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What are the benefits of investing in a unit trust fund?
Key takeaways
- There are many benefits to investing in a unit trust fund. Some of the key ones include:
- Funds are well regulated;
- Diversification;
- The services of a professional investment manager;
- Affordability; and
- Access to your investment.
There are a number of advantages to using a collective investment scheme to invest. The key ones are:
Well regulated: Collective investment schemes are well regulated so you can be sure your investment is safe and well managed in terms of specific legislation for these schemes.
Diversification: Your investment is diversified across a number of shares, bonds, property shares or money market instruments. You will get access to anything from 15 to 60 securities.
Choice: You have a wide choice of funds designed to meet different investment needs and investment time horizons.
Professionally managed: You get to enjoy the benefits that come with an experienced professional fund manager - who may also be backed by a team of highly qualified investment analysts - investing for you without paying the full costs of these services. The cost is shared by all investors in the fund.
Affordable: The minimum investment amounts are often more affordable than they would be if you tried to invest in shares or bonds or any other listed security as an individual.
Transparency: Funds are obliged to make certain disclosures about, for example, the risks of investing and the fund holdings. This makes the fund transparent and makes it easier for you to understand your investment.
Accessible: Unit trusts are obliged to buy your units back from you when you want to sell. This makes it possible for you to get your money out quickly if you need to – you do not have to wait for a seller to be found. Many funds are suited for longer-term investing which may make a decision to disinvest a bad one, but if you are in
need of the money, you can access it at any time as long as you are not invested in a unit trust fund through another financial product like a retirement fund that has its own rules.
Legally protected: Investments in unit trust funds have certain legal safeguards aimed at protecting you against your investment not being well-diversified and against any business risks within the unit trust management company or asset manager. Read more: Are there any restrictions on your unit trust fund? and How are you protected when you invest in a collective investment scheme?
Flexible: You can invest a lump sum or commit to invest a regular amount each month, but unless you are investing through a long-term insurance product like an endowment or a retirement annuity, you are not bound to contributing for a certain period. This means you can stop and restart your investment whenever you need to – for example, if you lose your job. You can also switch between funds if your investment needs change.
