access to different asset classes

Let’s say you want to invest in property. You can buy a building and manage the project on your own, with all the challenges that come with it. Alternatively, you can invest in a unit trust which focuses on property portfolios managed by experts. You can sell this at any time and you don’t have the hassle factor whilst you are investing. Selling is easy as you get the day’s closing price of the unit. Selling actual property takes a lot longer, as you need to wait for a willing buyer, and then the long process of changing registration before getting your money.

They are cost effective

There are no fees applied to selling units. However, you do pay a fee when buying them, and while you are invested, the fund manager, administrator and advisor (if you used one) will all charge you fees whilst they are actively involved in the investment. These fees are normally a specific percentage of the value of your fund, and are collected monthly from your investment.

Unit trusts provide access to sophisticated investments with ease and protection. However, the choice of funds needs homework and often needs the help of an financial advisor.

Listen to the audio below for more information...


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