Questions and answers

What is a unit trust?
It is simply a pool of funds contributed to by investors, that is put into an investment scheme which is managed by a unit trust company and invested on behalf of the contributors carefully selected, financially sound, listed companies in mining, finance and industry.

How do I invest successfully?
There are five golden rules:

  • Don't invest borrowed money.
  • Only use money that can be invested for longer than three years, preferably five.
  • In an unstable or expensive market, spread your investments.
  • Don't let short term fluctuations discourage you. Stay in the market when your needs are medium to long term.
  • When your planned investment term comes to a close, start selling your units gradually and in good time.


What can you use unit trusts for?
Financing (car/house deposit). Supplementing pension plans. Loan accounts. Endowment assurance. Deferred compensation. Estate costs. Income tax relief. Buying out of interests in company.

What if I become unemployed and cannot continue to invest, will I lose money?
You can cancel your regular monthly investments and repurchase your total unit trust investment to date. Or you can cancel the regular monthly investments and leave the unit trust investment to grow as it is. You therefore cannot lose your money. However, remember that the value of your units is dependent on the underlying asset value in the unit trust portfolio.

Must I invest in monthly amounts?
No, you can also invest in lump sums whenever you wish.

What are the minimums I can invest?
A minimum lump sum investment is usually between R100 and R500 and a minimum monthly investment is usually between R20,00 and R50,00. The monthly amount can be increased or decreased at any time, subject to the minimums. This causes unit trusts to be an effective investment vehicle to build up capital and to beat inflation.

What is rand cost averaging?
This is the key to successful investing in unit trusts. When the market is in a downturn, the unit trusts are able to buy more quality shares for smaller sums of money. Your investments will then benefit enormously when an upturn comes. In effect, after you have invested over a period of time, the average cost per unit will be less than the average cost at which you bought them.

What is better, monthly or lump sum investments?
Lump sums can take advantage of times when the stock market is low or inexpensive. However monthly investments takes advantage of rand cost averaging.

Can I switch between funds and is there a charge?
You can change between funds if you think one fund is going to out-perform another fund over the next year or more. This is only done at the written request of the client. There is a charge of between 0 and 1,5%, depending on the unit trust company.

What is the difference between high growth and high income?
High growth aims to provide you with a large lump sum at the end of the ideal investment period, say five years, with smaller twice yearly or quarterly dividend payments.

High income will aim to pay you out large twice yearly or quarterly dividend sums at regular intervals, instead of aiming for a large lump sum at the end of your investment period. Of course, your income payments can be reinvested.

Why are there so many different types of trusts?
Many investors believe that one sector will outperform another. For example, you might at present prefer mining to industrial, or a top companies fund or general equities fund instead of a gold fund. You are not restricted and may invest in all of them. Alternatively you can consult your advisor for advice.

How do I pay?
Payment can usually take place by either delivering the amount physically to your nearest branch, by posting your cheque/postal order or by arranging a debit order with your bank.

Is my investment protected?
Yes. The Act stipulates the manner in which the portfolio must be spread, thus reducing the investment risk. The Act also stipulates that the money must be kept in trust, thus protecting you against fraud.

How do I sell my units?
By giving written notice. A repurchase form is available for this purpose. The units will be repurchased at the ruling price on the day the instruction is received.

Are there tax benefits?
Yes, at present there are three:

  • Capital growth - normally tax free, provided you are not classified as a dealer in shares.
  • Dividends are tax free.
  • Interest is fully taxable after the maximum amount of R2 000,00 allowed at present is deducted from your total interest income.


What happens when I die?
As with any other asset, an investment in a unit trust may be bequeathed. It has the added advantage that it can be divided on an absolutely equitable basis amongst the beneficiaries in the will.

May I invest in somebody else's name?
Yes, you are free to invest in anyone else's name, for example in your wife/husband's name, or on behalf of your children or grandchildren.

What is a buyer's price?
The buyer's price is the price at which you buy units from the unit trust company. You buy units every time you invest money in unit trusts.

What is a seller's price?
The seller's price is the price at which you sell your units back to the unit trust company. You are able to sell your units at any time.

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