A Unit Trust is a form of a collective investment. Unit Trusts have fund managers that help manage the funds securities by investing the funds (or units) of the trust on behalf of investors. A Unit Trust offers access to various underlying assets such as bonds, shares, property and more.
Unit Trusts can be bought through a broker, popular trading platforms like EasyEquities or even your bank’s app. The fund manager’s goal is to grow the value of the trust, essentially making the value of the units (shares) worth more.
This type of investment is considered a great starting point for new investors, as these don’t need to be monitored as much as single shares and usually are lower risk than doing it yourself. However, be aware that Unit Trusts often incur higher fees than other investments such as ETF’s or buying shares. These fees cover management and other operating costs involved – so be sure to check these fees before investing.
The unit (share) price of trusts are updated after the stock market has closed for the day.
Great! I want to start investing in Unit Trusts
So now that you’re interested in Unit Trusts, and not sure which one to go with. There’s a great tool that EasyEquities provide to compare funds to help get you started (https://wealth.easyequities.co.za/unittrustsfinder).
With this tool you can compare things like the fees, securities, performance and more about the fund and the fund manager.
To find the right fund for you, be sure to understand the securities that the fund holds – such as bonds, property, shares in a company or certain sector and so on. If you want something more conservative or higher risk but possibly higher rewards. The choice is yours!
Some areas I look for when choosing a Unit Trust are:
- Fees – This is quite important to me. I try to keep to Unit Trusts that offer around 1% or less (sometimes ones that may be slightly higher but remember this will affect your investments).
- Inception Date – When was the fund created. Sometimes older funds can be great to show stability or a good track record.
- Company – Who’s the fund provider, such as Satrix, Allan Gray or Ninety One.
- Securities – What the fund invests in, it’s usually a mixture of shares. This determines the risk of the fund and may persuade you in investing into the fund, this is entirely up to you.
Some Unit Trusts I’ve been investing in, at the time of this writing are: Allan Gray – Balanced Fund, Ninety One – Diversified Income.
This is just the tip of the iceberg into your investment journey, but hopefully this has made it a little bit easier and less daunting to get started with investing.