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Unit trust is a company that pools money from a group of people with common investment goals to buy securities such as stocks, bonds, money market instructments, a combination of these investments, or even other funds.
The collected holdings of these securities will form a portfolio. Each share, or unit, represents an investor’s proportionate holding of the portfolio and their proportionate entitlement to the income generated by these holdings.
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| Why buy Unit Trusts? |
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 Professional Management |
| Unit trusts are managed by professional fund managers with expertise and experience in investments. They will monitor your investments on a day-to-day basis and make decisions based on research and analytical tools that you may not have access to. |
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| Diversification |
| A unit trust invests in several stocks and bonds in its portfolio from different companies and often from different industries or regions. This means that poor performance of any one security or business sector is not likely to have a major adverse impact on your investment as a whole. |
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| Windows of investment opportunities |
Investing in unit trusts not only allows one to gain access to overseas markets at ease, it also allows individuals to invest in products that might not be affordable. For instance, some bonds require a minimum investment of around $100,000. Individuals might have difficulties coming out with the lump sum. Unit Trust is a good alternative for investors to participate in these bond exposures at a relatively lower amount.
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| Lower costs |
| Costs associated with buying units in a mutual fund are lower than buying individual stocks and bonds on your own to build a diversified portfolio. This is so as the costs of accessing extensive research, as well as administrative, operating and trading expenses are spread among thousands of unit trust investors. |
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| Liquidity |
Generally, unit trusts are open-ended investments and investor can buy and sell on a daily basis (unless otherwise stated, some funds are traded on a weekly or monthly basis).
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| The downside of investing in Unit Trusts |
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| Entrusted control |
| Investing in a unit trust, you give up control over the choice of individual bonds, shares and other assets that go into the fund, as the fund manager will make these decisions for you. This in turn means that specific needs of individual investors will not be considered. |
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| Low risk does not mean no risk |
Similar to other investments, there is always an element of risk investing in unit trusts. Although, risks are relatively lower as compared to stocks and shares, it is not eliminated entirely. Hence, there will still fluctuations in the market price of your unit trust. Unit Trust are not capital protected investments.
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