Unit trusts are popular because they're managed by experts and they offer diversification. Learn a bit more about how they can grow your wealth.
What are unit trusts?
A unit trust is a form of investment fund. A pool of money collected from investors worldwide is managed by a fund manager, who will use it to invest in different assets for steady and long-term growth. Each unit trust has a specific focus. This can be a geographical location or a business sector. Fund managers will then pick suitable assets and regularly review the performance.
Depending on the unit trust's objective, some managers will pick riskier assets for better return potential, while others may opt for something safer. Since you're investing in multiple assets at once as small fractions, you won't feel as much impact if one of the investments does poorly, compared to investing in just one asset.
Unit trusts have several advantages, including:
- Professional management by experts who are dedicated to the pool's growth
- Access to global opportunities otherwise unavailable for individual investors
- Risk diversification as the fund comprises multiple assets
But there are a few considerations:
- Funds have annual management fees
- They're medium- to long-term investments, and might not be suitable for short-term investors
- Like all other investments, there will be risks involved when you invest in unit trusts
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What types of unit trusts can you find?
Here are a few of the most common types of unit trust funds:
This type involves investing in company stocks. Fund managers will seek out companies from different locations and sectors, such as technology, property and finance.
This type invests in a portfolio of bonds from a specific geographical location or sector. It generally has lower risks, provides income to investors but gives lower potential returns compared to equity funds.
Balanced or multi-asset funds
A combination of different asset types, such as equities, bonds and cash, this is good if you are looking for extra diversification in your portfolio.
The income funds focus on providing regular income or dividends to investors and such approach can be found in equity, bond, balanced or multi-asset funds. If you're looking for a regular source of extra income, income funds are the way to go.
Money market funds
This type involves investing in cash equivalent instruments, such as treasury bills or bank promissory notes.
There are many other kinds of funds available, such as property funds, technology funds and single-country /region funds.
Now, where to find them?
Contact us if you still have questions. Our wealth managers are happy to help.