Unit Trusts

A unit trust is a professionally managed investment fund investing in a portfolio of financial assets. Unit trust holders own units in the funds. Local funds are constituted by a trust deed. The trustee acts as the custodian of the fund’s assets.

Unit trusts have a good number of advantages. One of them is that you are able to purchase a diversified mix of securities with a smaller amount of money. They provide access to difficult or expensive assets or markets. They offer a combination of funds. One is able to generate income using unit trusts. There are some risks as well, associated with unit trusts. The funds are not capital-guaranteed. There are fees and charges payable regardless of the performance of the unit trusts. There can be a possible poor performance from the fund manager. The funds invested in emerging markets are subject to political, legal and foreign exchange risk.

What should be your considerations when selecting unit trusts? Do monitor the fund’s performance regularly. You should find out about the type and amount of fees payable. You must choose a fund that meets your investment objectives and risk profile. Also, a note must be taken that there is no penalty for fund purchase cancellation within, usually, 7 calendar days. One should exercise caution when selecting unit trusts.

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