What is Unit Trust and its Importance as Saving and Investment Tools

November 18, 2020

Unit trusts are funds legally set up as a trust. It offers a diversified range of investment products for different investment objectives. You pool your money with other investors with similar objectives. It is managed by experienced investment managers by investing it in different assets in financial markets, including a wide range of local and international bonds, equities, property, and money market instruments. More than that, you’ll find a variety of benefits whether you’re only starting as an investor or looking for other avenues.

Professional fund managers invest the pooled funds in a portfolio which can include the asset classes below:

  • Cash
  • Properties
  • Bonds & Deposits
  • Shares
  • Commodities

Why it’s beneficial to investors like you

Unit trusts are very easy to access with no minimum investment periods, therefore you can check your money within 48 hours. Although note that if you’re planning to invest long term then do not touch your investment unless necessary. Unit trust allows you to invest with a minimum lump sum depending on your chosen service provider.

Also, you always know exactly how much you own since you receive several units based on how much you invested. Each unit of trust has a cost per unit (or net asset value). You can regularly check how many you have as well as check their value in the paper daily.

You get pretty good value as well. Historically, annual management fees are competitive and clearly explained. Also, the initial fees are low and negotiable with your chosen service provider. You can be sure that your money is safe since it’s held in a trust account – and not by the investment company.

With regards to tax, they are generally tax effective in terms of Capital Gains Tax since the tax is paid within the unit trust fund. As a part of a pool of investors, you can increase your buying power since your fund managers can purchase assets that you, as an individual investor, couldn’t acquire on your own.

Unit trusts also help you diversify the risk (you don’t have all your eggs in one basket). Therefore, if one range of asset classes is not performing as expected, the performance of the others can potentially compensate for this.

Unit trusts are always managed by skilled, highly qualified, and experienced investment professionals, who make the best decisions on behalf of the investors.

End Note

Historically, you are safe with unit trusts – call it a conservative investment even. It has been proven that the longer you invest and leave your money in the unit trusts, the greater the growth potential.  Start working on anything from three to five years, but the longer you can leave it there, the better.

To get started, you can check out banks that offer this investment. You can also check out your risk appetite through banks’ websites before you commit. Your investment goals and risk appetite play a huge part in your investment personality. It’s wise to choose the personality that suits you best based on what you want to achieve from your investment.

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