What is a Unit Trust?

You might have heard people talking about unit trusts or telling you to invest in unit trusts. But do you actually know what a unit trust is?

A unit trust is an investment product that pools the money of many individuals and invests these funds into a portfolio. These portfolios can consist of several assets such as shares listed on the JSE, government bonds and property.

These portfolio’s are managed by investment managers whose only focus is to maximise your returns, which means you do not need to be an expert in investments to get a good return on you money. This does not mean that unit trusts will always make a profit for you, they price of unit trusts will go up and down all the time and you might sell them at a loss. But it does give you a chance to invest in assets that you might never have had the money to afford to invest in.  Investing in unit trusts also allows you to spread your risk. Normally the longer you leave your unit trusts and stay invested, the more likely you are to get a good return on your investment.

How does buying one buy into unit trusts you might be asking? Well unit trusts are priced per unit on a forward pricing basis. What this means is that when you buy or sell units you do so at the closing price of that day. The price of the unit trusts are constantly changing from one day to the next. The price is determined by the net asset value (NAV) of the portfolio’s underlying investments, whether they be shares, bonds, property or other investments. When you invest in a unit trust, you are allocated units according to the amount of money you invest and the price of the units on the day you buy them.  There is no time allocation set to how long you must keep unit trusts, you may keep them for a couple days or for several years. One of the main advantages is the fact that you do not sign a contract committing yourself to invest for a certain period. You have easy access to these funds in that you should be able to get your money back from between 24 hours to 3 days depending on what investments you have and who you invested with.

While you might not need expert advice in investing when it comes to buying unit trusts, knowing when to buy and when to sell can always be hard. That is why you should contact one of our financial advisors today and get help in understanding more about Unit Trusts and when and how to buy!