Whether you want to invest R500 or R100 000, you might like to pool your money with others rather than go it alone. That’s exactly what unit trusts offer.
A unit trust pools money and invests in shares, bonds, money market instruments and other investments. The pool is then divided into equal portions called units.
Each unit has a price or Net Asset Value (NAV) based on the value of all the assets held in the fund. Your units increase in value as the fund’s overall performance improves.
For a monthly contribution or a lump sum contribution, the investor gets a certain number of units, as the underlying investments go up or down, so does the unit price.
The fund manager will charge a small fee for the management for the fund. There is risk attached to these unit trusts, but with exposure to growth assets, the chance of outperforming inflation is better.
What are the different types of unit trusts?
Equity funds
These are funds in shares listed on the stock exchange. At least 80% must always be invested in listed securities. For example, a South African equity fund invests in shares traded on the JSE, while a foreign equity fund gives you exposure to international markets.
The advantage is that equity funds can focus on certain sectors, for example a fund might only be interested in investing in the technology sector on the JSE.
Interest-bearing funds
This is an investment channel where investors can benefit from investing in a diversified portfolio, which includes cash holdings and fixed deposit instruments, Treasury bills, government bonds and corporate bonds. Unit holders benefit from investing in a range of investment options while having the flexibility to disinvest funds according to financial needs.
Multi-asset funds
Multi-asset funds are able to invest across the investment landscape and may include equities, bonds and cash. This provides a greater degree of diversification than investing in a single asset class.
Real estate funds
These are funds that invest in listed property shares in the JSE Real Estate sector or on international stock exchanges. They mainly invest in real estate investment trusts (Reits) listed on the local bourse.
They can also invest in property unit trusts. Reits are companies that own or finance income-producing real estate across a range of property sectors.
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