A unit trust is a shared investment fund. It is an 'open-ended fund' which means the fund grows and shrinks as more people invest and as more people withdraw their money, respectively. The fund is run by a Fund Manager, who makes all the investment decisions. The fund is divided into segments called 'units' and investors buy these units to acquire a stake in the fund. The price of a unit is based on the value of the investments the trust has invested in.
Charges
- You pay an initial charge when you buy into a Unit Trust fund. This charge leads to a difference between the price at which you can buy and sell units. This difference is known as the 'spread'.
- Some unit trusts have no initial buy-in charge, and instead apply an 'exit charge' when you sell the unit.
- All unit trusts have a yearly charge taken by the company running it, usually taken directly from the investment fund.
You need be aware of all the charges that apply to a unit trust before you decide which trust to invest in, as charges can have a major impact on the performance of the investment. To invest you can buy unit trusts direct from the unit trust management company or you can choose to go through an independent financial advisor, stockbroker or an investment manager.
