Why do so many people choose unit trusts?

Savings and investments. Unit trusts. Equity funds.

With the combination of industry jargon and the sheer volume of options available, it’s easy to see why the man on the street will glaze over when the subject comes up.

However, this is something that each of us should be thinking about. The future comes – whether we want it to or not – and South African statistics relating to saving for the future are looking very bleak indeed.

Perhaps you are considering a savings fund – but are not sure where to start?

What are Unit Trusts?

A unit trust is a vehicle which offers the man on the street access to blue chip shares. Blue chip shares are in demand, and therefore expensive – such as SAB.  In fact, some are prohibitively expensive and the man on the street simply can’t get in at ground level.

This is what makes unit trusts such a useful savings vehicle. Fund managers use money from a large pool of individuals to obtain solid, high-performing shares on the JSE. The management company will then purchase shares on behalf of the investors and combine them in a portfolio, divided into many equal “units”. Units trusts usually represent the four main sectors of the stock exchange, namely; gold, other mining, mining houses and industry. A fifth sector – liquid assets or cash – would complete the trust portfolio.

An individual can invest a single lump sum or invest smaller amounts on a monthly basis, which makes this savings method viable for almost anyone.

What are the risks?

When investing in shares there is always an element of risk. Share prices can fluctuate which would increase or decrease their value on a daily basis. A good management company would invest in a healthy spread of products which means that a variation in one would not affect the overall value of the portfolio.

The advantages of unit trusts.

The obvious advantage is that these give individuals wealth creation opportunities regardless of their financial status. No specialist knowledge is required in order to invest, and the investment bar can be set low enough for most people to afford.  A qualified financial professional would oversee the fund with an eye on the firm legal frameworks that exist to care for the individual investors.

There are now more unit trusts in the world than there are stocks – which can be quite overwhelming when deciding where to place your money.

Whether you need more information on unit trusts or would like investment advice, our experienced team are available to assist. Contact us today to find out how to secure your future.