Friday, March 7, 2008

Unit Trust Investment - The Basic

Unit Trusts offer you the ability to invest in a mix of the major asset classes - equities (shares), bonds and short-term money market instruments. When you invest in a unit trust you are effectively lumping in your money with other investors and paying a fund manager to invest it wisely according to a specific mandate.

Investors can invest much smaller sums of money in a unit trust and thus achieve a greater level of diversification than is usually practical when buying shares through a broker.

Investors were encouraged to buy for the "long term" (five years) and had a handful of unit trusts to choose from. The unit trust industry has changed enormously over 30 years. There is a broad choice of funds offering different combinations of capital growth and income across different market sectors. Some funds are now designed specifically to benefit from market timing and sector rotation.

Unit Trusts though, should generally be viewed as medium-to-long term investments, reducing your exposure to short-term volatility and risk and allowing you to take advantage of underlying trends in market sectors.