Unit Trust
Unit Trusts are a form of collective investment that allows investors
with similar investment objectives to pool their funds to be invested in a
portfolio of securities or other assets.
A professional fund manager then invests the pooled funds in a portfolio
which may include the asset classes listed below:
• Cash
• Bonds & Deposits
• Shares
• Properties
• Commodities
Unit holders do not own the securities in the portfolio directly. Ownership
of the fund is divided into units of entitlement.
As the fund increases or decreases in value, the value of each unit
increases or decreases accordingly. The number of units held depends on the
unit purchase price at the time of investment and the amount of money
invested.
The return on investment of unit holders is usually in the form of income
distribution and capital appreciation, derived from the pool of assets
supporting the unit trust fund. Each unit earns an equal return, determined
by the level of distribution and/or capital appreciation in any one period.
Unit trust investors are typically those with savings to invest, who neither
have the time nor the inclination to hold portfolios of direct investments
or shares. Rather, they prefer to invest in a secure, reputable investment
vehicle which suits their purposes. Unit trusts allow investors to have easy
access to a wide range of investments not normally available to them.
As investors seek to maximise returns on their financial resources, unit
trusts provide an ideal way for them to gain exposure to investments that,
in the long run, should produce returns superior to cash savings and fixed
deposit investments.
The cost of these potentially higher returns is of course the risk that
accompanies the investment. In the short term, the certainty of investment
returns of most unit trust products is less than those offered by fixed
deposits. However, in the medium to long term (i.e. 3-20 years), unit trust
investments generally provide better returns at acceptable levels of risk.
undo Other Banking Products