Unit trusts explained

• A unit trust is what we call a ‘collective investment’. This means that a large number of investors pool their money together to create a much larger investment fund.
• The fund is divided into units, each worth a certain amount of money. So when you invest in a unit trust, your money buys you a certain number of those units.
• The Fund Manager uses the money in the fund to invest in different types of investments, called ‘assets’. Depending on the type of unit trust, these assets could be shares in companies (equities), corporate or government bonds, property or cash.
• The assets generate a return which is added to the value of the Fund.
• And in turn, the total value of the fund affects the value of your units. So if the fund increases in value, your units would be worth more, and if the fund is decreasing in value, your units would be worth less.

This is a really simple example to help you understand how a unit trust investment works.

Unit trusts are investments, not savings accounts, so it’s important to remember there is a degree of risk with investing. The value of an investment can go down as well as up and you may get back less than you put in.

Three good reasons to invest in unit trusts

	Bigger and better When it comes to investing, bigger generally means better. By investing in a ‘collective investment’ your money can be combined into a much larger fund, which gives it a lot more ‘buying power’ than it would have on its own. By pooling relatively small amounts of money together into a unit trust, you have access to a wide range of investment types, without having to lift a finger.
	Professionally managed, by experts Unit Trusts are managed by an expert Fund Manager and supported by a team of investment specialists who know all about the best investment opportunities, and the best times to buy and sell. Using their expertise means you can relax.
	Spread your investment risk If you were to invest in one particular company, all your eggs are in one basket. If the company does well, great! But if it does badly, your investment may not be a good one. By investing in unit trusts, the ‘collective investment’ can be spread to different investment types; for example some cash, some government bonds, some company shares and even some overseas investments. So you spread your investment risk, to give your money the best chance of giving you a great return.