The Unit Trust – The Money Hamper.

A unit trust is like a hamper of financial products. It’s usually known as a mutual fund in some countries. The fund manager goes out to do the shopping. He usually buys some stocks and bonds from a few stock markets and then packages them nicely into nice little hampers. Each unit (hamper) can contain a certain % of each sort of stock and bond. Along with the packaging, it will be given a fanciful name such as “Beverly Hills Asian Equities” or “Tan Ah Kow Europe Emerging Markets”.

There is usually a first time subscription fee of 5% for equity unit trusts and 3% for bond unit trusts. Other charges such as management fees are usually internally deducted from the number of units that you have. It is usually cheaper to buy unit trusts online or through a financial intermediary such as banks or financial planners. The reason is these companies are able to purchase the investments in bulk and resell them to you at a cheaper sales charge.

UT Funds (a.k.a Unit trusts) can be packaged in many different ways. For example: Equities, Bonds, Balanced Funds which are a mixed of equities and bonds, country specific funds, special themed funds such as technology funds, emerging markets or even REITS.

Unit Trusts are generally less risky than owning stocks. It like owning a mini portfolio of stocks and bonds all nicely packaged for you. However, to spread the risk further, it’s good to have a portfolio of many types of unit trusts to cover different areas of investments. If you’re not sure which funds to pick out, you could try using the services of a financial planner. Otherwise, there are online resources and magazines to refer to on suggestions of what sort of investments to purchase.

Anybody like to share what are your favourite sort of funds that you have?