If you invest in a unit trust or fund, your money is pooled with money from other investors and invested in a portfolio of assets according to the fund’s stated investment objective and investment approach.
This collective investment fund is managed full time by professional fund managers. An investment portfolio typically includes equities, bonds and assets.
A unit trust is a three-way relationship among the manager, the trustee and the unit holder. The manager manages and operates the unit trust fund, the trustee holds all the assets and the unit holder is the investor.
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Why invest in unit trust funds?
Funds invest in a diversified range of assets. A fund’s diversified portfolio means risks can be better spread over the assets in the fund. The poor performance of any one asset in the fund is less likely to have a major adverse impact on your investment as a whole.
Funds also provide access to assets or markets which may be difficult for you to invest in directly. Also, for a smaller amount of money, you can invest in a diversified portfolio of assets which could cost you more to buy if you had to pay for each asset in the fund individually.
There are many funds to choose from. You can select a fund or a combination of funds to cater to your specific investment objectives and risk tolerance. For example, if you are nearing retirement and have a low tolerance for risk, you may consider funds whose objectives are capital preservation and income generation. On the other hand, if you are looking for capital appreciation and are willing to accept higher risks, there are also funds that focus more on growing your capital rather than generating income.
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