Different types of unit trusts


Unit trusts provide investors with an avenue to invest in stocks and shares. Over one million South Africans already have total unit holdings worth more than R12,8 billion. They know that unit trusts are an attractive way of investing on the stock exchange.

Unit trusts reduce the risk of investing in shares. Instead of buying one or two shares, investors pool their money, thereby creating a substantial fund. This fund (or unit trust) has professionals managing it and investing in a wide range of shares. If one share in the fund performs poorly, the other shares should be able to maintain the value of the investment.

To invest in unit trusts it is essential to analyze one's needs and priorities before making any decisions. Different types of funds can satisfy individual needs:

General equity funds

These provide growth by investing in a spread of different shares, across all sectors of the JSE. For the first time investor it would be wisest to invest in one of the well-established general equity funds which usually perform well against other forms of popular savings and are less risky than the specialist funds.

Specialist equity funds

These also focus more on growth instead of income. The investments can be in a specific sector of the market that may be performing particularly well (for example the mining sector or industrial sector). Because the focus is on single sector, the risk is higher as the growth of the fund depends solely on the performance of a single sector of the market. These funds are suitable for the investor who has a bullish view on a specific sector of the market.

Income funds

These are reasonably secure investments in Gilts, government stocks and fixed interest securities. Income funds provide investors with an income - with a regular payment rather than high capital growth over a long period of time.

Income payments from all unit trust investments can be twice yearly or quarterly, or automatic reinvestments can be made for you. We recommend reinvestment of income to ensure maximum capital growth in the equity funds.

When deciding to invest in unit trusts it is important to remember that growth is not immediate and you should regard it as a medium to long-term investment. Most unit trust companies recommend an investment period of at least five years. This enables the investment to overcome stock market fluctuations.

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