What are Unit Trust Investments?
Unit trust investments are pooled investments in a unit trust.
Unit trusts offer a great opportunity for a diversified investment in the stock market, while at the same time spreading risk by having the potential to invest in many companies and asset classes. In this, you also have the services of a professional unit trusts manager.
Unit trusts are also termed ‘collective investment schemes’. As the word ‘collective’ indicates, a unit trust is a scheme where a large number of individuals can combine their money, entrusting it to a fund manager who buys shares in a wider range of companies, and pools these in a fund. As an investor you can buy ‘units’ in the fund.
The advantage of spreading the units across different companies is that your risk as an individual investor is minimised. As your unit trust investment is spread across many individual company shares, it is likely that, if one company does badly, and the other does well, your losses will be balanced out.
A unit trust investment offers you a means of accessing investment in businesses, with your money in the hands of a professional manager who understands the scope and possibilities of the stock markets. Furthermore, by pooling together the cash of many investors in the unit trust, investments become feasible which would not have been available to the small or individual investor.
Discuss unit trust investments with one of our investment advisers on 0800 678 5929
Or try our investment risk profiler to discover which investments suit you best.
Unit trust investments open foreign markets
Unit trust investments can also offer the individual access to international investments in foreign markets which, again, are possible only because of the pooling together of a large number of individual investments into a sizeable fund. Again, due to the principle of diversification, investment risk can be significantly reduced.
Dealing with the various procedures of buying and selling shares, and trading on various global stock markets are, again, part of the skill of the professional manager of unit trust investments.
Many unit trust investments have specific investment objectives, or a specific geographic focus. Some limit themselves to investing mainly in the UK, some state that they will invest only in North America, and so on. In each case, the fund has trustees who safeguard the assets of the fund, and ensure that the person managing your unit trust investments adheres to these objectives.
When you place your money in unit trust investments, you are allocated a certain number of units in the fund. The number you receive will depend on the unit value at your time of entry. When additional individuals make unit trust investments, additional units are created in the unit trusts, each at the unit price at that particular time. As there is no limit to the number of units or investors in the unit trust, the unit trust is known as an ‘open-ended’ investment company.
Please use our investment risk profiler to discover which unit trust investments suit you best.
The costs of unit trusts investments
Unit trust investments involve an initial fee when buying the units, and an ongoing, usually annual, management fee as well. These costs will vary among the various unit trusts and unit trust investments.
Given the global and diversified nature of unit trusts investments, it is important to seek financial advice to ensure that the unit trust or unit trusts you choose really are right for you. An important first step in this process is to establish your attitude to risk. Some investors may feel comfortable with a high level of risk, while others would prefer not to have unit trust investments the value of which are likely to rise or fall considerably in the short term.
