What is a unit trust?
Simply put, a unit trust is another way to invest your money. You can invest in a unit trust fund through a financial aid agent such as your bank, a broker or an investment management company. This fund is a pooled fund which means that it is a group of investors that have combined their money in order to earn a bigger amount of profit altogether. You will then buy units or shares into the fund. The deposit or amounts of money deposited into this account determines the percentage of share you have within this fund.
How to invest in a unit trust
The best way to do this is to go directly through a service provider that offers low costs. There are companies that do not permit investing directly through them. Another option of investing in a unit trust is within assets like platinum or large companies.
Some benefits and drawbacks of unit trusts
Many first time investors face the struggle of not really knowing if this is a good option or not. Here are a few benefits as well as drawbacks to help clarify things.
- Easy to buy and sell
- Small amounts monthly; no need to invest large the first round
- Well regulated
- Some unit trusts charge a lot of money
- Not as liquid as other types of investments
- Not very personal
What to remember when investing in unit trusts
Before making your choice of investment, have a look at the points below. You might want to consider the following:
- Know and understand the state of your finances - Calculate how much you can afford to invest and if that same amount can afford to be lost.
- Choose your financial advisor wisely - Make sure to do a proper check on the possible candidates. Make use of online reviews or references to avoid scams and to make sure you are taking advice from someone who really does understand the industry.
- Don’t invest in everything - The more places you invest will not determine the profit you will get. Investing wisely will add onto your profit.
- Read the fineprint - ALWAYS read the fine print before signing anything.