Q:

What is a unit trust fund and how does it work?

A:

Simply put, a unit trust fund is a way for you to invest your money.  You can invest in a unit trust fund through financial services providers such as a broker; an Investment Management Company or in some cases through your bank. A unit trust fund is a pooled resource, which means that it allows a group of investors to combine their cash and invest it.  Think of it like going in on a group gift. Taken altogether, those investments are called the fund’s assets.

So how does it work?

A unit trust fund is made up of equal shares which are called “units”; these “units” have a price called a Net Asset Value. While you as an individual invest in a unit trust fund, the fund itself is run by a fund manager, whose aim is to grow the overall value of unit trust fund.  The fund manager does this by investing the fund’s assets, usually by buying stocks, bonds, or a combination of these two securities which are listed on the Stock Exchange. These stocks or bonds are often referred to as a fund’s “holdings” and all of a fund’s holdings together are its “portfolio.”

A fund’s type depends on the kinds of securities it holds. For example, a small-company stock fund invests in the stocks of small companies. What you get as an investor or shareholder is a portion of that portfolio. Regardless of how much or how little you invest, your shares are the portfolio in miniature.

Source: Morningstar

It is never too early to start investing, but it is also never too late. At Sharenet, we offer a wide range of investing opportunities and will help you tailor your portfolio to your needs.

Visit www.sharenetinvestments.co.za for more information or contact our investment team on investments@sharenet.co.za.

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