Unit trusts are managed by a professional investment manager who looks after money from multiple investors. This is usually invested in large numbers of shares from various companies. The unit trust manager invests money to give the investors the best return. The value of investors' shares is directly related to the value of the trusts' shares. There are many different types of unit trusts so it's a good idea to shop around.
Some unit trusts are general and may be investing in various industries, others offer more specialised investments. For example, specific types of companies or ones based in particular geographical areas.
The plus side of unit trusts is that someone is managing your investment for you, so it can be a good way to invest in the stock market with little specialised knowledge. However, many experienced investors do not think highly of unit trusts as over the medium to long-term, 80-90% of these trusts under perform the market. In other words, you wouldn't get as much return as if your money had been invested in just one company because some companies in the trust may have been profitable, yet others may have under performed, bringing the total value of the trusts shares down. However, with good research, it's possible to invest in less risky unit trusts. For example, one that has shares in mainly blue-chip companies would be less risky than investing in one that only deals with little-known, emerging ones.
Expect to pay a fee on investing, which may range from 1%-6% of your investment. Some companies are changing to exit fees instead. Also expect to pay an annual fee, which may be between 0.75-2%.
