Unit trusts offer a simple investment opportunity and convenient way to invest in the stock, bond and money market. Unit trusts are the best way to take a bite of the share, bond or money markets without risking too much indigestion.
A unit trust pools your money with that of other people and invests it on your behalf. The pool is divided into identical units, each of which has an equal share in the assets in the fund. Unit trusts are designed to suit the different investment needs of different people. Some unit trusts offer you capital growth – increasing the value of your investment – while others concentrate on providing you with an income stream through dividends and interest. Risk varies from one unit trust to another.
In general, unit trusts focused on the share market carry more risk than those which spread their investments across different asset classes or which focus on the money market. Every unit trust fund is governed by a trust deed which falls under the authority and supervision of the Financial Services Board (FSB). The trust deed specifies the goals of the fund and all fees. Each trust is obliged to appoint trustees who act as custodians of the fund and ensure that it is managed within the terms of the trust deed.