Due to the emergence of the internet and technological advancements, traditional savings plans that involve stacking up your hard-earned cash in the bank waiting for a rainy day are slowly getting replaced. Schemes like Unit Trust Funds have emerged as investment options accessible to most people. Read on to learn more about Unit Trust Funds and their benefits.
Understanding Unit Trust Funds
Unit Trust Funds are investment schemes managed by professional fund managers who pool money from various investors and invest them in a portfolio of securities such as bonds, stocks, and other money market facilities or authorized securities to meet the fund’s objectives. The pooled money earns income in the form of capital gains, dividends, or interest income depending on the asset class the funds are invested in. Investors are usually issued with units that act as a portion of the underlying portfolio of securities in exchange for the amounts invested.
A Unit Trust Fund should have the following personnel:
· A Fund Manager manages, administers, and ensures investor funds are invested according to the fund’s investment objectives.
· A Custodian is a company, typically a bank, that holds the assets or funds of the investment scheme in safe custody.
· Trustees to ensure investors’ interests are protected at all times.
There are a variety of investment tools with different returns and exposures that include:
· Money Market Funds
They invest in short-term debt securities like commercial papers, bank deposits, and short-dated treasury bills. These investments are highly liquid, relatively low risk, and suitable for investors who aim to stabilize their portfolios.
· Equity Funds
These funds buy ownership in businesses in the form of publicly traded stocks. They are highly volatile and are invested mainly in equities aiming for superior returns through dividend payment or capital appreciation over a medium to longer term.
· Fixed Income Funds
These funds invest in short-term debt securities to offer reasonable interest returns and capital gains on investments like treasury bonds, corporate bonds, and treasury bills.
· Balanced Funds
These are mutual funds that invest in diversified fixed-income securities and equities portfolios. Diversification helps hedge against risks; thus, a balanced portfolio offers exposure in all market sectors.
Some of the advantages of investing in UTFs include:
· Attractive returns
Unit Trust Fund offer better returns than traditional investment products as they have proven to beat inflation over time.
· Professional fund management
Fund managers have the expertise to invest the funds in a structured manner.
· Investment Security
Each fund has a trustee who oversees the overall operations of the fund.
· Investment Diversification
Small scale investors can be exposed to a wide range of investments which would generally require a lot of capital to access.
Investors who wish to sell do not need to wait for a buyer as the scheme can issue new units or redeem existing ones at any time.
You can decide what to venture in with ease based on your investment goals. There are many investment products; additionally, you can visit our website for all your product investment needs to make an informed decision.
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