A unit trust is a collective investment in which investors contributions are pooled together to purchase a portfolio of financial securities, such as equities [shares], bonds, cash, bank deposits etc. The portfolio is managed by professional fund manager with the aim of growing the overall value of the 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.  (Some unit trust funds can buy more complicated security types.)  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 unit trust fund is made up of equal shares which are called “units”; these “units” have a price called a Net Asset Value. Your contributions to a unit trust are used to purchase units; each unit represents an equal fraction of the total value of the pool of invested money. Interest is calculated every day, but compounded every month. The rates tend to fluctuate, though. You can check the change in interest rates on your fund manager's website or in the business pages of the daily newspapers.

What are the benefits of investing in Unit Trust?

  • Well-regulated Unit trust funds are regulated by CMA
  • Daily liquidity: Unitholders can buy and sell their units on a daily basis
  • Provide professional Money Management. Unit trust funds hire portfolio managers to supervise the fund's investments.
  • Don't demand large up-front investments; you can make a once off lump sum investment or you can choose to invest a small amount on a monthly basis.
  • Increased diversification: A fund normally holds many financial securities; diversification decreases risk.
  • Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
  • Ease of comparison: All mutual funds are required to report the same information to investors, which makes them easy to compare.

How to join a Unit Trust.

To join, you fill in the forms and make your first deposit. In your form you can decide to make regular contributions and choose to do so by check- off system, which makes your savings automatic, so you are able to save even if you lack discipline. Different equity Funds have different requirements. They have a minimum initial deposit and amount of top-up. You can deposit a lump sum or you can top up the stipulated amount regularly They charge an annual fee, usually of 2 per cent (and its not per person, but on the whole fund, so members cost-share this cost) and a withholding tax of 15 per cent on interest, but even after subtracting these, the interest earned is usually still higher than what you would earn in the bank.
Note:You get monthly statements showing you how much interest your money has earned

How to withdraw a Unit Trust

You are allowed to have free withdrawals over the month; you fill in a form (or send instructions via Email) and then wait for two to three working days for the money to be transferred to your bank account.

Types of unit trust

A fund's type depends on the kinds of securities it holds. We have different types of funds which include:

1. Money Market

It is a unit trust that invests in short term deposits. This includes: Government treasury bills, treasury bonds, and commercial paper and bank deposits of less than 12 months maturity profile.

  • It is a low risk investment that gives an investor high interest returns
  • It provides capital preservation
  • Interest is earned daily
  • Ease of withdrawal of funds for investors

2. Equity Fund:

Designed for investors who are seeking long-term capital growth, from a well diversified portfolio and are comfortable with taking on some risks of market and potential capital loss.

3. Balanced Fund:

Investors who are ready to invest over the medium to long-term period and hold large cash balances but need extra returns at moderate risk.

4. Fixed Income Fund

Investors who ready to invest over the medium-to-long term period and are seeking reasonable return from a well-diversified portfolio of fixed income securities.